Condos, Claims, and Coverage – Industry Update
Professional Liability Insurance (PLI) carriers provide valuable insights on trends facing architects and engineers (A/E) firms. The following information has been obtained from leading A/E PLI carriers.This will aid design firms as they pursue work, renew coverage, and what is used in determining premium, including risk management.
Restrictions and Exclusions
Not all risks are created equal. Multi-family residential—particularly oceanfront condominiums and projects in Florida—remains one of the most restricted classes. Geotechnical, structural and marine services are also commonly excluded or tightly underwritten, with some carriers stating they are simply “not a market” for those risks. Infrastructure, marine projects sometimes trigger additional scrutiny, while more conventional building types, schools, or carbon-neutral design initiatives are less likely to face underwriting restrictions.
Exposures Driving Rate Increases
The overall market is stabilizing with flat or slight increases with certain exposures continue to draw higher premiums. Higher risk disciplines along with the challenges with large public infrastructure projects, high-rise condos, wildfire-exposed utility work, mega data centers, and luxury residential developments are all viewed as higher-risk. Carriers also flagged firms with frequent or severe claims as likely to experience above-average rate increases.
Underwriting
When evaluating A/E firms, insurers consistently weigh annual billings, claims history, discipline, and project mix as critical underwriting criteria. Firms with effective risk management programs obtain more favorable terms and premium credits along with good loss experience receive competitive pricing. For prior acts coverage, most carriers will extend full coverage provided the firm maintains continuous policies and avoids major claims.
Rates – Past, Current and Future
From 2022 through 2024, most carriers reported steady but moderating rate increases: roughly +5% - +10%. For 2025 into 2026 expectations are for a flat market or slight increases in the 0–5% range. Competitive pressure is keeping rates in check for low-risk firms, though insurers caution that high-risk exposures could still see notable increases especially those with a claim history.
Premium Determination
Factors that influence premium include; billings, claims history, type of practice and project types. Other meaningful considerations include experience, and risk management practices. Importantly, carriers also pointed to contract language as a source of risk.
- Indemnity obligations;
- Warranties and guarantees;
- Elevated standards of care;
- Liquidated damages provisions;
all impair insurability. Firms should negotiate these terms carefully to avoid uninsurable liabilities.
Risk Management - Premium Impact
Carriers consistently review how a firm manages its professional risk. Applied risk management practices are an important factor influencing pricing and terms.
Carriers offer premium credits or discounts (5–10%) for firms that attend insurer-sponsored risk management seminars and/or demonstrate strong internal practices. A firm with effective risk management protocols may still face a claim - but better documentation, contracts, and communication practices often reduce claim severity, which keeps loss ratios favorable and helps maintain competitive premiums over time.
Risk Management Key Areas
- Contracts — Well-drafted contracts (with clear scope, limitation of liability, and indemnity language) are viewed more favorably.
- Contract Review Process — Reviewed by in-house counsel, insurance brokers, risk management consultant or outside attorneys.
- Client and Project Selection — Turning away high-risk clients or projects demonstrates discipline and lowers perceived exposure.
- Quality Control Procedures — Documented peer reviews, QA/QC protocols, and project close-out processes reduce claim likelihood.
- Education and Training — Participation in professional liability and risk management seminars is a positive underwriting signal.
- Technology Adoption — Use of tools like BIM, project management systems and AI and identified practices for their use to reduce coordination errors.
Conclusion
Professional Liability Insurance (PLI) market has largely stabilized after several years of upward rate pressure. Well-managed firms with clean loss histories are likely to benefit from flat renewals or modest increases. However, exposures in multi-family residential, large-scale infrastructure, and wildfire-prone regions will continue to attract heightened underwriting scrutiny. The key to favorable project outcomes, and getting the most out of your insurance dollars will be proactive risk management program efforts.
