The transition from traditional pen and paper design drawings to digitalized models began more than fifty years ago. Computer Aided Design (CAD) has been with us for a couple of decades and, more latterly, the last major milestone has been the widespread adoption of Building Information Modeling (BIM) for all design and construction disciplines, even though there is still not a common platform across the industry. The current evolution goes further. Technological tools continue to advance, but perhaps more importantly many design professionals are emerging as technology product designers and technology service providers. This creates new risk profiles not all of which are protected by traditional professional risks insurance policies. Designers must understand these new risks to properly manage and transfer them.

Technology as a Tool

Technological tools (CAD, BIM, and others) used to produce architectural and engineering designs generally do not present any challenges. Designers and their insurers have long recognized the integration of these tools into the professions. Based on our discussions with them, early misgivings about model fallibility, and even more so about data model sharing (for example between multiple building contractors and design professionals), appear not to have materialized. In fact, increased precision, clash detection, and the ability to design and construct virtually in multiple dimensions is widely believed to moderate, rather than increase risk. Insurers have recognized this, and nearly all insurance policy contracts cover the use of technological tools in design and construction delivery.

Technology as a Product

Technology products can be defined as technological solutions developed for single or multiple sales or mass distribution. In the design context, this can include a wide variety of products from those developed to aid in a specialized design process, to those intended to monitor and maintain built structures. Some designers strive to commercialize the fruits of their past labor by converting bespoke solutions designed for one client, into more widely adaptable and useful products, that can be sold to multiple clients.

What is the concern? Historically, professional risks insurers have been wary of any situation where one error is at risk to be manifest across multiple applications. From the insurer standpoint, the risks of paying multiple claims emanating from the same source are deemed too great and far outweigh the rewards of the premiums they collect. Such risks are certainly created when designers produce technology products for multiple sales or mass distribution.

Are there any solutions? Yes, but... most off the shelf insurance policies contain rigid exclusions for design of products intended for multiple sales or mass distribution. However, a small handful of forward-thinking insurers offer insurance policies that affirmatively cover technology products for architectural and engineering designers. These policies have existed for many years, but they have largely been a solution in search of a problem. More recently, these solutions have increasing relevance as the number of architectural and engineering designers are entering product design, either bundled as part of their professional services, or as standalone discreet products. Many insurers remain cautious and are unwilling to provide this coverage. Some may be willing to provide incremental coverage for very specific technology products, but for architectural or engineering designers with any appreciable scale in their product design offerings, the best solution is to partner with an insurer who has expertise at evaluating and providing affirmative insurance risk transfer. The best of these carriers also provides risk management counseling, to their insured clients, to help them mitigate their risks.

Technology as a Service

The third and most esoteric area of convergence between the technology and design professions is where architectural and engineering designers are providing technology as a service. Generally, these projects involve using technology solutions to monitor, operate and/or maintain built facilities or other tangible assets. One example is an engineering company which remotely monitors alternative energy facilities (solar and wind). On-site sensors provide constant data to the engineer’s software that, in turn, provides remote control for the energy facility. A second example is database maintenance in the form of regularly updated Geographic Information System (GIS) data fed from remote sensors to the engineer’s data facility to track coastal erosion. A third example is engineering firms who provide outsourced IT work (e.g., data storage and manipulation) for U.S. Federal Government entities. Generally, technology services are unique and specific as the above examples demonstrate. Many insurers are willing to cover these services conditional upon understanding of the associated professional risks exposures. Technology as a Service may be outside the definitions within professional risks insurance and such exposures should be disclosed and explained to insurers to establish coverage.

Artificial Intelligence (AI) or Machine Learning (ML)

Sometimes termed the fourth industrial revolution, this is all about software, automation, cyber systems, Artificial Intelligence (General and Narrow) and Machine Learning. Currently the EU AI Act, the first regulation on artificial intelligence, is pending and lots of territories beyond the EU are wanting to replicate the tenors of the legislation, either in whole or in part. The key aspect to the legislation is that if the open-source coding (hyper-parameters, etc.) are varied in any way, or the code from open-source, such as ChatGPT (an AI-powered language model developed by OpenAI), has been dropped into new solutions, then the person making those changes may be liable for the results of the AI or ML.

Additionally, the regulation seeks to establish intellectual property rights around the use of source code. AI and ML are very useful tools, and the recent publicity around the shortcomings of AI and ML should not stop the advancement of these in the architectural and engineering design space; however, be warned, AI and ML requires very careful monitoring around transformers (the type of artificial neural network architecture that is used to solve the problem of transduction or transformation of input sequences into output sequences in deep learning applications).

A Side Note

The insurance market at present has a limited number of underwriters with the skill and specialization to handle technology risks in general. Many have migrated to the Cyber market, as the urgency and perceived prestige and rewards, have outpaced the longer-established Technology E&O market. This means that it’s critical to partner with those insurers who retain this capability and raise emerging exposures with them as early as possible, to enable the underwriters to evaluate risks and provide solutions.

Contact

Aon values your feedback. To discuss any of the topics raised in this article, please contact Bob Rogers.





Bob Rogers
Managing Director
Architects & Engineers Practice Leader
Construction Professional Liability Practice within Construction & Infrastructure at Aon
Boston, MA