For this week’s Guest Post Friday, Musings welcomes, Mark E. Rabkin, a triple-bottom line risk consultant assisting his clients understand and manage the exposures they face daily that threaten their economic, social and ecological performance. Licensed as a property and casualty insurance broker for over 10 years, Mark works with the team at Althans Insurance Agency in Chagrin Falls, Ohio. In addition to traditional property and casualty insurance counseling for clients as diverse as real estate owners, manufacturing companies, non-profit organizations and construction entities, Mark provides unique counsel for anyone involved in the ownership, development, construction, operation and maintenance of sustainable buildings. A frequent presenter of his original program, “The Unique Risks of Sustainable Building,” Mark has assisted numerous construction firms and legal counselors understand the new intricacies and risks being created daily as the building environment shifts to one focused on energy efficiency and natural resource conservation.
In a recent post to the Green Real Estate Law Journal, author Stephen Del Percio addresses a very unique risk to any construction professional that is working on building projects that aspire to either achieve certification by an independent rating system like the US GBC’s LEED TM standard, GBI’s Green Globes or contain some other requirement as to the expected benefits of a sustainable building project. Mr. Del Percio focuses specifically on the design professional’s exposure to legal liability related to the standard of care provision unique to “green” building projects. “…[O]n a green building project, an owner may seek to retain a design professional specifically because of [his/her] sustainable design expertise.” Specifically addressing the heightened responsibilities of a design professional on a sustainable building project should be carefully considered in drafting an enforceable contract between the owner/developer and the architect.
However, are the architects and engineers the only ones that have a professional liability exposure created from the standard of care? Let me rephrase that question: does the fact that a subcontractor that markets their services as being “experienced with LEED” or the fact that they have LEED AP’s on staff hold them to a higher standard of care? Remember, professional liability coverage provides defense and indemnification for losses other than bodily injury or property damage. For example, economic loss can occur when a contractor promises to deliver a project complete, on time and within budget. Failure to detect faulty work performed by a subcontractor can create an exposure to the construction management team.
The unique benefits of a LEED or any other “green” building are used by owners and developers in marketing their spaces. Tenants will enter into leases specifically based on the expected level of certification a building HOPES to achieve. Building owners should be cautious in promoting specific building characteristics and performance prior to occupancy and use. Should a project fail to achieve certification either at all or to the desired level through some negligence of a party to the construction, the owner will make claims of economic loss and injury due to the failure to achieve the expected results.
As more and more public entities including cities, counties, states and the federal government draft policies and mandates pertaining to the incorporation of a third party rating standard for all new construction, contractors applying and winning the opportunity to work on these projects should carefully examine the contractual language specific to their responsibilities related to certification and performance. Sureties that bond public work will quickly identify any new language and will more than likely avoid bonding a contract that provides guarantees of certification and/or building energy performance.
Contractors professional liability is available to trade contractors working on “green” buildings and can address these unique exposures created by the heightened standard of care on such projects.