Just before the July 4 holiday, Fireman’s Fund, which launched the green building property insurance market back in 2006, released what it is calling its “next generation” of green building policy endorsements. Calling it a “significant enhancement to what’s currently available in the marketplace,” Fireman’s Fund’s Steve Bushnell also introduced a “Green Financial Incentive Coverage” policy that provides policyholders with protection from the loss of green building-related financial incentives, including tax credits and deductions, utility rebates, and loan discounts, for a period of two (2) years after the loss.

According to Mr. Bushnell, the new endorsement evinces Fireman’s Fund’s “deeper understanding of evolving green building construction and insurance issues.” David Cohen, the company’s senior director of real estate, called the policy “a powerful incentive as many new green buildings are built with these cost savings factored in. Every day, new incentives are introduced – both from the utilities and the government at the local, state and federal level – incenting property owners to build green and losses could get in the way of that.”

This latter point, of course, is one we make frequently here at GRELJ in the context of design and construction agreements and leases; the pace of regulatory activity continues to make translating legislative requirements into contract documents a major challenge. The new endorsement also appears to be – at least implicitly – an acknowledgment of the $600,000.00 in lost tax credits which the developer suffered in the Shaw Development litigation, though it is unclear whether – under the terms and conditions of the endorsement – the developer’s loss would have been covered.

In addition to the new endorsement, Fireman’s Fund simultaneously announced that it has made further refinements to its existing line of green building coverage, including:

• Broadening eligibility for post-loss green upgrades to include all real and personal property that more efficiently uses energy or water, improves human health or reduces environmental impact (such as alternative energy generating equipment and water systems or green roofs);

• Combining four of its endorsements – three commercial and one manufacturing – into a single endorsement, which also includes coverage for building commissioning;

• For certified buildings, coverage now allows the insured to attain certification at one level above the certified green building level that the insured had prior to the loss or damage (i.e. LEED Gold instead of Silver);

• Vegetated roof coverage has now been extended to vegetated swales and other vegetation that reduces the heat island effect, including vegetated walls. This coverage now applies to both certified and traditional buildings (previously it was only for certified buildings); and

• Coverage has also been expanded to include porous paving – water permeable paving that allows water to drain into the ground to help manage water flow.

Perhaps what’s most interesting about the press release is Fireman Fund’s acknowledgement that, to date, approximately 1500 commercial property insurance policyholders have purchased one of the company’s green building endorsements (though there is no information on how many claims have been asserted against those policies).  It goes without saying – as always – that you should review your policies of insurance – property, professional liability, builder’s risk, or otherwise – with heightened scrutiny in connection with your green construction project to confirm exactly what additional insurance – if any – you may need to procure.

The Addendum also creates a new role for design professionals, contractors, or consultants: the Green Building Facilitator, responsible under the terms of the Addendum for coordinating and facilitating the process of obtaining the owner’s desired green building status or certification, identifying green building measures (both procedural and physical), potential design and construction alternatives, and other services as required by the terms of the Addendum. The Green Building Facilitator is identified explicitly in Section 4 of the Addendum and can be the architect, engineer, contractor, or other corporate entity (or individual). However, the Addendum places certain risks on the Facilitator, and parties that choose to accept this role pursuant to the Addendum should review its terms and conditions carefully.

What’s most interesting for purposes of this article, though, is that Article 8 of the Addendum is devoted exclusively to risk allocation. Article 8.2 provides that the parties- including the Green Building Facilitator- will be subject to any limitations on liability that are included in their underlying contracts. However, this provision explicitly acknowledges that the owner’s “loss of income or profit or inability to realize potential reductions in operating, maintenance, or other related costs, tax, or other similar benefits or credits, marketing opportunities and other similar opportunities or benefits, resulting from a failure to attain the [project’s green building goals as defined in the Addendum] shall be deemed consequential damages subject to any applicable waiver of consequential damages” in any underlying design or construction contract. Compare this provision to the discussion which arose out of the Shaw Development litigation, where many commentators wondered what types of damages flowing from the breach of a green building contract would be deemed consequential in nature rather than direct. It’s therefore particularly noteworthy that the Addendum (i) acknowledges the types of unique damages that may flow from the breach of a green construction contract; and (ii) actually makes an initial effort at defining them. Of course, parties are free to negotiate the terms of the Addendum, including (depending on the project’s scope) (i) the types of damages which would be included in the provision; and (ii) any waivers – mutual or otherwise – in the underlying agreement. In Shaw, as you will recall, the issue was whether the lost tax credits were consequential and therefore waived by the owner through the A201’s mutual waiver provision; under the form terms of the Addendum, they would have been explicitly categorized as consequential. Had the parties in Shaw implemented a document like the Addendum, it would have assisted them in more comprehensively assessing the green building-related risk associated with the project and allocating that risk accordingly.

