Top 5 in ‘25 Management Practices for Architect & Engineering Firms to Reduce Professional Liability Claims

By: David Blue, Great American Insurance Group, Professional Liability

Design Professionals face unique risks that can lead to professional liability claims. Their work directly impacts public safety, client satisfaction, and project outcomes. Given the complexities of their responsibilities, implementing effective risk management practices is crucial to reduce exposure to professional liability claims.

Below are 5 key practices for design firms and why they are critical to protecting the firm’s reputation, finances, and relationships.

1. Develop Comprehensive Contracts
   Clear and comprehensive contracts are a cornerstone of effective risk management. One of the most common sources of professional liability claims against design professionals is disputes over the scope of work. Clients may have unrealistic expectations or misunderstandings about what services are included, leading to allegations of negligence, delays, or cost overruns. A well-drafted contract should define the scope of services explicitly, including what is excluded, to avoid ambiguity.

Best Practices

• Use precise language to define the scope of work.
• Clearly outline exclusions and limitations.
• Specify the responsibilities of all parties involved.
• Incorporate a clause addressing scope changes and additional services- all verbal instructions or opinions given in the field must be documented in writing
• Avoid broad indemnification clauses- ensure indemnification is tied to actual negligence
  
  Professional contracts should outline the scope of services, timelines, fees, deliverables, and liability limitations. Interesting fact, the average lifespan of all claims in the Great American program is ~261 days. However, claims arising out of Client Drafted Contracts, the average lifespan of claim is ~401 days.
  
  For more information, please see our Great 8 + 2 Contract Review guide, here.

2. Evaluate Your Subs
   Did you know that your firm is totally responsible for the services provided by subconsultants that are under your control? Errors, omissions, or delays caused by a subconsultant can become a liability for the lead firm, even if the mistake was not their own. This is particularly true in design-build contracts, where responsibilities are closely intertwined. Inadequate performance by a subconsultant can lead to contract disputes, claims for professional negligence, or even litigation. For Design Professionals, the selection of subconsultants is a critical decision that directly impacts the success of a project and the firm’s overall risk exposure.
   
   Subconsultants, including structural, mechanical, electrical, and plumbing (MEP) engineers, and specialty consultants, contribute to the design process and influence project quality, schedule, and cost. If they are not chosen carefully, they can introduce significant liabilities that may lead to legal disputes, reputational damage, and financial losses.
   
   If the subconsultant engineer either is uninsured or underinsured or by contract limits its liability, the exposure to the prime design firm is significant.
   
   Your Professional liability insurance covers this vicarious liability created by others providing services through you. However, your subconsultants should have their own professional liability insurance coverage or significant assets pledged through an indemnification provision in your contract with them such that if you are held liable for harm caused by their negligence you (or your insurer) can pursue them for contribution or indemnity.
   
   Additionally, while most architects and other prime design professionals can understand structural, mechanical and electrical engineering services for a building, few have any idea if information obtained and analyzed by a soil consultant is accurate.
   
   Selecting reliable subconsultants and vendors is essential to mitigating project risks. Firms should implement a thorough pre-qualification process, requiring subconsultants to provide proof of insurance, licenses, past performance history, and financial stability.

Best Practices

• Evaluate technical experience
• Availability 
• Financially Stable
• Require Certificates of Insurance annually 

3. Foster Robust Internal Controls 
   For Design Professionals, effective internal controls are crucial in managing risk, ensuring project success, and protecting the firm from legal, financial, and reputational harm. Internal controls help establish clear procedures, enforce accountability, and mitigate potential risks associated with design errors, contract disputes, and operational inefficiencies.
   
   Quality control (QC) and Continuing Education (CE) are two sides of the same coin. QC procedures ensure that deliverables meet industry standards and client requirements. Continuing education and training on emerging practices, legal trends, and technical advancements help maintain a competent staff. Oversights in design can lead to costly rework, delays, or safety concerns. A robust QC process minimizes the likelihood of errors, reducing the risk of claims.

Best Practices

• Peer reviews by experienced professionals help identify potential design flaws, code compliance issues
• Project Checklist
• Financial controls for tracking project budgets, monitoring expenses
• Continuing Education

4. Communication & Documentation Protocols
   Clear internal communication protocols ensure that project teams, including architects, engineers, and construction managers, stay aligned on project objectives, specifications, and timelines. Miscommunication between departments or team members can lead to conflicting designs, coordination issues, and construction delays. Standardized communication practices, such as regular team meetings, email documentation, and internal project management software, help maintain consistency and prevent misunderstandings.
   
   Project cost overruns and delays often arise from undocumented changes or unclear instructions. A structured documentation system ensures that all scope changes, cost adjustments, and schedule modifications are recorded and approved before implementation. This prevents unauthorized work and helps firms recover costs associated with client-requested modifications.
   
   Effective communication with clients, contractors, and other stakeholders is essential to manage expectations and avoid misunderstandings. This includes documenting all significant decisions, changes, and approvals throughout the project lifecycle.
   
   Proper documentation creates a reliable record of all project-related communications, decisions, and approvals. In case of disputes, documentation serves as evidence of adherence to contractual obligations.
   
   Poor communication is a leading cause of professional liability claims. Maintaining clear and consistent communication ensures transparency and fosters trust, reducing the risk of disputes.

Best Practices

• Weekly/biweekly project meetings
• Standardized communication channels – email for official correspondence, collaboration tools for internal discussions (Slack, Teams etc.).
• Submittal Logs – shop drawings/RFI’s including received dates/responded
• Critical decisions made in-person; follow-up in writing

Maintaining proper documentation is crucial for risk mitigation. Firms should implement a centralized document management system to store contracts, design plans, communications, and approvals. This ensures that all project-related records are organized, easily retrievable, and protected from unauthorized alterations. Document retention policies should also align with industry standards to support potential claims defense or dispute resolution.

5. Conduct Thorough Risk Assessment
   Risk assessments identify potential hazards such as unstable soil conditions, flood zones, or hazardous materials that could compromise worker safety or structural integrity.
   
   Before a project begins, architects and engineers must evaluate site conditions, structural feasibility, environmental impacts, and material selections. A risk assessment helps uncover potential design conflicts, infrastructure constraints, or code compliance issues that could lead to rework, safety hazards, or project delays.
   
   Additionally, having a client selection process in place can help to avoid costly conflicts. High-risk clients can lead to disputes, non-payment, or excessive demands. Vetting clients reduces the likelihood of entering relationships that could result in claims or financial losses.

Best Practices

• Scope & Site review from all stakeholders
• Preconstruction meetings with contractor(s)
• Contingency planning

An effective risk assessment not only prevents costly disruptions but also builds confidence among clients and stakeholders, ultimately contributing to a project’s long-term success.

Conclusion:

By systematically evaluating design, financial, contractual, safety, and regulatory risks, firms can enhance project efficiency, protect against legal and financial liabilities, and deliver high-quality outcomes. An effective risk assessment not only prevents costly disruptions but also builds confidence among clients and stakeholders, ultimately contributing to a project’s long-term success. Regularly reviewing these practices and incorporating them into daily operations will help design firms operate more securely and mitigate financial risks.