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Christopher,
I have an Architect-led Design-build firm in San Francisco and have been practicing with this project delivery method for fifteen years. Obtaining E&O insurance has always been extraordinarily difficult.
We have two separate Sub-S Corporations set up; one is for Tekton Architecture and the other is for Artisan Builders Corporation (the construction arm for Tekton). Each corporation has its own professional liability insurance (Tekton has an E&O policy and Artisan has a general liability program). We use completely separate agreements with each corporation to firmly establish a line in the sand where the architecture stops and the construction begins.
We build about 85-90% of what we design. All the team members essentially work for both companies based on the task they are performing. Sometimes we receive one check per pay period, sometimes we receive two checks per pay period.
The main point with the two separate Sub-S corporations is that they each contract individually and separately with the client, there is no single design-build agreement (this not a favorable place to be). The E&O carriers will block you out if you do everything under one roof, i.e., one company. My greatest problem with my own E&O program is that I have an ownership position with a separate construction company. This places me out of the box and into a "high-risk" arena with regards to potential liability. My E&O policy premiums went from astronomical to now barely manageable and are at least 50% higher than someone who only does straight architecture.
Unfortunately, the actuary statistical modeling the insurance industry has on this project delivery is really in its infancy so the premiums are on a very conservative weighting scale. This is the price you pay to work as a "master-builder".
Please feel free to reach out to me for further discussion if I can be of any additional help in navigating through this quagmire.
All the best.
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James Walbridge AIA
Tekton Architecture
San Francisco CA
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