Environmental liability concerns can serve as major deal breakers during commercial real estate sales and transfers. While sellers want freedom from environmental liability issues after the sale, buyers want to avoid the many challenges associated with contaminated properties.

For example, a shopping center was recently purchased from an owner who had held the complex for approximately five years. After the transaction was completed, the new owner implemented a property expansion and capital improvement project. During construction, contaminated soil and groundwater were discovered as a remnant from a former dry-cleaning operation.

Sustainable construction is rapidly expanding with the continued development of green codes and eco-friendly building materials. Championing the movement is the United States Green Building Council, whose Leadership in Energy and Environmental Design (LEED) certification system has become the benchmark for energy efficiency and environmentally safe construction.

Building information modeling technology eases the interaction between the owner, the design team and the general contractor, and that can raise the risk of higher professional liability exposures.

Many contractors view insurance as a hefty expense that’s filed away and forgotten until the broker arrives a year later to renew the process. Sure, there is a collective sigh of relief that coverage exists when a claim occurs. But, business owners often think, “I’ve hardly had any claims in all my years in business. Why don’t I just invest the money in something that offers a little payback?”

In reality, contractors don’t necessarily want to see “payback” in the way of claims coverage. Other alternatives, including partnering with insurers, can help companies avoid costly and time-consuming mishaps. Proactive loss control and claims management services actually can help businesses become more profitable.

So much is going on in the world of sustainable construction, green construction products, LEED (Leadership in Energy and Environmental Design) and other green initiatives–and all these activities appear to be moving fast.

Green-building codes have now been created for approximately 20 states. New “eco-friendly” products are being created on what seems to be a daily basis.

“Green” is the new mantra for many institutions. School districts as well as colleges and universities across the country are constantly searching for new ways to reduce energy use, waste and the harmful greenhouse gas emissions emitted into the environment.

In fact long before “carbon footprint” became a common phrase, educational Institutions nationwide have been concerned about the possible environmental impact and/or liabilities produced by their activities. This includes the growing emphasis on sustainability and the impact these practices can have on environmental insurance as well as the numerous environmental exposures that can be encountered during nearly any phase of construction and operation.

With government stimulus money trickling down through the system, numerous civil projects have either started, are in the process of being bid or have entered planning stages. All of these projects will require an array of insurances—from general liability to auto liability coverage by the winning contractors.

With government stimulus money trickling down through the system, numerous civil projects have either started, are in the process of being bid or have entered planning stages.

All of these projects will require an array of insurances, from general liability to auto liability coverage by the winning contractors.

Historically, potential environmental liability concerns often have been a major deal-breaker in the sale or transfer of real estate. Sellers wanted to be free of environmental liability after the sale, while buyers were extremely reluctant to assume liability for a site that could possibly be contaminated.

Likewise, in years past, prospective investors, lenders and financial institutions representing a wide range of industries have been understandably concerned about the risks of unexpected cleanup costs, delays and environmental liabilities that could derail an otherwise promising real estate project. This is because environmental “pitfalls” not only plague commercial and habitation real estate owners, but can also cause significant financial loss to health care institutions.

As most construction firms will attest, green building is not a waning fad. Sustainable design is now embedded in our culture as a proven method for conserving water and materials, creating healthier and safer environments, reducing carbon footprints, and saving energy.

However, the best of intentions as well as the staunchest precautions will not always protect contractors and site owners against the many liabilities that can surface during green building projects. For example, over the past few years, several instances have arisen where contractors were sued during excavation projects that led to the third-party exposure of dust containing hazards, such as asbestos fibers and silica dust. In addition, similar problems have also been created through the release of carbon monoxide, carbon dioxide, methane, and nitrous oxide produced from generators and other equipment operating in improperly ventilated areas.

Most people do not normally link environmental impairment to commercial or habitational real estate. Commercial property owners and contractors tend to believe that pollution conditions such as mold/microbial matter or lead-based paint are covered by general liability policies. They are not.

The insurance marketplace has greatly expanded over the past two to three years to accommodate the growing demands of the
construction industry for enhanced and encompassing forms of environmental and professional liability coverage. As a result, the market now consists of a variety of polices that address these risks with an assortment of new products as well as old ones that have been updated with new twists.