Since project-specific professional liability (PSPL) and other professional policies typically include significant self-insured retentions (SIRs), eroding policy limits, and an aggregate limit for all claims, early investigation and evaluation of high-exposure claims is paramount to avoiding potentially catastrophic breakdowns in communication and coordination among the insured, insurer, and defense counsel. This article focuses on PSPL policies covering professional services, although the discussion also applies to other policies with deductibles/SIRs, eroding limits (coverage limits reduced by defense fees and expenses), and/or finite aggregate limits for all claims.
Understanding the Exposure Framework
Professional liability (PL) policies, including PSPL coverage, often contain different coverage triggers vis-à-vis general liability or contractor’s risk policies. Most PL policies are triggered when a claim is made and reported during the policy (or extended reporting) period, while general liability and contractor’s risk policies are triggered by “occurrence” of an event during the policy period giving rise to the claim. In other words, the “occurrence” giving rise to a claim is often remote in time (sometimes a matter of years) from when the formal claim is made against the insured. For the insured, understanding the nature of the claim, policies that may be in play, and the corresponding coverage triggers is crucial.
Early Investigation as a Strategy
In the early stages of a design-related PL claim arising during construction, time is the most valuable currency. Under a PL policy, early recognition and reporting of a potential exposure can determine whether coverage applies, making investigation not merely a best practice, but also a coverage-preserving step.
“Early” means notice of claim, root-cause or relatedness analysis, and documentation mapping. Waiting until after receipt of a formal claim notice often means working backward through confusion, such as deciphering project documents, correspondence, and emails, as well as conducting interviews to reconstruct context that should have been preserved from the start.
In practice, this requires connecting project facts, documentation, and technical insight before a formal claim takes shape. An effective early investigation involves three tracks running in parallel: factual discovery, technical analysis, and contractual review. Claims professionals work closely with project managers, design leads, and legal counsel to map design intent, trace decision points, and identify where professional responsibility begins and ends. Documentation mapping such as linking design directives, site instructions, and correspondence often exposes gaps or clarifies missteps long before a claim matures.
On a major transit program, for instance, early coordination between the design team and counsel allowed the parties to prepare unified responses that mitigated cost exposure and preserved insurer confidence. The proactive fact development and investigation transformed what could have been a multimillion-dollar exposure into a manageable, defensible claim.
Early investigation is, therefore, a discipline; not a reaction. It strengthens credibility with insurers; positions the insured to control its own narrative and be more proactive in any related litigation; and lays the groundwork for quicker, more efficient, and effective claim resolution.
The Legal Perspective: Coordination and Ethical Boundaries
In the claims and litigation world, there is often a perception that the best defense strategy is reactive—delaying resolution to wear down the claimant through litigation fatigue. In reality, such a strategy is often a disservice to both the insured and its carriers. High-exposure design and construction claims—particularly those with large SIRs, eroding limits, or finite aggregate limits—can spiral quickly when handled without a coordinated defense effort. A proactive defense that engages counsel and/or consultants earlier allows for faster resolution and preservation of available coverage limits, avoids unnecessary defense fees and expenses to insureds with high SIRs or deductibles, and mitigates potential bad faith claims against an insurer.
A proactive approach to investigation of claims can be beneficial in several other situations as well. To avoid overpaying on claims or to mitigate issues with its insured, an excess carrier on a high-exposure claim being defended by the primary carrier’s chosen defense counsel will often retain monitoring counsel and appropriate consultants early to conduct an independent investigation. This enables them to identify any potential differences of opinion concerning defense strategy or ultimate liability and damage exposure.
While a project is ongoing, an insurer providing subcontractor default insurance (SDI) or contractor protective indemnity coverage (which includes rectification coverage for a subconsultant’s design error) can avoid significant disruption to the project (i.e., mechanic’s lien or bond claims) by investigating and paying any covered claims as soon as possible.
Problems arise when there is lack of alignment and communication among the insured, insurer, and defense counsel on defense strategy or the claim exposure. For example, defense counsel and the insured must be aware of any eroding or aggregate limits, or significant deductible/SIR at the outset so the insurer, insured, and defense counsel can be on the same page as to necessary defense strategy, fees, and expenses to be incurred. Finally, an insurer providing SDI or contractor’s protective indemnity coverage only makes matters worse (potentially exposing the project to mechanic’s lien or bond claims) by not conducting an early, thorough investigation once a claim is known.
Clarity on counsel’s role and ethical obligations is also an important consideration. Defense counsel retained by an insurer to defend the underlying claim owes a greater ethical duty to the insured as compared to the insurer. On the other hand, monitoring counsel retained by an excess carrier or insurer responding to a subcontractor-default claim or rectification claim owes a greater duty to the insurer. These differing obligations can lead to tension when evaluating claims or coverage positions. Counsel must balance independence with cooperation, maintaining privilege while ensuring necessary information flows between all parties. Failure to recognize and respect these boundaries can create conflicts and jeopardize coverage.
The Collaborative Model
With design-related professional liability claims, access to the design team and project documents is paramount to a thorough investigation. Early investigation is not only a best practice, but also the foundation of an effective defense. To achieve results, information must flow freely from the design team to the claims analyst (insured), then to counsel and the insurer. Each party holds a different part of the picture, and alignment among them determines how effectively the claim is managed.
