New IPD Coverage

Mon, 13 Sep 2010 12:49:00 GMT

Schinnerer has seen few attempts at true integrated project delivery (IPD). Despite all the talk about significant changes in how projects are designed and constructed, most of the “integrated” projects we have seen are basically design-build projects using standard contract forms.

Despite this, we have been preparing for the rush of IPD projects by developing new forms of project-specific insurance that will not only cover the design team but also the increasing design liability of the construction team. The shared-risk, shared-profit collaborative aspects of IPD result in many aspects of the relationship being defined contractually. However, it is unclear how courts will construe the provisions of multi-party agreements with extensive waivers of rights, unusual limitations on risk, and blurring of responsibilities. Without clear law, such as the law of negligence that applies normally to design and other professional services, it is difficult to craft a responsive and affordable insurance policy specifically for IPD projects.

While the goal of IPD is to have the parties share risk as a way to protect project-based interests, there is a misalignment of currently available insurance to cover this risk-sharing and team decision-making. The unique challenges of the IPD system can best be solved by having a project-based policy that cultivates the commonality of interests in completing a project.

Schinnerer and CNA have responded to this gap by developing professional liability exposure coverage for all members providing design or design and construction services through a multiparty agreement on a project basis. While this project-based coverage will not be available on extremely large or high-risk projects, it will respond to the need for a dedicated policy to cover the design exposure on projects such as office buildings, public and private educational and healthcare facilities, and certain residential, commercial, and mixed-use projects, for example.

We also developed a special variation of the project-specific coverage for the highly unusual (and probably highly unlikely) Special Purpose Entity called for in the AIA IPD contract. Because of the project client’s involvement as a joint owner of a limited liability company with the architect and construction manager, no current professional liability policy can cover the design risks.

Look for more information as the coverage is rolled out nationally at www.Schinnerer.com.

Schinnerer's RM Blog - integrated project delivery tag

New IPD Coverage