A Look Into Rising Insurance Costs for Architects and Engineers

If you’ve noticed insurance premiums for architects and engineers inching upward, you’re not alone. The American Institute of Architects Trust, in collaboration with industry peers, recently shed light on the reasons behind these increases, and it goes beyond economic shifts.

Why the Increase?

Two major factors are playing a role: “social inflation” and “nuclear decisions.” “Social inflation” stems from the belief that companies should pay more if found liable, creating challenges for architects and engineers. “Nuclear decisions” refer to jury verdicts that go beyond typical awards, especially noticeable in horizontal infrastructure projects.

Visible Trends: What’s Happening?

Recent studies point out that bodily injury claims, particularly those tied to bicycle path plan projects, are on the rise. California, Florida, Illinois, New York, and Pennsylvania reported the highest claims. Additionally, discovery costs in litigation are pushing insurance rates higher, prompting insurers to seek early action on claims.

Changing Landscape: Legal Concerns

From a legal standpoint, there’s a growing worry. Recent cases, especially in Florida, challenge the traditional notion of privity of contract. Courts are expanding liability against architects and engineers, exposing them to claims by unrelated third parties. For instance, a Florida court ruled that a contractual relationship isn’t necessary to impose liability on a designer, setting a concerning precedent.

Future Challenges: What Lies Ahead?

Recent cases highlight the evolving legal landscape, where courts are finding ways to hold design professionals accountable. While this may increase exposure and litigation costs, the silver lining is the opportunity for the design professional community to reassess and strengthen their legal defenses.

Navigating the Path Forward

Despite these challenges, there’s hope. Understanding these shifts in the legal and insurance landscape is the first step. By staying informed and implementing reliable design professional legal defenses, architects and engineers can navigate the changing terrain, mitigating risks and ensuring the longevity of their firms.

Anastasia Juergens

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