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Victor Schinnerer: New LEED AP Program Raising Standards of Care, Changing Risk Profiles

Victor Schinnerer’s most recent quarterly report has some interesting commentary on the increased risk that the new LEED Accredited Professional (“LEED AP”) program may be creating for professionals that participate on LEED projects. Specifically, on page 4, the report notes that the program, which now divides LEED APs into three tiers of increasing expertise, from LEED Green Associate, to LEED AP with specialization, and up to LEED AP Fellow, “has significantly changed the value of the program and the risks to [the] program’s participants.” However, although the report acknowledges that “[m]embers of the upgraded LEED AP [Fellow] program now will face a higher standard of care for their services,” it also states that “[c]urrently this increased exposure is a manageable risk. Current claims information does not indicate a need for additional insurance premiums to cover the exposure created by the higher standard of care.”

I think that this latter point is critical- as I wrote previously here at GRELJ, most professional liability insurance policies contain an exclusion for assumptions of liability that are not imposed by law (i.e., because the LEED AP Fellow designation implies that the design professional will perform at a higher level than the prevailing common law standard, the design professional may not be covered for any resulting claims of negligent design services arising out of disputed green design services). It seems to me that if the LEED AP fellow designation implies a higher standard of care than is prevalent in the industry, this type of form exclusion would come into play. Accordingly, I am very curious to see if there is any reaction from insurance industry professionals on this crucial issue.

Nevertheless, although the idea that programs like LEED and green design techniques generally are changing the standard of care for design professionals is nothing new, the Schinnerer report is the first time I have seen a major insurer pointing to the new tiered LEED AP program as playing a role in that uptick. The report also emphasizes the importance of a “mutual understanding on designing for sustainability and certification,” and offers two form contract provisions that should serve as a good jumping off point for design professionals concerned about risk management on green building projects.

The same section of the report discussing the new LEED AP program also identifies the “successful marketing of the LEED program” and state and local governments’ tying of certain project-based incentives to private certification as a potential source of “significant financial repercussions if a project is not granted a desired level of LEED certification” (likely a reference to the Shaw Development litigation). The report rather ominously suggests that “[g]overnmental enticements to support the pursuit of these LEED accredited projects and their environmentally conscious goals represent a level of risk that approaches a project-level warranty.” The danger here, of course, is that any claims alleging a breach of such a warranty would likely be excluded by a design professional’s controlling errors and omissions policy, and the notion that legislation may be creating the equivalent of a warranty is certainly interesting to consider.

Finally, on page 5, the report proposes two form contract provisions for design professionals to consider incorporating into green construction contracts. The first reflects the situation where an owner may want certain green building materials or systems incorporated into the design, and the second where the Owner intends to seek third-party certification. These provisions are merely form language and should be treated as such by design professionals; the report does explicitly note the important of assessing risk on project-by-project basis, as well as retaining counsel to draft provisions that reflect the circumstances of a given project. As the Shaw Development litigation teaches, this is the threshold consideration for a green building project team. Each of the provisions is reprinted below for your reference:

When Owner Wants the Design to Meet Specific Sustainability Criteria

Owner has made Design Firm aware that Owner wants a specific level of sustainability incorporated into this Project and that Design Firm shall use the standards published by [specific design guidelines or certification standard] for this Project. Design Firm shall research the applicable sustainability requirements and design the Project with the intentino of having the Project meet the requirements. Owner recognizes that a project designed to meet a specific sustainability standard might not perform as designed because of the construction, operation, and maintenance of the Project and therefore agrees that it shall bring no claim against Design Firm if the project does not perform as intended, unless the negligence of the Design Firm is the sole cause of the performance deficiency.

Owner also recognizes that during the design of the Project, Design Firm shall use professional judgment in the selection of materials, products, and systems for the Project but that Design Firm cannot and does not warrant the performance of any specified material, product or system. Design Firm will identify for Owner any material, product, or system that, in the Design Firm’s judgment from the Design Firm’s examination of available performance information, might provide Owner with a benefit on this Project but does not have adequate information on its performance in actual construction or operation. Owner acknowledges that it shall look solely to the manufacturer, supplier or installer of materials, products, or systems if their performance does not meet expectations.

When Owner Wants Third-Party Certification of Sustainability

Owner has made Design Firm aware that Owner intends to pursue [specific certification standard] for this Project. Design Firm shall research the applicable certification requirements, design the Project with the intention of having the Project meet the requirements, and document the design of the Project for submission by the Owner to the certifying organization. Owner recognizes that certification is not based on design alone but also on the construction, operation and maintenance of the Project and therefore agrees that it shall bring no claim against Design Firm if the Project is not certified as intended unless the negligence of the Design Firm is the sole cause of the Project not being certified.

Owner also recognizes that during the design of the Project, Design Firm shall use professional judgment in the selection of materials, products and systems for the Project with the goal of meeting certification criteria but that Design Firm cannot and does not warrant the performance of any specified material, product, or system. Design Firm will identify for Owner for any material, product or system that, in the Design Firm’s judgment from the Design Firm’s examination of available performance information, might provide Owner with a benefit on this Project but does not have adequate information on its performance in actual construction or operation. Owner acknowledges that it shall look solely to the manufacturer, supplier or installer of materials, products or systems if their performance does not meet expectations.

The full report is available via the link below for your review.

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2 Responses to Victor Schinnerer: New LEED AP Program Raising Standards of Care, Changing Risk Profiles

  1. Lesley LEED Certified June 26, 2009 at 2:19 pm #

    Wow, that’s an interesting perspective noted in the report. I hadn’t quite thought of it in that way. Thanks for providing the link to the report.

Trackbacks/Pingbacks

  1. “Green” Insurance Basics | Konstructr - June 26, 2009

    [...] As contractual provisions change and mandates for energy efficiency and responsible construction are passed by local legislators, construction professionals will encounter new exposures if, for any reason, an owner or developer’s expectations are not met. A leading provider of professional liability insurance to the construction community, Victor O. Schinnerer recently released a report addressing the potential for standard of care claims driven by a firm’s marketing themselves as having specific experience as designated by accreditation such as the LEED AP+ and Legacy LEED AP and a very comprehensive analysis is available by Stephen Del Percio at http://www.greenrealeastatelaw.com. [...]

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