Design firms are under constant pressure to move projects forward. Clients demand speed. Contracts 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.
Over years of contract review and industry experience, certain types of provisions have emerged as what 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 language varies widely, and patterns emerge over time that consistently 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.
Risk enters through subtle wording choices that may seem inconsequential at first. For example, describing construction administration services as “inspection” rather than “observation” can elevate the standard of care. That single word can make a claim much more difficult to defend.
Certification or warranty language, often driven by lender requirements, can introduce similar exposure by requiring you to confirm conditions you neither control nor can reasonably verify.
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:
To avoid disputes with 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.
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:
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 jobsite safety, courts may impose liability for a workplace injury even if the design firm’s contract disclaims such responsibility.
To avoid unintended liability, brief team members on contract boundaries and encourage conduct that matches agreed-upon responsibilities.
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.
Addressing these questions early allows you to engage counsel, explain concerns clearly to the client and seek reasonable revisions. When those efforts fail, declining the work may be the most responsible decision you can make.
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 help protect your people, your coverage and your business.
Learn how Risk Strategies, part of the Brown & Brown team, supports A&E design firms in evaluating contract language, identifying uninsurable exposure, and aligning risk with available insurance solutions.
To connect with an A&E specialist, email aepro@risk-strategies.com or submit a request through our secure online form to discuss contract-related risk considerations and coverage strategies.
For over 20 years, Darren Black has advised architectural, engineering, and design-build firms as a professional liability insurance broker and risk management specialist. Drawing on his prior experience as a litigator and coverage counsel, Darren educates firms on managing contract-related insurance risks.