Construction claim trends in a changing risk landscape

Posted by & filed under Published Articles.

These emerging trends are challenging traditional construction risk management.

By Stephanie Thomas | August 14, 2025

As construction practices evolve to meet new environmental, technological and efficiency demands, so too do the associated risks.

Three emerging areas are giving rise to increasingly complex claims scenarios: solar farms, data centers, and modular construction. Each involves unique exposures, legal ambiguities and implications for underwriting and risk management.

Solar farms: Small damages, giant verdicts

As the renewable energy sector continues to grow worldwide, the construction of solar farms across America’s rural areas has triggered an uptick in high-severity pollution runoff claims. Though these claims often involve limited physical damage caused by silt or sediment runoff onto neighboring residential properties and waterways, they increasingly result in multi-million-dollar jury awards.

Solar farm construction involves clearing and grading large sections of land, often in rural communities. This phase of construction can lead to significant erosion and major sediment run-off into waterways and neighboring residential properties if the stormwater controls and drainage basins are inadequate. What might begin as a modest environmental incident can escalate into a highly litigious and emotionally charged dispute.

A landmark example of this trend is the Lumpkin Solar case, in which a Georgia jury awarded $135.5 million, including $125 million in punitive damages, to a couple whose private pond was contaminated by runoff during the construction of a nearby solar farm. The actual cost to remediate the damage was estimated at less than $1 million, but the verdict reflected deeper social dynamics: a strong jury inclination to penalize corporations thought to be infringing on rural livelihoods.

These high-dollar claims are rarely driven by catastrophic physical losses. Rather, they emerge from a mix of social inflation, the rise of third-party litigation funding and a growing public skepticism toward industrial-scale projects in rural settings — all resulting in nuclear jury verdicts, defined as verdicts in excess of $10 million. Plaintiffs’ attorneys have recognized this dynamic and are actively seeking similar cases, which is accelerating both the frequency and severity of these claims.

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Free Webinar: Could This Happen to You? A Compendium of Claim Tales and Lessons Learned: Season 2

Posted by & filed under Events.

Presented by:
Diane P. Mika, Senior Vice President, Risk Management Officer, Berkley Design Professional
Anthony Andersen, Senior Vice President, Professional Liability Claims Manager, Berkley Alliance Managers 
Lisa McKay, Assistant Vice President, Senior Claims Examiner, Berkley Alliance Managers 
Liz Molina, Assistant Vice President, Senior Claims Examiner, Berkley Alliance Managers 
Mark A. Froehlich, Esq. Assistant Vice President, Senior Claims Examiner, Berkley Alliance Managers 

Wednesday, December 4, 2024
10-11:15 AM Pacific
12-1:15 PM Central
1-2:15 PM Eastern

Earn Learning Units
Approved for 1.25 AIA Learning Units
Approved for 1.25 RCEP Professional Development Hours+
Health, Safety, and Welfare Qualified

Berkley DP policyholders who participate in this program can qualify for a 15% Risk Management Education credit. Contact your agent for further information*

Register Now

In Season 2 of “Could This Happen to You,” Berkley DP claims examiners discuss four new claim tales. Each episode sets the stage with the project type, delivery method, and parties involved. You’ll get the juicy details of the problems that arose and discover the realities of the final resolution and meaningful lessons learned, providing you with valuable insights to help avoid or mitigate similar situations. 

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Controlling Outcomes and Preserving Relationships Through the Mediation Process

Posted by & filed under BDP Blog.

By Lisa MacKay, Assistant Vice President, Senior Claims Examiner, Berkley Alliance Managers, a Berkley Company
Liz Molina, Assistant Vice President, Senior Claims Examiner, Berkley Alliance Managers, a Berkley Company

June 21, 2024

Controlling Outcomes and Preserving Relationships Through the Mediation Process

As claims handlers, we always look for reasonable opportunities to resolve our claims. Mediation is the most common and beneficial pathway to claims resolution. Most professional liability policies offer incentives for insureds to attend mediation and resolve their disputes. Moreover, mediation provides a means to foster and preserve relationships with insured clients. There are occasions when we can socialize, share some ideas, interact and even find common ground with other insurance professionals as well as attorneys. This ability to connect with others and with the help of a neutral third party or mediator, gives us some control over the outcome of a case and avoids the unknown risk of a decision being rendered by a judge or jury.