Claims management begins with documentation. The first step is to create or obtain a log where issues are tracked. This may originate from existing project logs but should be structured to record when notice was received, whether the team responded, if timely notice was provided to the insurer, and any updates to the notice such as revised claimed costs or new information about delayed deliverables. The log should also capture damages, contractual basis of claim, and policy relevance. Filtering data chronologically, by date of notice (to identify policy period), location, main issue, discipline, root-cause date, or subconsultant allows the team to perform relatedness searches and identify duplicates. Relatedness analyses are particularly important for policies with per-claim deductibles or SIRs.
When coverage counsel becomes involved, typically on complex infrastructure or multi-party programs, their guidance ensures alignment between claim strategy and policy interpretation. This coordination aligns the factual development with policy interpretation to reduce the risk of missteps that can affect the defense. Establishing and enforcing privilege protocols protects sensitive information from discovery.
Educating project teams on compliant communications can mean the difference between preserving privilege and exposing attorney work product or defense strategy. In one design-build mega-project headed for arbitration, a relatedness analysis revealed that roughly $38 million of the contractor’s $95 million in claims were tied to issues previously noticed to the insurer. The analysis saved time for all parties. For the insured, it preserved control of the defense narrative and reduced costs; for counsel, it clarified facts and avoided duplicate expert work; and for the insurer, it supported faster and more confident reserve decisions.
When this alignment of facts and responsibilities is achieved, the next logical step is to channel it into resolution through early, structured use of alternative dispute resolution (ADR) before positions harden.
ADR as a Cost-Control Tool
Most design and construction contracts have ADR provisions that govern resolution of disputes between the parties. Early investigation/analysis of claims postures the parties to take advantage of ADR procedures to resolve disputes sooner in the claims process.
Whether through informal negotiation sessions, structured mediation, or expert determination, early investigation and use of ADR provides a means to preserve policy limits and relationships before litigation consumes resources and parties take more entrenched positions. It also identifies and narrows disputes and clarifies damages, which often facilitates settlement. However, even if resolution is not achieved, the early ADR process defines the key issues and streamlines the litigation, reducing total defense costs. Proactive parties view ADR not as a concession, but as a cost-control strategy aligned with the insurer’s and insured’s mutual interests.
Alignment among the insured, insurer, and counsel though the ADR process on the liability risk and settlement evaluation is imperative. For policies involving SIRs or deductibles, the insured may be paying all or a portion of the settlement and must agree with any settlement amount. Most professional liability policies require the insured’s consent to settlement, even if the settlement payment is funded entirely by the carrier. Even when consent is not required, and the insured does not contribute to the settlement, payments made by the carrier to defend or resolve a claim can still influence the insured’s future insurance premiums and underwriting considerations.
Failure of the insurer, insured, and counsel to be in alignment through the ADR process can only lead to confusion, inefficient use of resources, and potential coverage or bad faith issues between the insurer and its insured.
Lessons Learned From Design-Build Claims
Design-build projects consistently demonstrate that timing and coordination define claim outcomes. They hold equally true in professional liability claims where design and construction responsibilities intersect. Across multiple programs, the same lessons surface: late discovery of issues, unclear communication between disciplines, and hesitation to give notice until internal certainty exists. Each delay compounds exposure and erodes both the defensibility of the claim and the confidence of the insurer.
One recurring lesson involves the intersection of technical and contractual responsibilities. Design teams often continue investigating field issues internally while contractors or owners interpret silence as acceptance of liability. The result is a preventable coverage gap when notice is given too late. Establishing an internal “potential claim” review process where project, legal, and insurance stakeholders meet regularly has proven effective in identifying and reporting exposures early while maintaining privilege.
Another pattern involves documentation. Claims frequently hinge on incomplete or uncoordinated records of what decisions were made, by whom, and when. Implementing systematic document indexing tied to contract sections and policy obligations allows claims teams to respond confidently and consistently under scrutiny.
The most successful projects share five principles:
1. Investigate early and often.
2. Document contemporaneously.
3. Coordinate across functions—ensure consistent communication among design, project, legal, and risk teams so technical facts and contractual obligations stay aligned.
4. Protect privilege intentionally.
5. Measure lessons forward.
Effective claims management in design-build claims is both cultural and procedural, it starts with awareness and matures into discipline.
The Case for a Proactive Culture
Proactive investigation and evaluation of claims, coupled with early ADR, is the best way to protect an insured’s financial interests. Early investigation and settlement of high-exposure claims preserves indemnity limits in the case of an eroding limits policy and mitigates deductible and/or SIR payments by the insured. It also tends to identify and flush out disputed issues between the insured and its carriers much earlier in the process to allow the parties to collaborate and work collectively and avoid any potential claims of bad faith.
Early investigation and evaluation of claims also typically results in a more thorough, quality defense (and ultimate result) if early settlement is not achieved. Relevant issues, documents, and project details are identified, flushed out, and preserved before project files are archived and participants move onto other projects or gain employment elsewhere. Early investigation and analysis of claims permit defense counsel to be proactive in the litigation and control the scope and flow of discovery to the insured’s benefit. Finally, early identification of disputed issues through early investigation and ADR streamlines the litigation process, which saves defense fees and expenses and avoids litigation delays.
About the Authors:
Joe Cavasinni, Esq. is an attorney at Hall & Evans. cavasinnij@hallevans.com
Lisa Jones, JD, is a senior claims and risk consultant at Arcadis. Lisa.Jones@arcadis.com