$26M Lawsuit Highlights the Steep Risk of Design Delays for Architects

An architecture firm based in Atlanta, Georgia, is being accused of causing delays on a Hilton Columbus Downtown hotel project that led to $26 million in extra costs. In a lawsuit recently filed in Franklin County, Ohio, the owner of the 28-story hotel, which opened in September of 2022, claims that construction on the project was “anything but successful” and that the hotel was completed late and over-budget primarily due to the architect’s delayed delivery of plans and errors within those plans, the Columbus Dispatch reported April 3.

Detailed drawings were submitted 15 months late, the lawsuit claims, and contractors “had no choice” but to begin construction before receiving completed drawings. The lawsuit also alleges ongoing issues with the hotel as the owner, the Franklin County Convention Facilities Authority, continues to find and incur costs related to “design-related issues.” The firm, Cooper Carry, declined to comment and had not yet responded to the lawsuit, the publication reported.

“There are consequences across the board when a project gets delayed,” said John Wozny, Broker, Professional Liability, Burns & Wilcox, South Florida. “That is why it is essential to catch these issues early on. Delay costs can involve more hiring, more labor, more materials and more equipment. It prolongs the job, and it increases costs, sometimes very significantly.”

There are consequences across the board when a project gets delayed. … It prolongs the job and increases costs, sometimes very significantly.

Some of these costs, along with the legal defense expenses associated with lawsuits, can be covered by Architects & Engineers Professional Liability Insurance, which is essential for architecture firms and self-employed design professionals. 

“This is definitely an industry where large losses can occur,” said Abby Lavertu, Senior Underwriter, Professional Liability, Burns & Wilcox, Vancouver, British Columbia. “On a large project, like a high-rise condo, for example, the amount of loss exposure can be extremely high. It is really important to be aware of how much work is at risk.”

Breach of contract lawsuits ‘always a risk’

According to the Columbus Dispatch, the additional costs reportedly incurred due to the architect’s delays totaled $26 million, including $3.4 million in change orders, $2.9 million in lost profits and $3 million in contract extensions. In its lawsuit, the Franklin County Convention Facilities Authority is alleging breach of contract and seeking damages of more than $11.5 million.

“Breach of contract is always a risk” for architects and engineers, Lavertu said. Other types of lawsuits that can trigger coverage under Architects & Engineers Professional Liability Insurance, also known as Architects & Engineers Errors & Omissions (E&O) Insurance, include design errors and other mistakes made in the course of a professional’s work — such as a building that was not properly designed to meet fire codes and is later damaged in a fire.

“An architect can be found liable in that kind of situation,” she said. “Or, if a structural engineer did not review a junior engineer’s work, that could lead to a significant loss.”

Projects can also be significantly delayed due to errors, Wozny said. “When there is a delay, it often coincides with corrections that need to be made,” he said. “It is critical for architects and engineers to maintain Professional Liability Insurance for any potential design defects and project management errors, which can cause delays.”

In addition to legal defense, some Architects & Engineers Professional Liability Insurance policies can include coverage for subpoena assistance, expense reimbursement, claims assistance and more. “There are a lot of additional enhancements that many carriers provide,” he said.

Insurance may not cover subcontractors

In September of 2024, an architecture firm that worked on the Peterborough Regional Health Centre in Ontario, Canada, was sued over a leaky roof on the facility that required repairs costing $30 million, Peterborough Currents reported. The firm, however, claimed that the roof problems were the result of improper maintenance or errors by the general contractor and its subcontractors, the publication noted.

This is not an uncommon scenario, as design professionals are often named in lawsuits even when they may not be fully responsible for an issue, Lavertu said. The costs a firm could face when sued “ultimately depend on whether they are found liable,” she said, “but having E&O Insurance in place can help you with your legal fees and expenses, at a bare minimum.”

Architects and engineers can help limit their risk of losses related to a subcontractor’s work by requiring certificates of insurance from all subcontractors and having strong contracts in place. They should also review how their Architects & Engineers Professional Liability Insurance defines professional services. “Some policies include coverage for subcontractors and some do not,” Lavertu said.

According to Wozny, “it is essential for architects and engineers to maintain this coverage not only for the work they do, but they could also be dragged into claims that are the fault of their subcontractors.”

“It is really important for professionals to maintain both very strong protocols and continuous Professional Liability Insurance coverage,” he said.

Coverage for vicarious liability should also be reviewed, Wozny said, as design professionals are often sued over the actions of others working on a job, even if they were not directly involved in that aspect of the project.

“There are times on really large jobs where the architect or engineer is responsible for only a small portion of a project,” he said. “It is surprising to see how often vicarious liability claims come up in which the professional was not really responsible but got dragged into a lawsuit because of a subcontractor defect. Many of those claims at least require defense costs. This is one of the reasons why it is important for architects to have limitations of liability in their contracts and maintain strong risk management protocols.”

It is important for architects to have limitations of liability in their contracts and maintain strong risk management protocols.

Risks evolving amid AI integration

Another potential exposure for architects and engineers is artificial intelligence, which they are increasingly using for a variety of tasks. According to a 2024 report in Forbes, AI is set to “revolutionize” the field through generative AI design algorithms and other tools. This comes with its own set of risks and a growing need for Cyber & Privacy Liability Insurance, Wozny said.

“Architects are getting more involved with AI by the day, so there is an increasing cyber exposure,” he said. “It is becoming an essential tool for architects to not only speed up designs and prevent delays, but also to help improve project scheduling and enable architects to catch issues early on.”

While some Architects & Engineers Professional Liability Insurance policies include coverage for network security, many companies would need a separate Cyber & Privacy Liability Insurance policy, which can respond to data breaches, job delays due to cyberattacks, and more.

Design professionals should regularly review all their insurance policies with a specialized insurance broker, including whether they may require Excess Liability Insurance — especially given the risk of a lawsuit involving a large project.

“If the total payout on a loss exceeds your limits of insurance, that could bankrupt the company,” Lavertu said. “These kinds of massive lawsuits can be a huge reputational issue, as well. Depending on the actions that occurred, there could also be licensing issues and disciplinary action.”