Insurance broker issues green building risk alert for design firms

WASHINGTON, D.C. — With President Obama pushing for tax incentives to stimulate green building, insurance broker and risk management consulting firm Ames & Gough issued an information alert to help these firms understand and navigate the various risks associated with green building projects.

The Ames & Gough alert, “Understanding the Risks of Going Green,” provides a brief overview of the green building landscape and examines emerging risks through some of the more significant recent litigation related to these projects. Ames & Gough also reviews several instructive claims examples and some key insurance considerations associated with green design and construction.

“There’s no question green building represents a significant opportunity for design firms across the U.S.,” said Dan Knise, president and CEO of Ames & Gough and author of the alert. “As they become engaged in these projects, design firms need to do so with their eyes open. For starters, they need to pay close attention as to how contract language might affect their potential exposure.”

Knise noted that design firms should examine carefully language defining “scope of services,” “standard of care,” and “consequential damages.”

With respect to scope of services, the American Institute of Architects (AIA) has established a number of requirements for architects related to certification under the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program. These include incorporating green design alternatives and feasibility assessments in their project evaluation and development, as well as steps for architects to document LEED certification and the establishment of related performance requirements.

As to standard of care, the Ames & Gough alert states: “… the standard of care is evolving and requires architects and engineers to … formally evaluate sustainability issues and potentially go much further in promulgating an environmentally sensitive design.”

With respect to warranties and guarantees, Ames & Gough advises design firms to avoid contractual wording that stipulates attaining certain levels of LEED certification, guarantees of specific percentages of energy reduction, among other definitive outcomes, as they are “affected by owner and contractor decisions” or otherwise “beyond a design professional’s control.”

The Ames & Gough information alert also reviews recent litigation and claims scenarios related to green building, identifies additional emerging exposures, and discusses related insurance issues. It also provides a list of resources for green building specifications. To obtain a free copy of the Ames & Gough report, e-mail info@amesgough.com.