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What are the key risk allocation issues that may be impacted by the use of Building Information Modeling (BIM) on a specific construction project?   According to some attorneys and commentators, the risks unique to BIM are minimal and more than offset by its many benefits.  For example, my friend, attorney Rick Lowe, writes: “When all of these issues are analyzed, the perceived legal risks in using 3D modeling melt away and are outweighed by the obvious benefits of clash detection and greater project collaboration. It should only be a matter of time before insurers offer discounts to encourage clients to wear the clash-detection ‘safety belts’ of 3D modeling.  Ultimately, the question will morph into whether team leaders actually increase risks by not using 3D modeling, much like not using seat belts.”(1)

While underwriters may agree that there are benefits of early conflict detection and resolution through 3D modeling, they are less likely to see how they can underwrite their single insured, who has a minor participation in the BIM model, and who may pick up full responsibility and liability for claims arising out of mistakes caused by use of or reliance on that model.  The challenge for the insurer is that this scenario resembles insuring someone “for all damages caused in whole or in part by their acts, errors or omissions.”

The courts interpret language of this type to mean the responsible party is liable for all damages arising out of the acts of all parties involved in a transaction, so long as the assuming party was responsible to any degree for the resulting loss or damage.   The collaboration of contractors and subcontractors in the design has the potential to create uninsurable professional liability risks for themselves, as well as the design professionals, where BIM is used for design and construction of a project.  Similarly, the collaboration of the design professionals in the means, methods and procedures of construction has the potential to create uninsured general liability risks for the design professionals.  In fact, both professional liability and general liability risks may be difficult to insure in projects where BIM is utilized.

Risks as Viewed by a Professional Liability and Environment Insurance Broker

Many serious risk allocation and insurance concerns have been raised by the managing director of Aon Environmental Insurance Services Group, Rodney J. Taylor, in a white paper entitled: “Professional Liability Risks in BIM Applications:  If BIM is Here to Stay, How Can We Insure Errors and Omissions?” (2)   Because of the major role he plays in one of the most significant insurance brokers for construction industry, we should consider carefully his view of the impact of BIM risks.  Rather than paraphrase or edit his comments, I will quote him directly:

Reliance on the information developed and maintained in a BIM system raises questions concerning the role of the architect in performing professional services associated with the construction process.  With systems that are capable of generating beam sizes and concrete thickness from three-dimensional models, who is responsible for the specification of the final elements incorporated into a structure designed and built with BIM technology?  Is the answer the same if the architect’s data is supplemented by data from the contractors, vendors and the owner that result in the selection of different elements from those originally specified by the architect and/or the BIM system?

Over-reliance on BIM technology presents a chance for heightened liability on the part of design professional if the information being input into a BIM system is incorrect or the software processes it incorrectly. (3)  Some architects and structural experts fear that this will result in catastrophic failures where no human judgment is applied after the fundamental construction components have been selected by computer programs based on the architect’s design parameters.  There is also fear that the new breed of architects that interface with the BIM systems may lack field experience and “street-sense”.  This could lead to construction using materials and systems that experienced personnel would intuitively understand to be unworkable.

Legal issues will also arise in determining responsibility for design errors where greater collaboration among the construction team spreads decision-making for design elements beyond the traditional set of design professionals. Liability may depend on what information is included in the database; who has the ability to add or change data and how much reliance contractors place on the output from the BIM system.  With the lines of responsibility blurred, professional liability risks may spread from the traditional design professionals to include contractors, subcontractors and even building owners that alter the data in the BIM databases.

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Another question that has been asked with respect to the use of BIM systems is whether they alter the standard of care applied to design professionals for their work in developing building concepts and specifications.  It is important to understand that BIM does not promise “perfect” drawings.  The work of the architects and engineers is still subject to errors that can result in change orders during construction or future structural problems.  The owner still needs to set aside a contingency fund for construction coordination issues that arise during construction * * *.

In his White Paper, Mr. Taylor also makes several suggestions for design professionals that, if followed, may facilitate the availability of insurance to cover the risks arising out of BIM.  If a design professional’s current policy does not provide affirmative coverage for BIM, it should, at a minimum, not contain an exclusion expressly excluding claims arising out of BIM.  An astute underwriter will want to inquire as to the following:

(1) Is the design professional obtaining risk allocation clauses in its contracts stating that the use of BIM is not intended to alter the normal standard of care applicable to the design professional’s services?

(2) Who can input data into the BIM model and can that affect the data or the results of the data provided by the design professional?

(3) If the design professional’s BIM content can be altered by future decisions of the Owner or contractors, is there a contractual indemnity provision to protect the design professional against liability resulting from those changes?

(4) Does the design professional’s contract with its owner/client include a third-party beneficiary clause stating that use of the BIM model is not intended to create any contractual relationship with third parties (e.g., contractors and suppliers) that may also be using the model?

(5)  Does the design professional contract include a waiver of consequential (and even direct) damages resulting from flaws or failure of a BIM system for which it was not responsible? (4)

Footnotes:

1) Richard H. Lowe, Constructor Magazine, January/February 2007 (McGraw-Hill Co.).

2) Rodney J. Taylor, J.D, P.E., CPCU, CLU , ARM – Director , Professional Liability Risks in BIM Applications,  AON Risk Services, unpublished white paper (December 14, 2007), pages 7-9.

3)  Gary Prather, Building Information Modeling:  The Wave of the Future?, INSIGHT, September 18, 2007 .

4)  See Taylor, Professional Liability Risks in BIM Applications, supra, pages 8-10 for additional risk management suggestions from the insurance professional’s perspective.

About the author: By: J. Kent Holland, Jr. – (with attribution to Rod Taylor – AON) (Short excerpt from ABA Presentation to ABA Forum on the Construction Industry – Winter Conference (January 15-16, 2009 – Bonita Springs, FL)

J. Kent Holland is a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is also founder and president of ConstructionRisk, LLC, a consulting firm providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report at www.ConstructionRisk.com (Jan 2009).