I am considering the cost of insurance increases to
perform a condo design. I found costs exceeding my design fees by at least
200%. I have made some assumptions that I would like to have comments on.
What is the usual increase of insurance cost for one project???
This is highly variable. If
you are discussing "project insurance", separate coverage for this one
project, you will find it is extremely expensive and virtually
unobtainable. If the project just becomes one of your normal projects,
adding condos to your mix can be minor if it is an isolated instance and
does not represent a large percentage of your annual gross, usually less
than 10%. The problem is this is 10% every year, not just the year you
did the condo project. The scale escalates rapidly from there, and if
condos start to represent more than 25% of your annual gross you
may find yourself un-insurable. Doubling your
annual insurance costs can happen very quickly.
Extra insurance payments from one project will
be for about 10 years. I wonder if litigation is more likely to occur as
time nears to the 10 year mark.. ????
situation in CA in so bad that if the HOA does not initiate a lawsuit, the
lawyers threaten to sue the HOA for negligence in protecting the rights of
the members. There are even tickler services that lawyers subscribe
too that will notify the attorney as the latent period approaches for all
peritted condo projects.
Insurance increase estimates needs include
the time that the designer will spends in settlement conferences,
depositions and possible trial. Maybe another 30% of the time it took
to design it????
Good luck. I would be
very hesitant to try and estimate how much it will cost in tomorrows dollars
to get out of the lawsuits and try and add it to the fee. There is no
way you will negotiate enough additional funds to cover your losses.
No matter how much you try and negotiate for there will be someone who will
do the job without all the protections and cost factors.
Go see the information at…
www.structuralist.net is by
I encourage our profession to take on condo and
apartment designs. There is a need for the housing. Make sure that the
client understands that the larger fees are to pay extra for E&O
insurance. Understand that the increased E&O fees are reasonable,
because most condos are going into litigation regardless of the quality of
Get back to us in a year and
let us know how many of these projects you were able to negotiate with
adequate fees. I agree that there is a need for the housing, but this
does not mean you are going to find enlightened developers who can and will
pay the additional costs. The developer will be an LLP, and will make
some minor name variation as a new company every few years to protect
themselves from the liability. You on the other hand cannot do this as
a design professional and will get hit with the liability regardless.
Developers now must get an over-all coverage that
might also include the Structural Engineer.
Wrap insurance is another
often mis-understood aspect of condo projects. The wrap policy
protects the developer and contractors, but very rarely will wrap coverage
extend to the design professionals. Even if it does extend to the
design professionals, the term of coverage is usually not sufficient to
include the design work performed prior to construction or will not extend
long enough to cover the full latent period for the design professional.
Go see structuralist.net.
Structural Engineer of California