Claim Severity in A&E Professional Liability Climbs Even as Frequency Holds Steady

Victor found that average claim severity in its North American architects and engineers portfolio rose roughly 62% in nominal terms over the past decade even as claim frequency stayed flat or declined in several segments.
By: | November 5, 2026
architect and engineer reviewing plans at site

Professional liability claims against architects and engineers are not becoming more common, but they are becoming far more expensive to defend and resolve, according to Victor Insurance Managers’ 2026 A&E Cost of Risk Report.

Across Victor’s U.S. portfolio, average claim severity increased approximately 62% in nominal dollars between the rolling 10-year periods of 2006-2015 and 2016-2025, or about 19% after adjusting for inflation. Engineering firms saw an inflation-adjusted increase of roughly 22%, while architecture firms saw about 13%.

Canada showed a similar pattern, with severity up approximately 64% in nominal dollars over the same periods, including a 109% jump for multidisciplinary firms and 72% for structural engineering firms. The report said average indemnity paid on all A&E claims closed in 2025 was 94% higher than on claims closed in 2016.

Defense Costs and Fault Allocation Add to the Bill

Claims that close without any indemnity payment still carry substantial cost, the report found. Approximately 32% of claims in Victor’s U.S. A&E portfolio from 2016-2025 were expense-only, yet they generated nearly $220 million in defense and allocated loss adjustment expense.

That finding aligns with Ames & Gough’s 2026 survey of leading A&E professional liability insurers, in which 93% of respondents said rising defense costs were materially affecting claim severity, citing more aggressive claim prosecution, greater use of eDiscovery and expert witnesses, longer resolution times, and higher counsel and vendor costs.

Fault allocation does not limit exposure either, according to Victor’s report. Between 2016 and 2025, Victor paid approximately $28.2 million in indemnity on closed U.S. claims in which the insured’s assessed liability was less than 50%, reflecting how settlement dynamics, contractual relationships, and joint and several exposure can push payments above a firm’s proportional share of responsibility.

Project Economics and the Litigation Environment Are Driving Costs Higher

Several structural forces are inflating A&E claim costs, the report said. Construction input prices rose more than 45% between February 2020 and February 2026, directly raising the cost of corrective work such as labor, materials, demolition, and redesign. At the same time, projects valued above $1 billion represented more than 18% of U.S. non-residential construction dollars in a recent 12-month period, compared with approximately 10% five years earlier, meaning a single professional error can carry outsized financial consequences.

Social inflation compounds the effect. Swiss Re’s sigma research found that U.S. social inflation averaged 5.4% annually from 2017 to 2022, compared with economic inflation of 3.7%, contributing to rising liability claim costs.

The report also pointed to expanding delivery models, noting that the Design-Build Institute of America projects design-build will account for 50% of U.S. construction spending by 2028, which can complicate questions of decision-making authority and responsibility when disputes arise.

States with the largest concentrations of so-called nuclear verdicts, those of $10 million or more, including California, Florida, New York and Texas, also represent major construction markets, according to a 2024 U.S. Chamber of Commerce Institute for Legal Reform study covering 2013 through 2022, the report noted.

Workforce shortages add further pressure: approximately 288,000 U.S. construction positions remained unfilled in 2024, and 51% of engineering consulting firms reported declining work because qualified staff were unavailable, per the report. Meanwhile, a historic infrastructure investment cycle, including roughly $1.2 trillion authorized under the Infrastructure Investment and Jobs Act, means many projects remain in planning or phased implementation for years, exposing earlier professional judgments to later scrutiny under changed conditions.

The report concluded that professional liability rate changes have not always kept pace with rising loss trends across errors and omissions markets. In the first half of 2026, the U.S. insurance industry reported a 65.1% direct incurred loss ratio for the “other liability” category, which includes professional liability, up from 64.3% in the same period a year earlier, with rising claim severity and social inflation cited as continuing drivers of deterioration.

Obtain the full report here. & 

The R&I Editorial Team can be reached at [email protected].

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