With social inflation on the rise and sometimes resulting in extreme jury awards, resolution through mediation is the best way to take the uncertainty and risk of the outcome out of the hands of the judge or jury. The interactive process promotes a free flow of information and allows parties to identify and discuss the strengths and weaknesses of the case in a confidential setting. The mediator assists the parties in exploring legal issues and in evaluating the recoverability of certain damage items that may not have been discussed. An effective mediator also helps to narrow the gap between alleged damages, which are sometimes overstated, and what would ultimately be recoverable to move the parties closer together and to assist them with becoming better informed to evaluate risk and exposure.

For many people, whether the case involves a personal or professional matter, having a dispute that rises to the level of a claim whether litigated or not, is a new and unfamiliar experience, and often “uncharted territory.” The claim and litigation process can be intimidating, uncomfortable, frustrating and disappointing. This experience is also true in mediation. For example in negotiations, unreasonable opening offers can lead to frustration and irritation and cause parties to become more entrenched and unwilling to concede their position. It is not a natural process to most and there is a lot of gamesmanship and strategy on all sides. We often have preliminary conversations with our insured clients and counsel to set the tone and keep an open mind as we prepare ourselves for unrealistic opening demands. The valuation of a case or position becomes more realistic after discussions or back-and-forth offers are made in mediation. The process itself may take more than one session, especially if the parties are entrenched, to allow them time to process the information and better evaluate risk and exposure.

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Limiting Risk with a Waiver of Consequential Damages Clause in Contracts

Posted by & filed under BDP Blog.

May 14, 2024

Each year, insurers, defense counsel and design professionals are faced with ever increasing damages sought in actions alleging breach of contract and negligence due to the design professional’s alleged error or omission. One reason for the inflation is the tendency by plaintiffs’ counsel to seek an ever-expanding list of damages, including direct and consequential damages.

Direct damages are the costs to repair or replace the error that was caused by the design professional’s negligence. However, plaintiffs’ counsel are also seeking special or indirect damages called “consequential damages”, which include things like lost rents, rental costs for replacement property, damages to business reputation or the loss of goodwill, down time or idle time, material escalations, home office overhead costs, additional energy costs, increased construction management/supervision costs and additional interest and finance charges. For example, the cost to complete unfinished work on time may be very small in comparison to the loss of operating revenue a client might claim as a result of late completion.

Effective risk management in the construction industry begins with drafting a contract that limits the design professional’s exposure to damages. Design professionals, whenever possible, should try to obtain a limitation of liability provision in their contracts so that their liability can be limited to their professional fee or a multiplier of the fee. However, some owners will not agree to such a provision, so design professionals should look to include a mutual wavier of consequential damages in their contracts. This would limit the design professional’s exposure for a loss only to the direct costs to repair or replace the error, which is important since consequential damages can be so out of proportion with the reward of a typical design contract.

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To Sub or Not to Sub

Posted by & filed under BDP Blog.

March 14, 2023

To sub or not to sub, that is the question.

Should a firm retain a subconsultant that flows through them on a project, or should a firm let the owner directly retain the other design professional?

It’s probably not the first time that an architect or engineer has seen this question posed, nor will it be the last.

I raise this question not because it is an exciting topic, but because it is a very relevant claim scenario that I have seen time and time again.

Here are some things to think about:

  • Has your client considered what it would do if its subconsultant stopped responding to phone calls or emails?
  • What would happen if the subconsultant simply shut its doors without notice to your client in the middle of a project?

I know that a firm would not think this scenario would happen to them, especially if the subconsultant is a firm that your client has worked with in the past and has a good relationship with. But it happens.

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The Benefits of Centralizing Your Claims and Risk Management Responsibilities

Posted by & filed under BDP Blog.

By Mark A. Froehlich
Assistant Vice President, Senior Claims Examiner
Berkley Alliance Managers, a Berkley Company

July 14, 2022

Centralizing claims and risk management responsibilities for architectural and engineering firms provides significant benefits. It saves time, reduces cost and improves outcomes.

Based on decades of managing complex architects and engineers professional liability claims, I recommend designating a specific individual as risk manager to supervise all claims and potential risk issues for your firm — regardless of the size of your firm.

I have worked with many architectural and engineering firms and I can confirm that having a designated risk manager in place is more efficient. Some firms establish a standalone risk manager role, while others assign risk management responsibilities to a firm leader.

Project managers are necessary to communicate details of specific project issues, but they are often too busy managing projects to also effectively manage claims. Alternatively, assigning this role to a firm leader or another designated person allows more efficient communication with brokers, insurers and attorneys.

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