When things go right, a Los Angeles architect like Roland Wiley can make as much as 8% profit on the fees he receives for designing a building.
These days, however, fully half of that potential profit must go toward insuring that nothing goes wrong.
When Wiley recently designed a fast-food restaurant in Baldwin Hills, his profit on the job was cut in half by premiums on the liability insurance he had bought to protect himself against claims that his design was flawed.
The difficulty of being able to afford the increasingly steep professional liability insurance premiums is not unique to Wiley's architectural firm.
High premiums have become a burden throughout the architectural profession, and are particularly onerous for small firms--those with fewer than five employees--which, according to the American Institute of Architects (AIA), make up 81% of the firms in California.
Pushed up by the rising number of malpractice lawsuits aimed at architects, the higher premiums have forced many firms to employ defensive tactics, which some architects insist have forever changed the profession.
"Liability insurance is a very sore point in our profession," said Wiley, a principal at RAW Architecture, an 11-person firm in Los Angeles. "Liability fees are extremely prohibitive."
As a result of high liability insurance costs, many small, intermediate and even some large firms have changed the way they work. Some architects say they have reduced their roles in overseeing the construction of their projects in the hope that less involvement will mean less liability.
Other architects have refused to involve themselves at all in certain types of projects--such as condominium complexes, which are considered extremely high risk for lawsuits within the design profession. And many carry no professional liability insurance at all.
Known in the profession as errors-and-omissions coverage, or "E & O," the insurance is a type of malpractice coverage that protects architects financially from negligence in design and supervision during construction.
According to a 1987 survey by insurer Victor O. Schinnerer, one of the nation's largest writers of E & O, 30 liability claims are filed each year for every 100 U.S. architecture firms.
From the early 1960s to the mid-1980s, he said, the annual number of claims per 100 firms jumped from 12.5 to 42, before declining to 30 in 1987.
Architects are concerned not only about liability lawsuits regarding current projects, but with projects that have been completed for years.
In third-party liability, for example, in which a person is injured on a building's premises--the architect can be sued regardless of how many years have passed since the building was designed and constructed.
"We bear a large burden that we should not bear," said Fernando Juarez, president of the Los Angeles chapter of the AIA. "And in most cases, there's no statute of limitations, so for the rest of our lives, we are vulnerable."
While insurance rates have stabilized after an upsurge between 1984 and 1987, rates remain high enough to be unaffordable for many firms. Some architects only buy insurance on a per-job basis, passing the cost on to the client.
"I think the appropriate way to go these days is on a per-job basis," said architect Margo Hebald-Heyman of Los Angeles, who runs her own one-person practice. "This way the owner can pay the cost of the insurance. . . ."
But most small firms have concluded that insurance coverage is costlier than the risk of potential lawsuits--even though a successful claim could wipe them out. Many have decided that the best protection is none at all--based on the theory that the insurance itself attracts lawsuits.
Some architects argue that the only weapons against such costs are legal limitations on the kinds of lawsuits that architects can be liable for.
But lawyers contend that architects, like other professionals, must bear full responsibility for what they design, even if this forces reluctant change on the profession.
"Any time something goes wrong with a project, we are compelled to sue anyone who is involved in putting it together," said one attorney who has represented several homeowners' associations in their claims against architects involved in designing and building condominium complexes.
"Then, through the discovery process, it becomes clear who is responsible."
Claims take many forms, ranging from the mundane leaky faucet to someone slipping on the premises of a building 30 years after it was completed, to something as potentially tragic as a building collapsing when the metal bracing is improperly designed or constructed.
Architects, insurance professionals and lawyers agree that clear cases of errors or omissions by an architect are responsible for only 10% to 15% of those claims filed.
Seventy-five percent of claims filed, they say, are weak and unsubstantiated, with absolute fault virtually impossible to discern.