Saturday, September 25, 2010

Integrated Insurance Products Needed

Welcome to the Collaborative Revolution!

Integrated Project Delivery (IPD) increases the efficiency with which facilities and infrastructure are planned, designed, constructed, operated and maintained.  An effective integrated team leverages Building Information Modeling (BIM) and lean business processes tailored to meet the needs of the construction industry.  While use of this innovative delivery model is currently limited it will soon become the preferred delivery model of owners.

Before IPD can be widely adopted, integrated teams must overcome certain risk management challenges.  Many of those challenges, even the insurance conundrums raised in this post, can be addressed through integrated agreement.  Effective dispute resolution mechanisms, which Collaborative Construction incorporates in all of its integrated agreements, are an important piece of the risk management puzzle in an IPD setting, and will be addressed in a separate blog post.  Here, I want to highlight the need for a new generation of integrated insurance products designed to protect integrated team members.

A new insurance product is needed.  Currently integrated team members are insured under separate policies, and there are no insurance products available on the US market that fit the needs of an integrated team.  Typically, designers are insured under a professional malpractice policy for errors and omissions, the owner has a property and casualty policy and the general contractor has a general commercial liability policy.  Those three policies protect against different risks, but fail to protect the integrated team as a whole.  Further, those traditional policies tend to pit integrated team members - and their insurers - one against another, in violation of the collaborative and cooperative principles.

In addition to pitting integrated team members against one another, traditional insurance products fail to provide appropriate coverage for the team.   An integrated team needs protection from risks arising from decisions made by the team as whole.  Accordingly, an integrated insurance product needs to address design liabilities, property casualty issues and general commercial liability issues.  Further, coverage under an integrated insurance product needs to be triggered upon notice of a claim and not only upon the occurrence of an accident or other event that triggers coverage under a traditional policy.  As noted above, no such insurance product exists in the US market at this time.

In Australia Swiss Re Insurance and Vero Insurance offer project insurance that covers integrated team, and not just individual team members.  Effective dispute resolution mechanisms reduce the risk of claims among integrated team members.  An insurer that mandates use of an integrated agreement and effective dispute resolution mechanisms can control many of the risks associated with insuring an integrated team.  Collaborative Construction is interested in discussing the scope and nature of an integrated insurance product with interested parties.  Feel free to contact James or leave a comment below.

James L. Salmon, Esq. 69 West Southgate
Fort Thomas, Kentucky 41075

Collaborative Construction Resources, LLC
Collaborative Construction Website
International BUILT Association Website
Sustainable Land Development International


Stephen said...


Could not an OCIP or a CCIP with appropriate rider not cover IPD?

mathy evans said...

Hello James,

I suppose every person must read it and I really believe in Insurance agencies with a websites or blogs like this compared to those Insurance agencies with no websites because it is really advantage to have one. Just like Local Agent Sites that offers insurance agent website design and they are also insurance agent website builders.

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