Sustainable Construction: The Changing Climate of Professional Liability Risk
By: Jeff Slivka, New Day Underwriting Managers, LLC
Posted on: http://www.irmi.com
The world of sustainable construction is constantly evolving with the introduction of new green construction products and the rising interest in Leadership in Energy and Environmental Design (LEED)-certified projects. Approximately 20 different states have green buildings codes with a new array of “eco-friendly” products seemingly being introduced every day. As a result, we are now seeing a rapidly changing climate of professional liability for architects, engineers, and contractors surrounding new “green” exposures.
However, in reality, these green risks are actually quite similar to traditional construction or non-green construction exposures, with the exception of building information modeling. This is because most of the risks are merely examples of elevated design innovations that use new or experimental products to significantly raise expectations of “living” building benefits.
For example, a LEED-certified hospital was recently completed on time and within budget. But, after several weeks of occupancy, the administration reported numerous warm and humid spots throughout the building. An investigation then determined that the heating, ventilation, and air-conditioning systems were all undersized, resulting in a restricted flow of air to various parts of the building. Design and installation errors, not green building, were then to blame for these problems and resulting litigation.
That said, what is “new” is the potential economic loss associated with achieving less than expected green levels or certification, resulting in lost tax credits and program funding. In the case of Southern Builders v. Shaw, a 23-unit condominium was constructed in Maryland. The project was to be designed and constructed to be LEED Silver certification. Although there are many facts and issues surrounding this case, simply put, the project did not achieve LEED Silver, and Shaw Development lost green tax credits under Maryland’s green incentive program. Shaw sued for the $635,000 in lost credits, and the matter settled out of court.
Big Expectations Based on Even Larger Promises
If common words such as “green design” or “sustainable construction” are researched on Google, Yahoo, or other popular search engines, the results are likely to include statements like “environmentally conscious engineering,” “historically sensitive innovation,” “creating opportunities through sustainability,” “energy-efficient,” and “green apartments rent up faster than others.” Although no one doubts that sustainable construction is an attractive concept, it should be understood that there is still a lot to be learned and understood.
An example includes the bamboo flooring of a “state-of-the-art” condominium project. The flooring started to buckle near completion. After some investigation, it was discovered that the “environmentally friendly” adhesive selected by the subcontractor was the cause. The flooring had to be totally replaced, costing about a month of additional building time and numerous other material expenses.
Similarly, vegetative roofing systems, water walls, geothermal heating and cooling systems, and solar panels all offer potential energy and cost savings. But, there are concerns. For instance, at one commercial building, a vegetative roofing system began to show structural problems after particularly heavy rainstorms. The problem was that the system was neither designed nor equipped to hold as much water as it had received. Is this another example of traditional design error or “new” sustainable design error?
Consequently, building owners must remain diligent about the processes and products used by design professionals and contractors to deliver the expected outcomes. This includes being mindful of deceptive advertising and marketing techniques like “greenwashing,” which entails overselling the environmental-friendly benefits of products and services. Does the product or process have the track record needed to bring certainty to the design and construction of the project?
Albeit, over the past 5 years, there had been great advancements in expertise, another consideration is the building industry’s general lack of green experience and expertise. To meet demand, it seems as if many firms rushed into sustainable projects without properly understanding the building codes, statutes, and other requirements currently being developed to address sustainable construction issues. Moreover, it appeared many were taking advantage of the simple phrase “green construction.” Never defined, it could have so many meanings.
Therefore, everyone involved should be wary of claims or demands that are uninsurable. In fact, catastrophic results can occur when firms guarantee that a building will be built to a certain LEED certification level or they contractually link occupant satisfaction with environmental design. There are actually documented instances of building tenants who were “promised” employees would be happier, healthier, and more productive once the green upgrades were completed, only to find that productivity was actually down after a year and that performance had little or nothing to do with building lighting, air quality, or architecture.
Finally, no one can deny that building “green” offers many positive advantages. However, it also comes with risks, and design professionals, contractors, and building owners who best understand and manage these risks will undoubtedly profit in this new environment.