Claims Trends Looking back at claims experience can be helpful to firms as they expand their markets and enhance the range of professional services they offer. Information on the frequency and severity of claims, however, has limited usefulness for less traditional professional services because claims can only record past problems. The past, however, is a good predictor of future disputes, claims, and losses for more traditional services on common project types. For many project types, the frequency of claims might be considered a “coincident indicator” of the professional liability exposure for that project type or specific client base. The raw claims count—not just those claims that are ultimately resolved—can herald future losses. The frequency of claims indicates that, in some way, the design firm has not met expectations or has been identified as a cause of an economic loss or bodily injury. Even if claims do not result in payment by the insurer, they represent costs to the firm, distractions from the firm’s practice, and damage to the firm’s reputation. Even if claims do not result in payment by the insurer, they represent costs to the firm, distractions from the firm’s practice, and damage to the firm’s reputation. Often, claims for a specific service that is less traditional, such as design subcontracting on a design-build project or reaching a target level of sustainability in design, take years to develop as a trend. Patterns are not usually readily apparent. Changes in procedures or roles or even consensus contract language may not be construed by the legal system for many years. Still, a look at when claims are brought, how many occur and end up with payments, and what those payments average can be helpful in benchmarking professional liability exposure.
Security The dramatic increase in governmental and private concerns over physical security early in this decade was only the initial wave. Security in all forms will shape not only the demand for design solutions, but also how those solutions are delivered. Mission critical solutions are just one aspect of the growing market. Increasingly, clients are requiring integrated security both in the design and in how design firms manage confidential information. Firms that can respond to what is an evolving standard of care for security-conscious design solutions may find their services to be both marketable and in high demand. Integrated Design and Construction Perhaps the rapid movement toward the use of building information models rather than plans and specifications will cause the greatest impact on design firms. This sharing of information fundamentally changes the interests of stakeholders in the design and construction process. By both unbundling design services and blending design with construction and operations, building information models create a shared risk in the design of a project. As their use becomes the primary vehicle for project communication, the process would seem to move more seamlessly to the design-build project delivery system. The roles of design and design firms have yet to be determined. Firms modifying their practice management systems to incorporate building information models, as well as their business practices to take charge of the information sharing process, may be able to reduce their professional liability exposure while creating and controlling project information in a highly valued and appropriately compensated way. The design industry is changing. Professionals and their service firms will be facing many unknowns. Often, there is little time to look back; the road ahead seems too perilous. Having a clear idea of the past is essential to planning for, or responding to, the future. And we at Victor and CNA know that firms with an understanding of historical claims and liability information are more likely to avoid claims in the future.
7 • From Risk to Profit - Benchmarking and Claims Studies
Victor
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