Professional Liability Insurance Policy Endorsement for LEED Projects May be Imminent
Both Marsh- in its recent report reviewing the current state of the insurance marketplace with respect to green construction issues – and representatives of the Fireman’s Fund at Greenbuild have indicated that we will likely see a new insurance product on the market sometime in 2009 for professionals participating on green building projects. The product would likely be crafted as an endorsement to an existing professional liability policy and cover design professionals or other consultants against the possibility that, by signing credit submittal templates or other documentation in connection with a green rating system, they will trigger the standard exclusion to their professional liability policy that excludes coverage for claims arising out of an express warranty or guarantee. This is a critical issue for professionals and suggests the type of heightened vigilance with which green construction contracts must be vetted. Check out our numerous articles on the subject at gbNYC through the links below.
- Marsh Report: At Least One Insurer Considering Green Endorsement (gbNYC)
- The Green Built Environment in the U.S. (Marsh, register to obtain copy)
- Need for Green Counsel Becoming Increasingly Salient (gbNYC)
- Contract Language Remains Key (gbNYC)
- Thoughts on BIM and LEED Coverage for Design Professionals (gbNYC)
- Liability Archive (gbNYC)
Filed Under: Archives • Green Building Insurance • Green Building Risk Management • LEED
XL Design Professional Insurance made a presentation at GreenBuild 2005 in Atlanta on this issue. Nice to see the other carriers fianlly picking up on it. We also confronted USGBC and they they came out with a waiver to protect the USGBC. XL solved the issue short term by suggested contract language for LEED projects. An amendment may be the better way long term.
Gary,
We tried to insert such a disclaimer into a contract but their attorneys refused to include the language. Our design-build client had little bargaining leverage with this large owner. The owne even tried to insert LEED-related provisions into the warranty section of the contract stating that the design-builder had an ongoing (post subst. completion) warranty obligation to obtain LEED-Silver certification.
Thanks to both of you for your insights. Any thoughts on how an owner’s refusal to include the warranty-disclaiming language (as you describe above, Brian) in a green construction contract actually hurts the owner as well, in terms of it calling upon the design professional’s insurance coverage to remedy any deficient green design services?
As an insurance professional, I can tell you that perhaps XL and for sure the team at Schinnerer provide contracts that are beginning to address green building and the certification issue. Without proper endorsement however, many insurance companies are going to try and find ways to exclude coverage through their interpretation of policy language, terms and conditions.
One item in the section of the Marsh report that is noteworthy in my opinion, is the notion that an insurance company is endeavoring to create a professional liability policy that protects the E&O exposure for all of the entities with exposure on a per-project basis. For example, not only does the design professional have obvious exposure, but all of the contractors on the job are required to adhere to the practices aimed at achieving certification as well as proper documentation to support their efforts.
Points are available for regional materials, but if something is not readily available, a contractor may substitute a non-regionally produced product in an effort to complete their task and get paid. This might not be caught until the final inspection is performed and the project might lose a point. In that case, who is responsible?
Also, as Stephen indicated in his analysis of the Shaw case, a project delay most likely caused the loss of the expected tax benefit. Who was ultimately responsible for the delay? Was that spelled out in the subcontractor agreement?
Probably not.