How Do Insurance Policies Cover Design Errors?
When a design flaw causes damage—whether in construction, product development, or engineering—a claim often follows that implicates both professional liability policies and their coverage obligations.
At Myers Longhofer, our experience working with design professionals and insurance carriers allows us to offer practical, informed guidance when design error claims arise. We focus on protecting your rights and interests throughout the claims process, providing clear advice and strong advocacy to help you manage legal challenges efficiently and confidently.
For design professionals in Kansas, getting a clear understanding of how various insurance policies respond—and how insurance defense becomes a central component—can lessen the financial and legal fallout. Here, we’ll explain what counts as a design error, when coverage applies, the critical role of insurance defense, and real-world steps to manage a potential claim.
Defining Design Errors Under Liability Policies
A design error is more than an imperfect outcome—it’s a failure to meet the recognized standard of care for a design professional in a similar scenario. Under Kansas law and common policy language, these errors may result in:
Property damage
Bodily injury
Economic loss connected to inadequate plans
Courts typically assess whether a competent professional would have performed differently. Importantly, liability policies must consider when a claim is triggered—such as when damage occurs during the policy period, even if flawed plans date from earlier.
Additionally, design errors can lead to costly litigation and lengthy disputes over coverage, often requiring careful analysis of policy terms, exclusions, and the timing of damages. Insurance defense attorneys play a crucial role in interpreting these factors to protect insured parties from unjust claims and minimize financial exposure.
Understanding how design errors interact with insurance coverage is essential for professionals seeking to safeguard their practice and assets.
Types of Liability Coverage for Design Professionals
Different insurance policies may respond to a design error, depending on facts and policy wording:
Professional liability (errors & omissions): Specifically insures against negligent acts or omissions in professional services.
Commercial general liability (CGL): Covers bodily injury or property damage, but may contain exclusionary language for professional work.
Builders risk / owner-controlled insurance programs: Often used during construction to cover design-related defects before project completion.
Excess/umbrella policies: Activate when general liability or professional coverage limits have been exceeded.
Each policy has unique triggers and exclusions. For example, a CGL policy might cover damage caused by defective design only if the damage extends beyond the work itself—such as a varied basement collapse rather than a faulty wall design.
Types of Damages Covered Under Design Error Claims
Damages claimed due to defective designs often fall into several categories:
Property damage such as structural collapse or waterproofing failures
Economic loss, including losses for project delays, repair costs, or lost use
Bodily injury, such as when a pedestrian injured due to faulty sidewalk design
Third-party claims, such as damages asserted by downstream contractors, tenants, or homeowners
Insurance policies often distinguish between “property damage” and “economic loss.” Many professional liability policies will cover economic loss, while a CGL policy may not—making insurance defense coverage essential when policy application is uncertain.
How Insurance Defense Plays a Central Role
When a claim is reported, insurance defense becomes essential. The insurance carrier assigned that obligation has several crucial duties:
Duty to defend: If allegations fall within policy language—even just potentially—insurance companies must provide legal representation at no cost to the insured.
Reservation of rights letters: Carriers may issue such letters, defending the insured while reserving the right to deny coverage later—often based on exclusions.
Coverage denials and coverage litigation: A denied claim may lead to lawsuits over whether the design error triggers policy coverage.
Settlements: Insurance carriers handle negotiation or settlement discussions, coordinating defense strategy around policy limits and coverage scope.
A solid insurance defense helps professionals avoid paying attorney fees upfront and creates leverage to challenge claims that fall outside coverage limits. Insurance defense attorneys work to protect the insured’s interests by scrutinizing the claim details, challenging any unsupported allegations, and assuring that all procedural requirements are met.
This thorough defense process can limit financial exposure and help preserve the insured’s reputation in the industry. By understanding policy nuances, insurance defense professionals can make informed decisions that impact the outcome of claims and potential litigation.
Common Coverage Exclusions That Impair Utility
Policyholders must be alert to exclusions that can reduce the value of coverage:
Known acts/errors: Issues known before policy inception are typically excluded.
Improper performance exclusion: Removes coverage for faulty execution, though conceptual faults may still qualify.
Contractual liability: If liability is assumed by contract, it may be carved out unless the policy adds an exception.
Late notice clause: Failure to report a claim in a timely manner may jeopardize coverage.
These exclusions highlight why insurance defense coverage needs close scrutiny. Even if indemnity isn't owed, carriers often still must provide defense unless specific exclusions or endorsements remove that requirement.
It’s important to note that some policies include sub-limits or separate provisions that can further limit coverage for design errors, making it essential for policyholders to review all terms carefully to avoid unexpected gaps in protection.
Steps to Take When a Design Error Claim Arises
Early action makes sure that the strongest defense under available insurance policies:
Notify all relevant carriers, including professional liability and CGL insurers.
Review each policy’s coverage terms, triggers, exclusions, and notice requirements.
Retain counsel skilled in insurance defense and design error litigation.
Coordinate legal strategy with your insurance broker and carriers.
Preserve documents, communications, project files, design drafts, and client instructions.
Evaluate additional exposure—such as project completion bonds or sub-contracted design work.
Early attention helps avoid gaps in coverage and supports a coherent defense in both technical and legal disputes.
Coordinating Defense Across Multiple Carriers
Multiple carriers can be involved in design error matters. Policyholders should remember:
Primary vs. excess policies: There’s a hierarchical process in which primary carriers defend first, and excess carriers may be triggered later.
Apportioning defense costs: Carriers might share defense costs—even with reservation of rights—for where multiple policies provide coverage.
Separate counsel: A broad-reaching insurance defense approach could require separate counsel when coverage issues conflict among insurers.
Effective coordination prevents delays, minimizes covered expense disputes, and maximizes policy value.
Real-World Case Examples in Kansas and Beyond
Consider a project where an architect submits deficient structural drawings, leading to wall collapse. The owner sues for damages, and the architect reports to the professional liability carrier. The carrier appoints defense counsel, issues a reservation of rights citing the known acts exclusion, and conducts discovery.
Simultaneously, the general liability carrier is notified and argues that the injury is due to faulty workmanship, which it excludes. This leads to coverage litigation over whether the design error triggered either policy. Having immediate insurance defense counsel helps manage this type of dispute without exposing professionals to immediate financial risk.
Contact Us Today
At Myers Longhofer, we proudly support clients in Overland Park, Kansas; Olathe, Kansas; Leawood, Kansas; Shawnee, Kansas; Johnson County, Kansas; and Kansas City, Missouri. Understanding how insurance policies cover design errors is vital to protecting your business and assets. If you face a design error claim, contact us today for trusted insurance defense guidance and strong advocacy tailored to your needs. We’re here to help.
