Each year, the American Institute of Architects (AIA), the American Council of Engineering Companies (ACEC) and the National Society of Professional Engineers (NSPE) join forces to conduct the annual Professional Liability Insurance Carriers Survey. This collaborative effort provides valuable insights into trends, coverage options, and risk management practices across the industry—helping members make informed decisions about their professional liability insurance. The annual survey and additional professional resources can be accessed on the NSPE website. Continue reading to see what’s changing in professional liability—and what it means for your firm in 2025.

Professional Liability Forecast: Stable Rates, Bigger Projects

When it comes to how your premium is calculated, two major factors dominate:

• Annual billings, which are a key metric in rate calculations
• Claims history, which reflects your firm’s risk profile and internal practices

Strong internal risk management protocols can directly improve your attractiveness to insurers and reduce your long-term costs. Since premium calculations are based on billings, stable rates help offset the impact of higher revenue as your business grows.

Although some carriers are exiting the A/E space, new entrants are actively seeking market share. This means capacity isn’t a concern, and architects still have choices when shopping for coverage. However, not all insurers offer the same experience with A/E firms, so it’s important to evaluate both cost and the carrier’s understanding of your work.

An important shift to watch: the average project size is increasing, which puts pressure on coverage limits. As projects grow in complexity and financial scope, the potential cost of a claim rises—making it even more important to assess whether your current coverage aligns with the scale of your work.

Underwriting Challenges: Where Insurers Are Pumping the Brakes

Certain project types continue to be red-flagged by insurers. Residential and condominium projects, as well as geotechnical services, remain top concerns—consistent with last year’s findings.

Carriers also identified additional areas of heightened risk that may lead to higher rate increases, including:

• Large, public infrastructure and design/build projects
• Multi-family residential, custom homes, and condominium condition assessments
• Bodily injury and property damage claims, especially those tied to so-called "nuclear verdicts"
• Utility and electrical work in wildfire-prone regions
• Wind farms
• Rising labor and material costs due to inflation

"Nuclear verdicts"—jury awards exceeding $100 million—are increasingly common and often result from cases where emotional or punitive damages are involved. These large payouts are putting upward pressure on liability insurance pricing and are especially prevalent in litigation-heavy states.

Claims Trends: What’s Triggering the Biggest Losses?

Claims data remains consistent with previous years. The highest percentage of claims stem from commercial and multi-family residential or condo projects, followed by single-family residential and transportation.

Top contributing factors include:

• Technical errors (the most common cause)
• Project management missteps, including poorly negotiated contract terms
• Inadequate communication and documentation

Design/Build continues to be an area of elevated risk—particularly on large public infrastructure projects. These types of projects often include aggressive timelines, shared responsibilities, and unclear scopes, which increase the likelihood of disputes.

Bodily injury claims remain a significant source of large losses, and litigation costs continue to rise. Insurers report increasing frequency of high-value claims, with several states—New Jersey, Texas, California, Pennsylvania, New York, Georgia, and Florida—leading the trend in nuclear verdicts.

Emerging Issues: What’s on Carriers’ Radar

The insurance landscape is evolving alongside industry trends, client demands, and global events. Carriers highlighted several factors likely to impact architects in the years ahead:

• Social and economic inflation are both driving up the costs of claims and influencing how premiums are set.
• Climate change is putting new pressures on standard of care expectations. Architects should clearly communicate climate-related limitations and responsibilities to clients—and document those conversations in writing.
• Artificial Intelligence (AI) has gained momentum in areas like contract review and code compliance analysis. While these tools can increase efficiency, they must be used with care. Their full impact on future claims is still uncertain, but insurers are watching closely. Firms should treat AI as a support tool—not a replacement—for sound professional judgment.
• Client expectations for "elevated" standard of care are increasing. Contracts with language referencing the "best" or "highest" standard of care are becoming more common. These terms can expand liability beyond what’s typically insurable.
• Cybersecurity exposure is rising, with more clients requiring cyber insurance coverage. Best practice is to obtain a dedicated cyber liability policy, as professional liability coverage may not fully address these risks.
• Labor shortages and supply chain issues are still affecting project timelines and execution, though there has been some improvement post-pandemic.
• PFAS and environmental exposure are on the radar. While not yet a source of major claims under professional liability coverage, insurers are monitoring this space carefully.
• Turnover and staffing shortages remain a concern across the A/E industry, impacting everything from firm stability to quality control.

Risk Management Best Practices: What Carriers Want to See

Insurers consistently emphasized that clear communication, good documentation, and contractual awareness are the most effective ways firms can reduce liability exposure.

Key takeaways include:

• Use clear, reasonable contract language that accurately reflects your scope and responsibilities. Avoid elevated standards of care unless specifically intended and insurable.
• Maintain thorough project documentation, including records of client communications and decision-making.
• Establish strong quality control processes and conduct regular reviews.
• Educate your team—especially emerging professionals—on contracts, risk management, and liability basics.

Many claims can be avoided or mitigated with proactive communication and realistic client expectation setting. Firms that build a culture of risk awareness— and act on it—tend to fare better with both insurers and clients.

Also, take time to review the terms and conditions of your professional liability policy. Understanding what is and isn’t covered will help you avoid surprises if a claim arises.

THE AIATRUST PROVIDED THIS CONTENT ON A/E LIABILITY TRENDS. THE ORIGINAL ARTICLE (2024 PROFESSIONAL LIABILITY TRENDS EVERY ARCHITECT SHOULD KNOW) CAN BE ACCESSED ON THEAIATRUST.COM.