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Construction Insurance Bulletin


By April 1, 2013No Comments

An environmentally-friendly heating system that just doesn’t work…Units certified by the Leadership in Energy and Environment Design (LEED) program that don’t meet certification requirements…Contractors facing lawsuits from building owners because they were denied tax breaks from promised green structures…

As sustainable buildings become increasingly common, more and more contractors are facing potential losses from their green construction activities. In response, insurance companies are tailoring Property policies to meet these needs. However, it can be hard to define what makes a building green – and how to determine green-related damages.

According to the California Department of Resources, Recycling, and Recovery (CalRecycle), “A green building, also known as a sustainable building, is a structure that is designed, built, renovated, operated, or reused in an ecological and resource-efficient manner to protect occupant health, improve employee productivity; use resources more efficiently; and reduce the overall environmental impact.” The Environmental Protection Agency defines a green building process as “the practice of maximizing the efficiency with which buildings and their sites use resources – energy, water and materials – from siting, design, and construction, to operation, renovation, and reuse.”

As a rule of thumb, the definition of “green” should match the needs of the owner and the environmental standards of the region. For example, the determining factor might be low water use in the desert Southwest, and lower heating bills in the Northeast.

So far, most claims filed under “green” Construction policies have come from advanced systems used in sustainable buildings – technologies so new that insurance companies might not understand fully how they work and what their shortcomings might be. In the final analysis, the deciding factor will probably lie in the contractual agreement between the building owner and the construction contractor.

If you are, or plan to be, active in green construction, we can work with your insurance company to help tailor the coverage you’ll need.