What Recent Claims Benchmarking Data Tells Design Firms About Risk
For design firms, professional liability risk is not evenly distributed. It changes depending on the firm’s discipline, client base, project mix, and contract structure. A recent claims benchmarking report from Berkley Design Professional provides a useful look at how these factors have affected claims reported to Berkley from April 2013 through June 2025.
The report is not intended to represent the entire design industry. It reflects Berkley Design Professional’s own claims experience, with a specific focus on firms with less than $30 million in annual fees. That distinction is important because the claims experience of very large firms can be volatile and may obscure trends that are more relevant to small and mid-sized design practices. Still, the findings offer practical lessons for firm leaders, financial managers, and project teams.
The New Focus: Loss Cost, Not Just Claim Size
One of the most important aspects of the report is its methodology. Rather than relying only on average claim amounts, Berkley also evaluates “loss cost,” which combines claim frequency and severity relative to fees earned. This provides a more balanced picture of risk. That matters because a single large claim can distort the data, especially in a category with relatively few claims. Loss cost helps normalize the experience across disciplines, client types, and project types, making the trends more useful for business planning and risk management. For design firm leaders, the takeaway is straightforward: risk should not be evaluated only by asking, “How big could the claim be?” Firms also need to ask, “How often do these claims occur, and how does that risk compare to the revenue generated by this type of work?”
Discipline Matters: Structural, Mechanical, and Geotechnical Lead the Risk Profile
The report shows that structural engineers experience the highest average loss cost, driven by both the most frequent claims and the largest average claim amounts. Mechanical engineers also show elevated risk, with above-average claim frequency and claim amounts. Geotechnical engineers round out the top tier, with claim severity second only to structural engineers and claim frequency near the overall portfolio average. This result is not surprising. Structural and geotechnical services are foundational to a project. When a significant problem occurs, owners and other claimants often look for errors that may have started “from the ground up.” Mechanical engineers also face increased exposure because of the complexity of HVAC systems and the performance expectations placed on those systems.
Architects present a different type of risk. While their average claim amount is slightly below the overall portfolio average, their claim frequency is higher than average. The report attributes this in part to vicarious liability arising from the services of subconsultants. For principals and CFOs, this reinforces the importance of understanding how each discipline contributes to the firm’s overall risk profile. For project managers, it highlights the need for careful coordination, documentation, and communication around high-impact disciplines.
Vicarious Liability Is a Major Issue for Architects
The report’s section on architects deserves particular attention. Claims involving architects were broken into three categories: claims arising from the architect’s own services, claims involving both the architect and subconsultants, and claims arising solely from subconsultant services. A little over half of the architect claims stemmed solely from the architect’s own services. About one-third involved a combination of the architect’s services and subconsultant services. Just over 10% were purely vicarious, meaning the claim arose entirely from the subconsultant’s work.
The financial impact is notable. Combination claims represented about one-third of claim count but accounted for 45% of total claim dollars. This shows that shared liability claims can be disproportionately expensive. For architecture firms, the message is clear, subconsultant risk management is not administrative housekeeping. It is central to professional liability performance. Firms should pay close attention to subconsultant selection, scope definition, coordination obligations, indemnity language, insurance requirements, and documentation of responsibility.
Contractor Clients and Design-Build Delivery Carry Elevated Risk
The report identifies contractors as the riskiest client type, with both the highest claim frequency and the highest average claim amounts. Berkley ties this exposure largely to design-build project delivery, which carries inherently greater risk for design professionals.
Owners are the next most costly client group, primarily because claims are more likely to be filed. Other client categories, including design professionals, government entities, developers, and similar client types, fall within a more reasonable range of outcomes.
This finding should be important to any firm pursuing design-build, delegated design, or contractor-led work. These opportunities can be attractive, but they often come with compressed timelines, blurred responsibilities, aggressive risk transfer, and performance expectations that may not be appropriate for a professional services firm. Before accepting contractor-led work, firms should carefully review the contract, understand the project delivery structure, confirm the scope of services, and evaluate whether the fee adequately reflects the added risk.
Certain Project Types Require Extra Caution
Among the top ten project types by incurred claim dollars, residential condominiums and mixed-use buildings were the worst-performing categories by a significant margin. Although these project types represented a small portion of Berkley’s portfolio, their loss costs were disproportionately high.
Mixed-use projects were driven mainly by high claim frequency, with average claim amounts slightly above the overall average. Residential condominium claims were more than twice the average in claim cost, with frequency second only to mixed-use projects.
The report’s conclusion is direct: design professionals should be very cautious when participating in these project types.
The report also looked at the ten most common project types by reported fees. Within that group, apartments showed the highest loss cost, driven primarily by elevated claim frequency and claim severity that ranked second only to utilities. Utilities were affected by a few unusually large claims within an otherwise lower-risk project type. For firm leaders, this data should inform go/no-go decisions, pricing, staffing, contract review, and project controls. A project type that generates revenue is not necessarily profitable if it consistently produces claims activity or consumes management time.
Contracts Are One of the Strongest Risk Management Tools
The report’s contract findings may be the most practical for day-to-day firm management. Claims outcomes varied significantly depending on the type of contract used. Firms using their own standard form of agreement experienced significantly better outcomes. Properly written firm agreements provide a stronger defense in the event of a claim and help ensure a fair allocation of risk.
Industry standard agreements also performed well when they were carefully negotiated and tailored to the project. By contrast, client-generated agreements were more challenging. These contracts often omit important client responsibilities, lack key professional protections, or include burdensome and potentially uninsurable obligations.
The worst outcomes were associated with verbal agreements. According to the report, verbal agreements had the highest claim frequency, severity, and overall claim cost. The bottom line is simple, every project should be documented with a written agreement. For principals and CFOs, this reinforces the need for contract discipline. For project managers, it means work should not begin based on informal authorization, email exchanges, or assumptions. A well-structured written agreement is not just a legal formality; it is a core risk management tool.
Practical Takeaways for Design Firms
This benchmarking report offers several practical lessons for design firm leadership:
- First, firms should evaluate risk by discipline, client type, project type, and contract structure. A firm’s professional liability exposure is shaped by the work it accepts and the terms under which it performs that work.
- Second, contractor-led and design-build work should receive elevated review. These engagements may create added exposure through unclear responsibilities, aggressive schedules, and broader contractual obligations.
- Third, firms should be cautious with residential condominiums, mixed-use buildings, and apartments. These project types showed elevated claims performance concerns in the report and should be carefully evaluated before pursuit.
- Fourth, architects should pay close attention to subconsultant management. The report shows that claims involving both architect and subconsultant services can account for a disproportionate share of claim dollars.
- Finally, firms should prioritize written contracts, preferably their own properly drafted agreements or carefully negotiated industry standard forms. Verbal agreements and poorly structured client contracts create unnecessary risk and make claims harder to defend.
Final Thought
The most valuable lesson from the report is that claims are not random. While no firm can eliminate professional liability exposure, firms can improve their risk profile by making disciplined choices about clients, projects, scopes, subconsultants, and contracts. For design firm principals, CFOs, and project managers, the report is a reminder that risk management is not separate from business strategy. It should be built into project selection, fee development, contract negotiation, staffing, and execution from the start.