|   Contact Us  |  
Green Building Movement Raises Some Construction Defect, Claims Concern
Source: INSURANCE JOURNAL, April 07, 2010
View Full Article
BEPAnews™ Article Recap:
New insurance products to protect innovative green construction products such as wind turbines, fuel cells and vegetative roofs are on the rise. But even those closest to the situation admit to being a bit, well, green, about the risks behind some of these environmentally-friendly and energy-efficient products and about some of the promises green builders are making.

The newer and more sophisticated the green building designs and products, the greater the uncertainty about the risks.

Construction Defect Problems

David Cohen, senior director of real estate for Commercial Insurance at Fireman's Fund Insurance Co., sees construction defect issues as one area of concern with green construction.

"What everyone always historically or traditional associates with construction risk is construction defects. Down the road, will there be any construction defect?" Cohen asked.

"I think it really depends on exactly what you're doing in terms of your building," Cohen said. "If you're building to the more basic level of LEED certification, for example, LEED certified or Silver level, you're probably not doing anything exotic in terms of the building's system or technology." In such cases, Cohen believes the building would pose no more risk for construction defect than a traditional building.

"Certainly any time you have new technology you've got that unknown potential risk or construction defect risk," Cohen said.

"Now people are starting to move beyond the solar engine, installing wind turbines either on the side of their building, on the roof to their building, in plazas, and that can create some potential risk," Cohen said.

Cohen referenced Adobe System's triple LEED Platinum corporate headquarters in San Jose, Calif., as a commercial building leader in the green market.

Cohen says Adobe Systems has always been one of the leaders in commercial green building standards and always pushes the envelope in green technologies.

Cohen says fuel cells typically are installed right outside the building and create high temperatures as they produce energy.

A Few Concerns Already

Wind and fuel cell energy in green buildings is yet in its infancy stage and risk exposure is a bit of an unknown, Cohen says.

One increasingly common green building element that creates concern from a risk management standpoint is vegetative roofing, according to Taylor. The claims involved a commercial property with a vegetative roof. The building was under construction when something happened to cause a leak in the vegetative roof.

Performance Promises

Environmental liability attorney Roecker says there are some not-so-obvious risks when it comes to green building to consider as well, including the failure of new products or the green building to meet promoted performance levels.

Attorney Roecker says if an architect designs a green building or the general contractor that builds it promises it will meet a certain standard, either a certain LEED certification level or will meet a certain energy reduction level, there could be liability if the building or product doesn't deliver on that promise.

The building owners did not receive certain tax credits because the building did not meet criteria for the LEED certification level. While the case never proceeded to trial, further green building litigation is anticipated.

To protect architect and engineers from future risks in green building, Argo Insurance Brokers developed the industry's first professional liability insurance program that protects both "traditional" and "green" design services.

Insurers' Interest

The green construction market accounted for just 2 percent of non-residential construction starts in 2005.

Zurich's Bitler believes that green coverage will be a standard coverage for commercial properties going into the future.

"All federal buildings and a lot of state buildings are now being built to some level of LEED standard," Bitler said. USGBC's Leadership in Energy and Environmental Design (LEED) program, is one certification program designed to measure green building performance.

Aon Environmental Group's Taylor agrees that green construction has become quite popular.

While many public and governmental buildings will wind up having some green certification requirements, Taylor wonders whether interest in green construction will be as sustainable in the commercial real estate world.

Fireman's Fund's Cohen continues to believe green risks are better risks.

"Policyholders who purchase our green insurance coverages perform better for us," Cohen said. Fireman's Fund's loss experience for its commercial green building coverages has been better by more than double-digit improvements, he said.

Carbon Offsets:No
Green Building:Yes
Energy Technology:
    Emerging Technologies

Adobe System
    San Jose,     CA
    LEED Building:Yes
    Energy Star Cert.:No
Circuit Court
    Somerset County,     MD
    LEED Building:Yes
    Energy Star Cert.:No

Roetzel & Andress

Bruce Bitler
Assistant Vice President

Zurich Commercial

David Cohen
Senior Director of Real Estate for Commercial Insu

Fireman's Fund Insurance Co.

Linda Giffin
Senior Vice President

Argo Insurance Brokers

Paul Roecker

Roetzel & Andress

Rod Taylor
Managing Director

Aon's Environmental Group

BEPI Published Date: April 15, 2010
View Full Article - Note, links to articles may be removed by the original source.

BEPAnews is devoted exclusively to energy conservation in Commercial Real Estate. the conversation with the thousands of subscribers who view our news.

Todays News, See all
  • Public hearing set on county PACE district

    OTSEGO COUNTY - The Otsego County Board of Commissioners will hold a public hearing on the establishment of a Property Assessed Clean Energy (PACE)...

  • Dane County Joins Pace Wisconsin Program

    Madison, Wis., July 06, 2017 (GLOBE NEWSWIRE) -- Dane County is 19th in the state to join PACE Wisconsin, a program which enables commercial property...

  • Guest commentary Kansas City, MO, has what it takes to use energy wisely

    Mayor Sly James of Kansas City joined mayors and governors across the nation to reclaim leadership on clean energy and climate change. President...

Most Read News, See all
  • March 28, 2017

    ‘Property assessed’ financing for solar panels reveal serious problems for Realtors, lenders

  • June 06, 2017

    Oakland, CA's Laney College Receives $3.6 Million Grant

  • June 06, 2017

    City of Fort Pierce, FL, and the SELF Offer Solutions for Commercial Property Improvements