The Addendum also makes it clear that no project participant other than the Green Building Facilitator will be “liable or responsible for the failure of [any procedural or physical green measures] to achieve the [project’s green building goals as defined in the Addendum],” including the project’s failure to earn any third-party certification as designated in the Addendum. However, the Addendum also makes clear that these limitations on the project team’s liability do not relieve them “from any obligation to perform or provide [procedural or physical green measures]” as required by their underlying contracts. It will be interesting to see if additional form green building contracts and/or addenda are issued in 2010, whether they take these types of risks and limitations on liability into account, and, if so, in what particular fashion.

As you may know, ConsensusDOCS was founded in 2007 and, to date, its suite of form design and construction agreements has been endorsed by 23 different A/E/C organizations. You can download a copy of the Addendum via the link below. As always, the Arent Fox Green Building & Sustainability and Construction Practice Groups are happy to assist you with any additional questions you might have about either the Addendum or working with construction contracts generally.

• 310 Green Building Addendum (ConsensusDOCS)
• New Document Defines Role in Green Building Projects (Arch. Record)

First, I think it’s important to note at the outset that in most jurisdictions- including New York- there is no statutory obligation for a party to carry professional liability insurance, though of course most owners will insist upon it where that party is rendering architectural or engineering design services. Accordingly, absent additional information, we don’t know what type of insurance Energy Ace typically procures or the scope of any discussions it had with its carrier in considering the coverage implications of announcing its guarantee. These are critical inquiries because, as you know, most professional liability insurance policies exclude coverage for claims arising out of the breach of warranty or guarantee. However, the notion that a limitation of liability provision in a contract for LEED certification services is novel is misplaced; most LEED consultants will typically limit their liability for such services to the total amount of their fee (and do not carry a corresponding professional liability policy).

Second, I also thought that the following quote from Mr. Robertson, sourced by Andrew Burr in CoStar discussing the Energy Ace guarantee’s genesis at a meeting where local stakeholders reviewed Atlanta’s pending LEED ordinance, was particularly interesting: “[o]ne of the senior architects [who attended the meeting] was saying that these mandates are putting us in a position to offer a guarantee and we can’t do that. And I’m thinking, yes we can.” For design professionals or LEED consultants who do maintain professional liability insurance, providing an explicit guarantee of ultimate certification level or other performance is indeed problematic on that basis. However, the more troubling possibility is that a guarantee in this context might also give a professional liability insurance carrier grounds to deny coverage for any other negligence claim arising out of the project but not specifically tied to the guarantee. Moreover, the concept of a guarantee is essentially representing perfection; anything less is a breach of contract, claims for which are similarly not covered by a professional liability policy (though the insurer may still defend under the policy but reserve its rights). Guarantees also elevate the professional’s standard of care beyond what is imposed by law; again, potentially triggering another another form policy exclusion that could lead the insurer to disclaim coverage. In short, absent confirmation from the carrier that coverage will remain available, it will continue to be dangerous for parties that maintain professional liability insurance to make the types of representations implicated by the Energy Ace guarantee.

Finally, putting aside insurance considerations, the question remains as to the extent a court would uphold a limitation on liability provision for LEED certification services where the economic losses sustained by the plaintiff for the LEED consultant’s negligence were disproportionate to the fee. In New York, at least, courts will review limitation of liability clauses with heightened scrutiny, particularly if they purport to reduce a party’s exposure to damages for its own negligence. If Energy Ace (or any other LEED consultant) breached a guarantee, the project failed to obtain certification, and certain financial incentives were lost or other damages resulted, a court might be inclined to strike the provision. For example, in Shaw Development, the owner’s counterclaims against Southern Builders included two separate counts for breach of contract and negligence for Southern Builders’ “fail[ure] to construct the Project in conformance with a Silver level of certification according to USGBC’s LEED system,” with both claims seeking damages for the project’s failure to qualify for $635,000 in state-level green building tax credits. Although in Shaw Development the receipt of formal LEED certification was not a prerequisite to the owner obtaining the tax credits, the Shaw facts do suggest the kinds of damages that could flow from the breach of a LEED certification guarantee in a jurisdiction where applicable legislation is tied to formal certification. A discussion of green building consequential damages is beyond the scope of this particular article, but it is important to note the possibility that they may arise and be quite significant.

