| Submitted by Lisa Colon Heron
As “Green Building” initiatives gather steam, the insurance industry is responding to creating insurance products that respond to the risks associated with building green. The insurance industry has been slowly responding to the needs of owners, developers, and design professionals who are building green. Builder’s Risk Products The Firemen’s Fund has a “Green Amendment” endorsement that addresses delay of occupancy or use. This product covers “green” soft costs for additional expenses incurred after a covered loss. Such costs could include, diverting debris to recycling, flushing out the reconstructed space with fresh air or renegotiating with the U.S. Green Building Council (“USGBC”). There is also coverage for loss of net earnings for alternative power or water systems if completed and operational prior to loss. Zurich N.A. offers a “Better Green” – builder’s risk endorsement. This product applies to insured projects that incorporate products, building features or building techniques from one or both LEED or Green Globe. Coverage extensions can include payment or expenses associated with: air quality management; consulting with a LEED accredited professional; building commissioning and debris recycling. The endorsement allows for reconstruction based on the current LEED rating criteria in force at the time of loss, not when the project was designed. Property Coverage Green buildings have special qualities which often require coverage enhancements to standard insurance policies. Some unique issues could include the costs of alternative water and energy systems, business interruption and the cost of building commissioning. The Firemen’s Fund offers the “Green Upgrade Coverage.” This policy allows for replacement of standard systems and materials with green alternatives if there is a loss, for example, non-toxic paint and carpets. Firemen’s Fund also offers its “Green Certified Building Coverage.” This product applies to buildings that are already certified. It provides coverage for the costs to hire a LEED professional and loss of income incurred through the use of alternative power generating equipment. Lexington has a “Green Endorsement.” It provides coverage for commercial and residential policyholders to rebuild an insured building and replace certain personal property with sustainable products. Liberty Mutual offers “Green Select” which is a property policy endorsement that gives customers a variety of green coverage such as the costs to recertify a building one level higher than its previous certification in the LEED program. Design Firm Professional Liability Coverage Much of the risk associated with green building comes from design services. To date the full extent of these risks remain unknown. The AIA B214-2007 provides the architect’s scope of services for LEED certification; however, it does not identify the consequences for failing to meet LEED certification goals. The industry is concerned that the addition of ethical and/or contractual requirements related to sustainable design may have an impact on the legal standard of care raising it above the negligent standard that is covered by professional liability insurance. Agro Insurance Group offers a comprehensive insurance solution for architects and engineers servicing green developers and owners. The product includes green design endorsements, retroactive coverage for past acts, mold and pollution coverage, and coverage for punitive damages. Argo advertises premium discounts for USGBC Members. Lloyd’s of London is the underwriter. Unique about the policy is the expanded definition of “professional services” to include technical consulting, site selection and water efficiency. It includes coverage for guarantees and warranties of LEED certification. Currently there are no casualty coverage products on the market. The insurance industry has yet to respond. The risks are high as there is a lack of appropriately qualified and experienced contractors and the products are processes are new and untested. Likewise, the surety market has not responded with any products relating to possible risks of green building. It is easy to foresee performance bond claims for failure to meet LEED certification. Many have been paying close attention to the DC Green Building Act of 2006. The act required a performance bond as a guarantee that public and private development projects beginning in 2012 will achieve LEED certification. Many questioned this requirement as there are currently no performance bonds guaranteeing LEED certification. In December 2009 the D.C. Council amended the act to replace “performance bond’ with the word “bond.” The revision does not solve the problem as there are still no bonds products that guarantee LEED certification. Lisa Colon Heron is an associate with Smith Currie & Hancock. Lisa is Board Certified in Construction Law by the Florida Bar. Lisa has experience in a wide range of construction disputes ranging from lien law, contract disputes, government contracting, bid protests and mistakes, Miller Act bonds, surety, condominium construction, licensing and arbitration. Lisa deeply immersed in matters relating to small business, equal employment opportunity and disadvantaged business enterprises. She has lectured on a variety of construction topics including key construction clauses, construction insurance issues, Florida Statute 558, construction lien law and condominium statutory warranties. |
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On July 13, 2007, Governor Charlie Crist signed three Executive Orders during the Serve to Preserve Florida Summit on Global Climate Change. The three Executive Orders “will guide Florida to reduce green house gases, increase efficiency and pursue more renewable and alternative energy sources, such as solar and wind technologies, ethanol and hydrogen.” The spirit of these executive orders was largely put into action in the 2008 legislative sessions culminating in many directives that will impact our clients and our practices in the years to come. Some of the highlights include the following mandates: All new state buildings must be built in accordance with the U.S. Green Building Council’s Leadership in Energy and Environmental Design for New Construction (LEED-NC) standards. Leadership in Energy and Environmental Design for Existing Buildings (LEED-EB) standards must be implemented for all existing state buildings. Florida’s 2008 Energy Act created a state definition of green building and started the ball rolling on several initiatives including increased energy efficiency in the Florida Energy Code and the legislative authority for the development of the Florida Renewable Portfolio standard. The Florida legislature passed on taking related action in the 2009 session.




