Green Building and Risk Management

On April 29, 2009 by

Just recently, the U.S. Green Building Council published an update to its readers explaining Risk Management issues to its readers, explaining that while green building is growing even in the current U.S. Economy, it presents unknowns that makes it difficult for the industry and insurance underwriters to manage risks.

Here is a snippet:

Underwriting insurance coverage is the art of understanding, assessing, and mitigating risk. Green building has presented challenges to insurance carriers stemming from the fact that green building design and construction is new. New things are tougher to understand from a historical loss perspective, requiring leading insurance carriers to take a proactive approach to understanding the possible ramifications of providing expanded coverage to meet the needs of firms engaged in the green building industry, while anticipating the market demand for these specialty insurance products.

As mentioned in previous posts, as the green building market continues to boom, green litigation and losses becomes more likely.   What if the planned LEED certification is not achieved?  What if the design is not as energy efficient as planned?

And the questions go on and on.

One question that is still unanswered, as hinted by the USGBC above, is with regard to Risk Management & Insurance.

In December 2008, Wolfe Law Group published an informative article on its Construction Law Monitor titled Green Building Insurance & Limiting Exposure.   The article discusses the need for specialty insurance, the packages available to contractors and the idea of green building performance bonds.

Just last week, ACE USA announced the launch of a Green-Specific Contractors Insurance Program, joining the ranks of companies like Fireman’s Fund, Travelers & AON.

Like everything else in the green building industry, the waters here are untested.   While we can read the policies and the brochures on the policies, it’s too early to determine what types of claims will be paid versus those denied, or the role green building insurance will play – or ever play – in protecting a contractor from professional liability losses.

On Apr 29, 2009