• LEED Certification or Your Money Back (CoStar)

The top five risk categories that were identified during the forums were finance, standards of care and legal, building performance, project consultants and subcontractors, and green building regulations; each of these fell either in the “likely” or “moderate” risk profiles (finance, standards of care, and performance were the top three, all of which were in the “likely” profile, which translated into “likely to occur at least once every three years.”). The lowest risk category? Brand and competitive edge or reputation (which is interesting given the new product from AIG that provides coverage (in the form of a lump sum payment and counseling services) for loss of reputation if a green building project fails to achieve third-party certification).

Within each of the top five risk categories, Marsh asked participants in each forum both to identify specific risks and challenges and propose some general solutions. Many of those risks will ring familiar to you, particularly in the standard of care/legal category. However, there were several that I thought were worth repeating, particularly because we have not mentioned them explicitly here at GRELJ previously.

First, the danger that “more aggressive” design may lead to an increased risk of errors or omissions in contract documents. I think that this risk ties in with many designers having little experience with green building technologies, yet specifying certain materials or systems without performing sufficient due diligence; we’ve already heard of claims arising out of this scenario. Next, potential claims for attractive nuisance from low-rise green roofs that are easily accessible- particularly on schools- as well as graywater collection ponds. While we’ve noted insurer attitudes about green roofs generally from the perspective of potential arson, the idea of the green roof or collection pond serving as an attractive nuisance is troubling (though a quick Westlaw search did not identify any reported decisions involving a green roof in this context), and this Marsh report is the first place that we’ve seen the concept identified. Finally, the report mentions that executives were concerned about the possibility that contractors may be assuming liability for professional design services, yet not procuring professional liability insurance coverage for those efforts. This scenario may arise where a contractor performs LEED certification or building commissioning services but is not obligated by contract (or statute) to procure such coverage. Note our recent article here at GRELJ discussing aspects of this important issue.

I thought it was also interesting to note that the top categories as identified by participants in each city varied widely. In New York City, for example, the top two risk categories were performance and standard of care/legal; in Washington, D.C. they were financial and education. With respect to New York City, it was also interesting to note that the panel considered regulatory risks as low-risk; given the Mayor’s Greener Greater Buildings Plan and the pending mandate for energy efficiency benchmarking and retrofits for every building in the city, this will likely change. Moreover, I have written extensively, both here at GRELJ and over at gbNYC, about how critical it is for project teams to survey and understand the regulatory requirements that may apply to a particular project. In that respect, I was a bit disappointed to note that the report’s composite risk map ranked regulatory risks as “unlikely.” As we noted in the context of the Shaw Development litigation, the issue in that particular lawsuit was the parameters of an applicable green building tax incentive program. As the Marsh report points out, most insurance policies will exclude claims based on non-compliance with controlling laws, codes, or regulations. Although claims- at least in negligence- for failure to comply with controlling green building regulations may be asserted as negligence per se, the idea that insurance may not be available for allegations that a designer (or a contractor) failed to comply with those regulations should be considered seriously by green building project stakeholders.

Finally, I think it is also important to quickly point out that insurance risks will change drastically under the LEED 2009 system if the specter of decertification proves as sinister in practice as many have suggested.

The report is a quick read and sums up many of the key issues that the green building legal community has been wrestling with over the past two years rather succinctly. A link to the registration page on the Marsh website from which you can download the report is set forth below.

• Green Building: Assessing the Risks, Feedback from the Construction Industry (Marsh- Register)

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.

• Victor O. Schinnerer & Company, Inc. – Guidelines for Improving Practice (No. 3, 2009)
• LEED AP = Higher Standard of Care (Real Life LEED)

First, I think that Ms. Shapiro’s last point is probably the biggest reason why we have yet to see a flurry of lawsuits. In my experience, plaintiffs will typically wait until they are up against the controlling statute of limitations before commencing a lawsuit. Here in New York, the applicable statutes of limitation for many of the causes of action under which green building liability may arise (such as negligence and breach of contract) range from three to six years. When you consider that LEED Version 2.2 only went live on January 1, 2006, many of the LEED-related green building claims that have been suggested to date remain well within the statute. This could be a significant reason why both LEED- and green building-related litigation will remain on the horizon for the near future. It is also important to consider that almost every construction agreement contains a confidentiality provision, which prevents the project team from disclosing any information about the project to certain third-parties. If aspects of an ongoing green building project’s design or construction are problematic, we will likely not hear about those failures until (a) the owner chooses to divulge that information; or (b) a lawsuit is commenced (subject to the foregoing SOL considerations).

