What are data centers, and how might the rise of data centers impact professional liability exposure? Much attention has been paid to data centers in the media recently. Positive attention comes from the fact that they support the digital economy and make many systems we rely on possible, including artificial intelligence (AI) and various conveniences. Some raise concerns about environmental impact, including electricity and water use, but major players in the industry make efforts to address these concerns.¹ In terms of design and construction, data centers raise some unique challenges and exposures.

What exactly are they, though? Perhaps you have seen the T-Shirt: “There Is No Cloud, It’s Just Someone Else’s Computer.” Think of a data center as the other computer that is holding all of your (and many other people’s) photos, music, Google Drives, and other information. 

The Data Center Coalition defines a data center as “the foundation of the digital infrastructure on which our modern society and economy are built. Data centers are physical locations that organizations use to house their critical applications and data. Anything that takes place online ‘in the cloud’ is powered by a data center.”

The Coalition notes that: “[d]ata centers aggregate our collective computing demands—everything from sharing photos with friends and family to streaming our favorite shows to supporting online learning and storing important medical and financial information—efficiently and securely in one location."²

From a design and construction perspective, data centers are buildings that house computer storage systems and network infrastructures. These include servers, hard drives, and storage systems. Further, there needs to be an uninterrupted power supply to protect data infrastructures. This creates a lot of heat and, accordingly, cooling systems are needed.

Key concerns for design and construction of data centers include site selection, power availability, and low risk of natural disasters. The construction of the interior of a data center can be much more complicated than other construction because of the cooling systems, network cables, and security needed.^.3

Data center construction brings new potential liability exposure for design professionals and contractors, similar to the construction of cannabis production facilities or green build projects, because of the specialized knowledge and design that are required and the potential for significant damages in the event of design and/or construction errors or system failures as a result of the same. Data centers may have specific requirements, such as temperature stability, humidity control, and uptime needs.⁴ Cooling requirements could implicate Heating Ventilation and Air Conditioning (HVAC) systems, and design of these systems are typically within the purview of engineers who specialize in Mechanical, Electrical and Plumbing (MEP) systems. Additionally, claims of construction delays or consequential damages could be significant when associated with data center design and construction.

While data center design and construction brings new challenges for design professionals and contractors, traditional means of limiting exposure arguably still apply. New York, for example, recognizes that lengthy delays in complex construction projects are foreseeable. Further, New York generally enforces no-damages-for-delay clauses.⁵ The Nasdi v. Skanska case involved a dispute over work on the Bayonne Bridge between Staten Island and New Jersey. The court in that case observed that New York enforces clauses that prevent a plaintiff from suing a defendant over delays that occur while performing on a contract. New York courts have enforced such clauses even where a claim involved a 32-month delay in major construction projects including a museum and an annex for a sanitation project. Data centers are similarly large and involved construction projects, and it appears likely a New York court would enforce a no-damages-for-delay clause, in a data center construction context.

New York also enforces clauses in construction contracts that exclude consequential damages.⁶ The case of Eldor Contr. v. County of Nassau involved a multi-million dollar raw sewage plant improvement project. A relevant contract provision in that case provided that “[i]n no event … shall [the defendant] be liable for special, incidental, exemplary or consequential damages, including but not limited to, loss of profits or revenue … [and] downtime costs[.]” Downtime costs are a major concern for data center owners, so it is important to know New York law would likely enforce such a provision in a data center design and construction context.

Data center construction is growing in Texas.⁷ Limitation of liability clauses are enforced there.⁸ In Fox Elec. Co. v. Tone Guard, the Court reasoned that “…contracting parties can limit their liability in damages to a specified amount [and] it is immaterial whether a limitation of liability is a reasonable estimate of damages resulting from a breach[.]” This is a significant point in the context of data center construction, since they are large scale projects. Damages associated with a design professional’s act or omission in connection with work on a data center could easily far exceed the design professional’s fee for services. The fee for services is often the specified amount in a limitation of liability clause. Fortunately, it appears there is authority in Texas for a design professional to argue that their liability can be a specified amount that does not necessarily have to correlate with a reasonable estimate of damages in order to be enforceable. Exculpatory clauses are also enforced in Texas.⁹ In Derr Constr. Co. v. Houston, the Court held that “an exculpatory clause is enforceable unless one party is at a disadvantage in bargaining power and the contract is void as against public policy.” It is not plausible that a company that has the wherewithal to build a data center would be able to argue that it had less bargaining power than a design professional firm. Accordingly, an exculpatory clause would most likely be enforced. The same goes for waivers of claims for consequential damages.10 In Kiewit Offshore Servs. v. Dresser-Rand, the Court enforced a consequential damages provision that provided that each party “… waive any and all claims it may have against the other for consequential…damages, including but not limited to lost profits or business interruption.” Note that a party seeking to avoid being held liable for consequential damages may wish to be specific about what types of consequential damages are waived, such as lost profits associated with a diminished capacity to store data.

The Takeaway
Data centers are important to the growth of technology we use every day, but they present new exposures for design professionals and contractors. Although data center design and construction is an emerging frontier, traditional methods of mitigating risk (i.e., limitations of liability, no-damages-for-delay, and limitations on consequential damages) can potentially be utilized to shield design professionals and contractors if their contracts are well written and contain key exculpatory and/or risk transfer clauses. 
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^{1 See https://datacenters.google/operating-sustainably/}

^{2 See https://www.datacentercoalition.org/data-center-industry}

^{3  See https://www.autodesk.com/blogs/construction/data-center-construction/ Autodesk, A Guide to Data Center Construction, by Justin Lipsey, Updated March 24, 2026.} 

^{4 See Association of General Contractors 2026 Surety Bonding & Construction Risk Management Conference White Paper, Kiley Stackpole, Esq.}

^{5 See Nasdi, LLC v. Skanska Koch Inc. Kiewit Infrastructure Co. JV, 2024 U.S. App. LEXIS 7114 (2nd Cir. 2024).}

^{6 See Eldor Constr. Corp. v. County of Nassau, 272 A.D.2d 509 (2nd Dep’t. 2000).}

^{7 https://news.utexas.edu/2026/05/06/data-centers-are-growing-in-texas-but-big-questions-remain-about-water-use/}

^{8 See Fox Elec Co. v. Tone Guard, 861 S.W.2d 79 (2nd Cir. Ct. of Appeals 1993).}

^{9 See Derr Constr. Co. v. Houston, 846 S.W.2d 854 (14th Cir. Ct. of Appeals 1992).}

^{10 See Kiewit Offshore Servs. v. Dresser-Rand Glob. Servs., No. H-15-1299, 2016 U.S. Dist. LEXIS 117835 (S.D. Tex. Sep. 1, 2016) aff’d. 756 Fed. Appx. 334 (5th Cir. 2018).}