The ConsensusDOCS 310 Green Building Addendum is the second form contract exhibit to be released by a major North American A/E/C organization for use on green building projects, but the first to make a significant attempt at allocating green building-related risk amongst the project team.
Green building consultant Jerry Yudelson delivered two keynote addresses earlier this month at an event sponsored by the Central Texas Green Building Council. According to a press release, during the course of his remarks Yudelson “presented clear evidence that high-level green outcomes add significant value to buildings. ‘What part of a 30 percent increase in value from LEED certification is hard to communicate?’ He challenged architects and engineers to do a better job of advocating for green building with their clients. ‘You are doing your clients a disservice by letting them build projects without LEED certification,’ he said. ‘It almost amounts to dereliction of your duty as professionals.’” As you likely know, this latter remark about the design professional’s responsibilities in the green building space is exactly the opposite of what many construction attorneys have been preaching over the past few years as best practices for architects and engineers. Putting aside for purposes of this article any analysis of Mr. Yudelson’s claims of 30 percent increases in value for LEED-certified buildings, I think his remarks provide a good opportunity to review the risk management implications of the design professional’s representations to his or her clients about the possibilities and potential pitfalls of green building, including the LEED certification process.
As you likely know by now, Atlanta-based Energy Ace, Inc. recently announced that it will offer what the company is calling the green building industry’s first LEED certification guarantee. According to Energy Ace CEO Wayne Robertson, the firm “can offer clients a certainty that their project is going to be certified and remove that anxiety.” The specifics of the guarantee are as follows: clients retain Energy Ace pursuant to a standard service contract under which the firm performs LEED administration, fundamental building commissioning, and energy modeling. It holds a LEED charette and, if everything is satisfactory, the contract will be amended to “guarantee” certification. That guarantee, though, actually reads in substance much more like a limitation on Energy Ace’s liability; if the project fails to earn its target level of certification (i.e. Gold or Silver) or is not certified at all, Energy Ace will refund its LEED administration fee to the owner (which is typically between 30 and 45 percent of its total fee). Although there are a number of additional facts that would be helpful in analyzing the implications of the Energy Ace initiative more comprehensively, I do think it provides us with a timely opportunity to review a number of important general construction contract and insurance coverage considerations, many of which we have considered here at GRELJ during the course of 2009.
Recently, there have been a number of articles suggesting that the risks associated with green roofs have been overblown. Over the past few days, I’ve spent some time looking for more concrete examples of green roof-related risks in practice. I started by looking for case law where a plaintiff alleged an attractive nuisance claim against the owner of a building arising out of a green roof or other rooftop landscaping. Westlaw did not return any results entirely on point, but I did find a number of interesting attractive nuisance decisions which I may present in a subsequent post here at GRELJ. The much more practical research that I turned up was the following except from an article by Kelly Luckett, the self-proclaimed “Green Roof Guy” who writes a column for greenroofs.com. In a column from the very end of 2008, Mr. Luckett describes how uneducated project teams may unwittingly expose themselves to unanticipated risks stemming from the maintenance requirements of green roof installations. His remarks also reflect a number of key points we’ve made consistently both here at GRELJ and over at gbNYC with respect to the additional risk management strategies demanded by new green building technologies and third-party certification programs.
The possibility that a LEED-certified project could be “decertified” by USGBC or GBCI in the event that any of the new LEED 2009 Minimum Program Requirements (“MPRs”) are not satisfied presents a variety of novel legal issues which we presented earlier this year here at GRELJ when the first iteration of MPRs was announced by USGBC. Today, Engineering-News Record (“ENR”) published an article that highlights a number of those issues, but also raises the question of who, exactly, would have standing to bring a decertification proceeding. If strictly limited to USGBC or GBCI, a recent comment here at GRELJ from Brian Anderson (“lawsuits are bad for marketing”) suggests that decertification would be a remote possibility. However, in the ENR piece, which is titled Building Rating System Requirement Raises Concern and authored by Nadine Post, my colleague Ujjval Vyas notes that “[a]ny third party has the right to initiate a non-compliance action by USGBC. This creates a huge risk and provides standing to any entity whatsoever to injure a building owner or tenant.” If third parties can compel decertification proceedings, the risks associated with failing to comply with the MPRs are far more serious than if that discretion rests exclusively with USGBC or GBCI.
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 new LEED AP program, which 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.
One of the most critical provisions in any contract for professional design services relates to the standard of care under which the design professional will be required to render its services. In the absence of contract language to the contrary, a design professional will be held to a common law standard of care commensurate with that of other professionals providing the same services to a geographically similar community. However, on a green building project, an owner may seek to retain a design professional specifically because of its sustainable design expertise. Accordingly, it may attempt to hold the design professional to a higher standard of care than that which prevails in the industry. This may be problematic for both sides for a number of reasons. Professional liability insurance policies provide insurance for legal liability that arises out of negligent professional acts, errors, or omissions. However, if not properly vetted, standard of care provisions have the potential to trigger standard exclusions to such policies. This article suggests two such exclusions and strategies for owners and design professionals to consider as they draft and negotiate construction agreements for green building projects.