Next, consider the following text describing the posture of the Shaw Development litigation from footnote 24 of the highly touted Harvard Law School green building liability study that was released last week: “[h]owever, a certificate of occupancy, which was necessary to obtain LEED certification, was not achieved within the requisite amount of time, and the developer failed to earn the tax credits.” (emphasis added). Moreover, in an article in the New York Times‘ Green, Inc. blog discussing the study, Robert Fox, a partner in the Philadelphia-based law firm that sponsored the study was quoted as stating that “the first lawsuit related to LEED, a green-building certification standard, occurred in Maryland, where a new condominium failed to get LEED certification and a certificate of occupancy in time to get substantial tax credits associated with green building.” These descriptions are simply not accurate. As discussed extensively here at GRELJ and over at gbNYC, LEED certification itself was not the source of liability in the Shaw Development litigation. Notwithstanding its pedigree and publicity, the Harvard study is an excellent example of attorneys misconstruing facts and, perhaps, creating heightened expectations that we will imminently see a crush of LEED-related litigation. There is no question that LEED and other third-party green building rating systems create an additional layer of risk that every project team must assess and mitigate through carefully drafted construction agreements, and I do believe that there is significant potential for LEED-related litigation. However, I think that the more imminent threat comes from regulatory structures that are, though perhaps well-intentioned, drafted poorly, enacted quickly, and confusing to project teams and their attorneys as was the case in Shaw Development.

Finally, I suspect that much of the activity that might fall within the purview of “green building litigation” will not jump off the page at us. Consider a recent news article in the Bakersfield Californian where a rooftop photovoltaic installation at a local Target caught fire and required officials to evacuate the store. Preliminary conclusions from the fire department indicated that the panels were not installed properly. These types of issues that arise in connection with green building projects- whether they lead to litigation or are otherwise managed through the insurance claims process- are likely to be far more pervasive than the higher profile LEED certification failures that have been discussed extensively to date. Of course, as LEED-driven mandates continue to proliferate, the potential for LEED-related litigation will continue to increase. But, I do think the relatively unspectacular failures similar to the Bakersfield Target fire are where we will find much of the activity in the short term.

• Solar Panel Mishap Sparks Fire at Target (Bakersfield.com)
• The Legal Risks of Building Green (Green, Inc.)
• Green Building Litigation: Whither the Lawsuits? (Greener Buildings)

The paper is essentially divided into five sections: (1) general points about whether risk exists for real estate stakeholders in connection with green building projects; (2) a brief overview of some emerging regulatory concerns; (3) whether increasing concerns about achieving LEED certification are valid; (4) a discussion of new products and technologies as risk concerns; and (5) how knowledge, experience, and contracts can help green building project stakeholders mitigate green building risk. The paper unquestionably provides a good legal primer with respect to each of these issues but injects a tone of commentary into the discussion that unnecessarily trivializes many of the legal issues that the green construction bar continues to grapple with. For example, the paper starts out by stating that “[a]ccording to insurance professionals . . . there have been very few claims reported arising out of sustainable design to date, despite concerns to the contrary. The risks to architects in ‘building green’ are essentially the same as the risks on other projects.” Standard of care and insurance coverage issues, for example, have many design professionals, their insurers, and even owners concerned about the availability of coverage in event of a claim that arises out of disputed green design services. While general principles of construction law will always apply to every project, calling their application in novel contexts to be simply “old bottles” suggests that there is no additional risk for project teams to consider or attorneys to address in contract documents.

One specific point made in the paper that’s also worth noting relates to the factual posture of the Shaw Development case. The paper incorrectly states that Maryland’s green building tax credit program which was at issue in the lawsuit was “limited to qualifying LEED projects and restricted to a set window of time. The project did not have LEED qualification within the window of time and Shaw sued for damages for the loss of the tax credits.” As you’ll recall, the issue in Shaw was the parties’ failure to understand the applicable tax credit program, which required a certificate of occupancy by a certain fixed date in order for a LEED-hopeful project to take advantage of tax credits; formal LEED certification was not required. Shaw emphasizes that legislative schemes are among the fundamental drivers of green building risk and must be clearly understood and accurately reflected by controlling contract documents.

