How Contract Clauses Can Lead to Uninsurable Exposure for A&E Design Firms

Design firms are under constant pressure to move projects forward. Most customers demand speed. Contracts can arrive late. Terms are presented as standard or non-negotiable. In that environment, it can be tempting to accept unfavorable language just to keep work moving.

But not all contract clauses carry the same weight. Some fundamentally change the role your firm is agreeing to play.

What defines a deal-breaker clause in A&E design firm contracts

Over years of contract review and industry experience, certain types of provisions have emerged that AXA XL refers to in its Contract Guide as “deal breakers” — clauses that can introduce risks that are difficult to defend, insure, or unwind.

A deal breaker is any contract clause that transfers responsibility beyond professional negligence, assigns obligations you cannot control, or creates exposure that standard professional liability insurance was never intended to cover. These clauses often signal the need for deeper discussion, clarification, or revision before moving forward.

Recognizing and addressing such clauses early, before a contract is finalized, can help avoid unmanageable exposure and support more resilient professional practice.

Contract clauses that commonly create uninsurable exposure

Contract language varies widely, and patterns emerge over time that consistently can lead to disputes, uninsured losses, or strained professional relationships.

As contracts evolve, design firms are being asked to meet higher standards for climate resilience and broader professional responsibilities. Requirements for certifications, warranties, and guarantees — often extending beyond what firms can reasonably control or even verify — are becoming more common. This can shift responsibility for unknown (and unforeseen) site conditions, long-term performance, or even lender liability to the design firm, making careful contract review more important than ever.

Why professional liability insurance does not address contractual risk

It’s natural to assume that insurance can absorb contract risk, but contractual liability falls outside the scope of professional liability coverage. These policies are designed to respond to negligence, not to breaches of contractual promises. Clauses that guarantee outcomes, assume others’ responsibilities, or elevate standards of care can:

• Trigger coverage disputes
• Limit or exclude defense, forcing you to fund portions of legal costs yourself
• Leave you self-insuring exposure you never intended to assume and didn’t price for

To help avoid disputes with the insurer(s), it’s important for firms to recognize and address these clauses before contracts are finalized. The issue is rarely whether a claim might arise. Instead, it’s whether that claim will be defensible and insurable when it does.

How A&E design firms can reduce contract risk before work begins

Problematic clauses are more likely to sneak by when internal processes break down or when teams rush decisions. Before a project moves forward, you can reduce exposure by:

• Establishing a clear intake and approval process for customer-drafted contracts
• Separating business development pressure from final contract approval
• Having someone with risk and insurance insight review agreements
• Consulting with your risk advisor and legal counsel to review and negotiate contract terms
• Defining scope carefully, including responsibilities you aren’t assuming
• Reinforcing that project teams shouldn’t expand contractual obligations through conduct

Be aware that even a well-drafted contract can be modified by project teams’ actions in the field. For example, if a project manager regularly provides input on matters involving job-site safety, courts may impose liability for a workplace injury even if the design firm’s contract disclaims such responsibility.

To avoid unintended liability, brief teammates on contract boundaries and encourage conduct that matches agreed-upon responsibilities.

Knowing when contract risk outweighs opportunity

Walking away from a project is never easy, especially in a competitive market. But resilience in professional practice also means knowing when contractual risk outweighs opportunity.

Deal-breaker clauses often appear early, during proposal review or initial negotiations. At that point, the question becomes whether the risk aligns with how your firm operates, prices work, and manages liability.

When evaluating whether to proceed, it can be helpful to ask:

• Are we being asked to assume responsibility we cannot control, verify, defend, or insure?
• Does this contract elevate our standard of care or expand liability beyond professional negligence?
• Is the additional risk reflected in scope, fees, staffing, or insurance, or are we absorbing it uncompensated?
• If this clause were challenged later, would we be comfortable defending it as a reasonable business decision?

Addressing these questions early allows you to engage counsel, explain concerns clearly to the customer, and seek reasonable revisions. When those efforts fail, declining the work may be the most responsible decision you can make.

Contracts as a core component of resilient A&E practice

Contract language shapes more than project terms. It defines responsibility, defensibility, and long-term risk.

Approach contracts with the same discipline you apply to professional practice. Early review, clear boundaries, and a willingness to walk away to help protect your people, your coverage, and your business.

Learn more about managing contract language risk for A&E design firms

Learn how the Brown & Brown team helps support A&E design firms in evaluating contract language, identifying problematic exposures, and aligning risk with available insurance solutions.

To connect with an A&E specialist, submit a request through our secure online form to discuss contract-related risk considerations and coverage strategies.