Green roofs have been a part of building for over a thousand years. The current green building movement has, however, had the greatest impact on the growth of the green roofing industry. A green roof is commonly defined as a roof that consists of vegetation and soil, or a growing medium, planted over a waterproofing membrane. There are two basic types of green roofs: (i) an extensive roof, which has a few inches of soil cover; and (ii) an intensive roof that has two feet or more of soil for a variety of grass, trees, bushes and shrubs. Green roofs are used in a multitude of buildings, including industrial facilities, commercial offices, retail properties and residences. The benefits of a green roof include reduced storm-water runoff, absorption of air pollution, reduced heat island effect, protection of underlying roof material from sunlight, reduced noise, and insulation from extreme temperatures. A green roof can thus be a critical design element for a green building. As more properties across the country are attempting to obtain LEED certification, it is worth noting that a green roof can help a property obtain over a dozen LEED credits, including credits for reduced site disturbance, landscape design that reduces urban heat islands, storm water management, water efficient landscaping, innovative wastewater technologies and innovation in design. The increase in green roofs and the green building movement is also resulting in an increase in liability resulting from errors in the design, installation or maintenance of green roofs. As a result, owners, design professionals and contractors should carefully consider ways to mitigate the potential risks involved with building a green roof.
As you may know, USGBC’s LEED v3 program launched this past Monday, April 27. Project teams currently pursuing LEED certification under any of the Version 2 programs can opt into LEED v3 for no additional registration fee through the end of the year. The Version 2 programs will be available to project teams for registration until June 26; after that date, all projects must proceed with registration under LEED v3. LEED v3 is comprised of what USGBC calls “LEED 2009″ revisions to the suite of LEED rating systems (other than Homes and Neighborhood Development, which are not changing under v3), a new online interface for project teams, and a shift in the administration of the LEED certification process to the Green Building Certification Institute (“GBCI”). USGBC calls the LEED 2009 credit revisions “a reorganization of the existing commercial and institutional LEED rating systems along with several key advancements.” The revisions contemplate harmonization (i.e., credits and prerequisites are consistent across all LEED 2009 rating systems), credit weighting (i.e., greater emphasis on energy efficiency), and regionalization (up to four bonus credits for projects that address a local environmental issue of import). Although they are important to review for background purposes, the thrust of this article is not to detail the mechanics of the LEED v3 program. Rather, a number of the new minimum program requirements (“MPRs”) present some novel legal issues for project teams- and their attorneys- to consider in connection with drafting construction agreements or leasing documents in connection with LEED v3 projects.
During the first homestand of the season at $1.6 billion New Yankee Stadium, baseballs flew out of the ballpark at an unprecedented rate; the 20 dingers that were clocked during last weekend’s series against the Cleveland Indians were the most ever in a four-game set to open a new stadium in baseball history. Last season, Old Yankee Stadium saw 160 home runs; the current pace would yield a mind-boggling 351 round-trippers for the entire 2009 season. The Yankees did not anticipate that their new ballpark would turn into a Little League bandbox; dimensions at the new park are the same as they were across the street and engineers performed a wind study in advance of construction that did not suggest any major changes in currents or speeds. So, after witnessing several routine fly balls to right field land halfway into the lower deck last Saturday, it struck me that there are some parallels between what’s been happening thus far at the new ballpark in the Bronx and some of the building performance issues that we frequently discuss here at GRELJ.
In early March, USGBC released a white paper titled “The Legal Risk in Building Green: New Wine in Old Bottles?” The eight-page paper, which was presented as a panel discussion between four attorneys, concluded that “[p]erhaps surprisingly, in light of the increased attention in seminars and workshops . . . much of the discussion among the attorneys [in the paper] suggests that many of the legal theories advanced in those venues to suggest novel liability associated with building green are, instead, simply new wine in old bottles.” While the paper does not appear on the USGBC’s web site, it was circulated by individual chapters; I accessed a copy through our New York chapter’s weekly email blast and have included a link to download the paper from the USGBC-NY homepage below. I applaud USGBC for taking a critical step towards acknowledging the liability implications of green real estate development and construction, but do think it is important for attorneys practicing in this space to digest the paper’s conclusions. Although the paper does identify and discuss many important legal issues, I think that it ultimately falls short of elevating the analysis of such issues to the level necessary for legislators and stakeholders to make completely informed policy- and project-related decisions. Specifically, by suggesting that “[c]onjecture, anecdote, and even rumor swirl around recent presentations, workshops and discussions circling the question of what legal claims may be based on the design, development, and construction of sustainable buildings,” the paper seems to be an effort to sweep many of the thornier legal issues that may indeed ferment into “new wine” under the rug.
Over the past two years, I have written extensively over at gbNYC about the potential for litigation arising out of green construction projects. The country’s first reported green building litigation – Shaw Development versus Southern Builders – is an excellent example of how hidden green building risks can present unconventional legal issues to construction industry stakeholders and their counsel. It is critical to note that the case does NOT discuss the contractor’s failure to achieve LEED certification on behalf of the owner (as many articles referencing my original post at gbNYC have incorrectly asserted). Rather, it suggests the importance of accurately translating green building regulatory requirements into construction documents.
I think it’s interesting to compare the treatment that green building risk management issues received at Greenbuild as compared to West Coast Green. We pointed out over at gbNYC earlier this fall that the latter included a panel discussion titled “Packing a Parachute: Practices that Minimize Risk and Prompt Best Use of Green Features,” while the legal issues associated with building green received very little attention at Greenbuild. As we have noted extensively at gbNYC, the West Coast Green panel similarly stressed that there is no such thing as a form green construction contract or “magic” green provision that can satisfactorily account for the risks associated with green construction. It’s important for stakeholders – or other organizations staging similar conferences – to recognize that attorneys in this space are attempting to assist the industry in mitigating emerging risks up front, in the transactional context, rather than through litigation.