Additionally, on page 5, the paper states that “[w]hile some commentators recommend avoiding guarantees, a precise contract can appropriately define the guarantee and mitigate risk.” However, there is no detailed discussion of exactly how stakeholders might begin to craft such provisions. More critically, the paper fails to discuss why even the appearance of the equivalent of a warranty or a guarantee or an elevated standard of care may be problematic from the perspective of a professional liability policy (i.e., these are form exclusions to the standard policy which most architects and engineers are required to procure on every project by contract). The Marsh end-of-year report from 2008 makes it clear that professional liability insurers are keenly monitoring this area of activity with heightened scrutiny. While standard exclusions to a professional liability policy are indeed traditional components of construction law, it is also clear that the rapidly moving standard of care for design professionals is unprecedented, and its implications should not be understated by attorneys who represent architects and engineers.

I want to emphasize that I am not criticizing USGBC’s effort to foster discussion about these important issues; rather, I think it’s extremely positive that the organization has taken this initial step towards engaging the legal industry in refining the parameters of green building risk management. As I noted last November over at gbNYC, this was a major shortcoming at last year’s Greenbuild and it’s encouraging that USGBC has started to move in a different direction. However, I think it is troubling that the paper chose to characterize green building law as “new wine in old bottles.” In my opinion, the reasons why many of the issues noted in the paper are creating a new paradigm meriting the attention of both legal scholars and practitioners are four-pronged: regulatory activity at the federal, state, and local levels is moving more rapidly than anyone can track in sufficient detail; the insurance coverage implications for claims arising out of green design have been largely unremarked upon; the insurance industry itself has acknowledged that the standard of care for design professionals is changing more quickly than at any time in history thanks to the proliferation of the LEED AP and green design obligations in the new AIA construction documents; and preliminary data suggesting that green buildings may not perform at the higher level generally anticipated by most project teams may have significant consequences both in terms of litigation and future policymaking. These are a set of completely new and emerging legal issues that will have a major impact on how attorneys create risk management strategies for their clients as green construction practices continue to proliferate. Suggesting otherwise will likely damage the long-term prospects of the green building movement, particularly if it encourages stakeholders not to take these emerging risks seriously and engage counsel capable of assisting them in navigating unchartered waters.

The paper is a quick read and I hope you will print it, review it, and share your thoughts in the comments below.

• The Legal Risk in Building Green (USGBC)

Assume for a moment that the owner had never counterclaimed against the contractor, but that the contractor never secured the tax credits and the loss of those same credits were what ultimately drove the project into foreclosure. Would the bankruptcy trustee have the ability to assert any claims that the owner might have, including those against the contractor? Probably, so it seems to me that the potential exposure for the contractor – in the absence of language in its agreement with the owner that limited its liability for consequential damages – would be significantly higher. The damages flowing from the contractor’s failure to secure the tax credits would no longer be just the $635,000.00 in credits, but those incidental to the bankruptcy filing itself, which, arguably, would include the decrease in sales prices during the course of the automatic stay that is imposed over the property, any other sales that were lost due to the bankruptcy reorganization, and associated professional fees and other carrying costs that the owner/trustee incurred during the course of the stay.

This line of analysis should reinforce – once again – the notion that contract documents on green construction projects must account for all potential legal permutations in the event that the project does not proceed as planned. The absence of a cap on consequential damages in the contractor’s agreement with the owner in this scenario could expose it to significant liability; on the other hand, if the owner simply signed a form AIA agreement waiving its right to consequential damages, it too would be barred from attempting to recover the damages that flowed from the contractor’s breach. The next question – which I will reserve considering for a separate post on consequential damages in green construction – is whether the damages incidental to a bankruptcy filing were foreseeable by the parties and therefore recoverable in any action asserted by the owner or the bankruptcy trustee on its behalf.

Finally, just a quick word of thanks to Brian Anderson for forwarding me the link below noting the bankruptcy filing.

• Owner of Captain’s Galley Condominiums in Crisfield Bankrupt (ESH.com)
• The Anatomy of America’s First Green Building Litigation (gbNYC)

The importance of Shaw cannot be overstated; the use of form contracts on green projects is a recipe for disaster, particularly in jurisdictions where green building legislation- in the form of either a mandate or incentive – may apply. AHRI may ultimately have even broader repercussions for the industry, as Judge Vazquez’ decision, grounded in federal preemption doctrine- and the plaintiffs’ willingness to bring the lawsuit in the first place – may end up spurring other legal challenges to state- and local-level green building legislation in 2009, particularly if the federal government takes a more proactive regulatory role once Barack Obama takes office. Here’s hoping that 2009 commands a much more robust discussion of the liability aspects of building green amongst industry stakeholders.

• Top 10 Green Building News Stories of 2008 (CoStar)
• Anatomy of America’s First Green Building Litigation (gbNYC)
• District Judge Grants Injunction in AHRI (gbNYC)

• The Anatomy of America’s First Green Building Litigation (gbNYC)