As green construction flourishes, so do the risks

Posted by John Cofini on Wed, Sep 04, 2013 @ 11:54 AM

The energy crisis of the 1970s was the dawn of a new age of urgency in the search for more environmentally friendly building solutions, bringing “green” building practices out of the research lab and onto the jobsite.

Today the movement shows no sign of slowing down. Navigant Research forecasts that the global market for green building materials will grow from $116 billion this year to greater than $254 billion in 2020. Engineers are under pressure to reduce energy consumption, maximize passive lighting, specify “green” construction products, and find other innovative ways to meet society’s demand for a greener world.

But with green building on the rise, so are the risks.

Although the overall benefits of green building are still being debated, the risks are becoming more apparent and rapidly evolving. And these risks can impact your company's financial, regulatory, and legal well-being. In a 2011 Marsh survey of construction industry executives, five major risk categories associated with green building projects were identified: 

1.  Financial: Completing projects on time and within budget can be a real challenge with the added costs of green buildings. But you need to weight those costs against the cost of not going green.

2.  Standard of Care/Legal: With more mandates regarding LEED certification, green building design and construction professionals are at greater risk of legal liability.

3.  Performance: Project owners and developers are increasingly requiring added contract provisions and warranties with regard to a building’s energy efficiency. That means more exposure to potential liability for breach of contract or warranty. And risk managers face exposures from a building's performance during and after construction from the consultants and advisers that make these projects happen.

4.  Consultants/Subconsultants and Subcontractors: Inexperienced parties can quickly put a wrench in obtaining LEED certification, and cause project delays and improper material specifications.

5.  Regulatory: Across the country, growing numbers of federal agencies, states and municipalities are mandating that public sector projects examine green alternatives and implement them wherever possible. With new building codes and mandates comes an increased liability for everyone involved in green construction.

And the risks are more complex today … For example: 

  • Who is responsible for documenting and achieving LEED certification?
  • Who is responsible if the building fails to meet local green building codes?
  • Who bears the burden for achieving any available tax incentives?
  • What if there are performance problems with green products that haven’t been thoroughly tested or used?
  • What if there are delays in getting “green” materials that are in high demand from only a few current manufacturers?
  • Are designers and contractors who advertise themselves as "green architects" and "green builders" holding themselves to a higher standard of care?

As green construction continues to evolve, the risks will continue to increase. If you’re involved in green construction, your insurance provider can play a key role in eliminating some of the uncertainties. Give us a call at Milbrandt Insurance, and take advantage of our more than 150 years of combined experience insuring New York's construction industry. We’ll find the perfect solution to keep your operations in the green.

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Tags: construction insurance, New York construction insurance, green construction, insuring new york’s construction industry