IPD Risk Management: Review Professional Liability Coverage before Entering into an Integrated Project Delivery Contract

While Integrate Project Delivery (IPD) contracts foster collaboration and allow faster project development cycles, the terms of these agreements tend not to fit with traditional professional liability policies.

According to Property Casualty 360, the American Institute of Architects (AIA) released The Integrated Project Delivery Guide in 2007 to facilitate the creation of integrated models, increase the quality of design, as well as to streamline construction processes. The basis of IPD contracts is a mutual agreement among design teams, project owners, and construction firms to share in the benefits and risks of a particular project. While IPD contracts usually meet their objectives, certain elements of the terms in these agreements essentially void the protections offered by each firm’s professional liability insurance. How can design professionals take advantage of the efficiencies offered by IPD contracts while protecting themselves from the legal and financial fallout stemming errors and omission claims?

Mitigation of Damage Coverage and No Dispute Provisions
Most professional liability insurance policies require a third party to file a claim alleging negligence in order for the insured to receive the benefits of coverage. The challenge of IPD contracts is that they have “no dispute” clauses that prevent parties to the agreement from making negligence claims against each other. In order to provide protection for design and construction professionals who enter into IPD contracts, some carriers offer Mitigation of Damage coverage that pays the cost of correcting design or construction issues that could triggers negligence claims. Experts recommend reviewing your professional liability coverage with your insurance agent before entering an IPD contract to ensure you and your firm are protected against errors and omission claims.