NEW YORK, NY - It seemed to be a straightforward task: An owner needed a new facility and wanted it to be sustainable and employee-friendly. The architect provided a design that included extensive daylighting systems to provide more natural light. The problem? The owner was a defense contractor, and the federal government determined that large windows and skylights posed a security risk. It threatened to revoke the owner's security rating, cancel existing contracts and bar future contracts. The owner sued the architect.
"It was a typical case where a government contractor had outgrown its old facility and wanted a new, employee-friendly building," says Frank Musica, senior risk management attorney for Victor O. Schinnerer & Co., a Chevy Chase, Md.-based underwriting manager for insurance giant CNA's professional liability program. Musica, who has assembled a large collection of claims related to green building, notes that this claim "went away" after the owner was able to sell the building at a premium price. "There has not been a major court ruling on a green-building risk yet, but there will be," he says. And the insurance industry is concerned about risks associated with building green, sources say.
The scope of the risks and concerns over building green can be seen in a new insurance study by Marsh, a New York City-based broker and risk manager. The emerging risks of claims include failure to obtain the promised green certification for a project, failure of a green design to deliver expected results, problems with new products and designs, and delays from lack of green-product availability, the study found.
The study also discovered that there are no new insurance products to address risks specific to the green market. "In the general-liability arena, underwriters are terrified," says Catha Pavloff, head of Marsh's Green Team and author of the report. She says underwriters have yet to gauge the risks unique to green building and do not know how to position or price products covering liability in that market.
"The number and scope of the risks have not been sorted out yet, and they probably won't be for another 10 to 15 years," says Stephen Bushnell, a director at Novato, Calif.-based insurance giant Firemen's Fund. In October 2006, it introduced a Green-Gard suite of property-insurance products to cover green buildings certified under the U.S. Green Building Council's Leadership in Energy and Environmental Design program, but it does not have a green-building liability product. "I don't think any of our competitors have introduced liability products yet, either," Bushnell says.
The risks of building green only now are being assessed seriously. "In the early stages of the green movement, it was OK not to grapple with risk issues because there wasn't that much at stake," says Edward B. Gentilcore, partner in Duane Morris LLP, a Pittsburgh-based law firm. But now, failure to achieve LEED certification or comply with local sustainability laws may place such things as tax incentives, occupancy allowances and premium-rate leases at risk, he says.
Source: Construction.com