Mr. Pokorny and Mr. Penaloza discuss the "green insurance" programs and policies, LEED concerns for commercial claims and the expertise required to investigate "green claims" on these types of properties.
Green building practices have grown annually, adding complexity to the analysis of construction projects, building systems, and building performance expectations. These efforts add a significant level of due diligence and the necessary expertise in responding to 'green claims' on the insurance products serving those properties.
There are many new concepts within green building efforts that must be known in the claim industry and the third-party experts servicing these claims. Green claims involve understanding green concepts, such as increased energy efficiency, decreased water use, increased storm water control, and better indoor air quality. There must also be knowledge of the systems that drive the performance of these concepts. This additional expertise is not always entrenched in the basic knowledge brought forth by a typical claim representative, forensic analyst, scientist, or engineer. Nonetheless, specific knowledge of U.S. Green Building Council (USGBC) LEED credits and information 'behind' the credits is essential. Examples of this are provided herein.
An ever increasing number of insurance companies are supporting these industry efforts by offering 'green insurance' programs and policies. These policies include insuring the construction process and parties involved and their attempt to achieve USGBC LEED certification levels (Certified, Silver, Gold, & Platinum levels). In addition to those, some newer insurance policies include options for building owners to upgrade the reconstruction on a claim to greener standards, including more energy efficient systems; enhanced or reduced water use on-site; and attention to potential indoor air quality problems associated with newly installed building materials and fixtures. Other policies provide professional liability insurance to designers, construction managers, and owners relating to the performance of installed systems that promise such sustainability and energy efficiency. Whatever the policy and resultant claim on that policy, the analyst such as a claim adjuster or third-party expert ? must possess the expertise to address not only traditional claim aspects (origin and cause, replacement value, potential subrogation), but also how these aspects may be impacted by the requirements of LEED certification or other sustainable building elements of the property.
Before analyzing these elements, one should note that the construction and building industry from site zoning to the performance of a building post-occupancy is a much different environment than it was only years ago in many parts of the country. Certain cities, such as Washington, D.C. and Boston, for example, are continuing to build the 'green' concepts into building code for new construction. Some areas limit 'green' codes to schools and commercial buildings, but it will not end there. The USBC has further advanced its LEED certification process to have specific requirements forthcoming for LEED in schools, healthcare, homes, and neighborhood development. Some examples of building processes and materials that may impact the overall claim value are:
Increased energy efficiency of heating and cooling systems.Natural or native vegetation and landscaping.Low-emission construction materials and/or green cleaners and chemicals.Use of coolants, and fire suppression that contain little or no amounts of ozone-depleting chemicals, such as CFC, HCFC containing coolants.Reduction of water use on site (low- or no-flow toilets, low-flow fixtures).Increased energy efficiency of occupant use systems such as motion detectors for lighting, heating, and cooling; after-hours lighting of buildings; and exterior landscape lighting.
Remember that while these are not currently required as part of the construction/design process the LEED certification process is voluntary for a building owner/developer guidelines are being incorporated in local code and regulation, thus becoming the norm. A good analogy is to consider the handicap accessibility requirements for a property owner. Although handicap accessibility was not widespread a decade or two ago, it is now a standard and a component of the American Disabilities Act (ADA) and integrated into local building code and the building permitting process. Reconstruction on a claim for a property subject to ADA improvements positively impacted a variety of construction-related items on site from emergency egress, floor plan layout, restrooms and fixtures, and other property elements. The result was that the property was better suited for current operating expectations, thereby remaining competitive in its local market and possibly increasing its marketability. These same concepts drive the sustainable building community, with the expectation that market factors will favor a property that is more responsible in its energy use, more cost efficient, and more sustainable, with a lower overall environmental impact.
Insurance claims on a property built to either certification standards of LEED or to local codes and regulations that reflect this sustainable approach can be viewed in three basic phases:
Design and constructionPost-occupancy building start-upNormal building operations
In analyzing any claim, there may be significant financial impact, depending on the stage. A damage claim during the construction phase may impact specific replacement of expected materials on-site, similar to any claim. While the materials may differ from that of traditional construction for example, if a wheatboard, cork, or bamboo material is used as a material that will gain the project credit for using a rapidly renewable resource the response is essentially the same: to replace the material in kind. This claim, however, speaks nothing to the performance of the building material.
A claim to the performance of this building material may create different implications to the parties responsible, from the designers to the construction managers and the subcontractor community involved in the installation, inspection and verification process. This example gets even more complicated when addressing the installation of solar panels that fail in the future because of improper installation or design. Similarly, a non-CFC HVAC system designed to work in concert within a wholly commissioned building program requires significantly more complex analysis of a failure and replacement back to original specifications.
A claim that occurs during construction or post-occupancy inspection of start-up because of equipment failing to meet the specified energy efficiencies can possibly be more easily addressed in a traditional claim response than a claim two years after occupancy when that same piece of equipment fails to meet the specified expectations. Significant information gathering may be necessary to determine the initial performance levels, what new standards may impact the overall commissioning ?formula? of the building, or new code compliance requirements.
As claims get more confusing because of the numerous factors in green building, the experts servicing them must have a greater depth of knowledge in not only code compliance and industry expectations but also in green building knowledge. Below are some comparisons for example purposes:
In addition to standard HVAC design, ventilation standards, and efficiency of equipment, a building that has met certain LEED credits for Indoor Environmental Quality and Energy and Atmosphere offers complexities in the following areas:
Addressing the commissioning plan of the building's HVAC and energy system, including such items as the rate of outdoor air ventilation within the energy efficiency model versus the actual performance in the building.Analysis of on-site renewable energy into the overall system, such as solar, biofuel, passive solar, and day lighting and the effect on temperature and comfort of the buildingContinuing the CFC-free and ozone depleting potential (ODP) safeguards in the existing system when reviewing replacements.Understanding certain building envelope enhancements that were made to impact energy efficiency.Understanding the level of individual occupancy controllability of certain building systems that affect the commissioning of the building. This is accomplished through individual controls and/or motion sensors.
Changes to these items as a result of reconstruction after a claim (without attention to the intent of their original design) may offset the originally intended energy efficiency and overall building performance. Therefore, an expert familiar with building commissioning, energy efficiency, and whole building energy management - for example, a Certified Energy Manager (CEM) - may be more suited to this analysis accompanied by a LEED-Accredited Professional (LEED-AP) for specific building sustainability knowledge.
Civil engineer and site development expert - Site development in a LEED-certified property may include significant efforts to control and reduce storm water from the site through a variety of methods, including installed subsurface systems, surface-level pervious surfaces, landscaped materials (bioswales, retention ponds, and so on), and vegetated roof systems.
Additionally, considerations should be made for installed building systems that collect and reuse gray water for sewage conveyance, landscaping, or other non-potable uses. Also, certain sites may treat water on-site for re-use. An engineer responsible for inspecting a system failure on-site should be informed of the whole-building use of the system and possible integration of that system into other uses on site. Reconstruction and repair should consider the LEED credit intents to maintain the integrity of the sustainable system.
It is evident that the challenges of sustainable building and facility management of these buildings will have an effect on the claim response process. Using experts that are current with local changes in codes and policies relating to 'green' building is important. Using experts who are proficient in these areas and are familiar with the processes of certification and the driving forces behind green building initiatives is equally important.
Many LEED Accredited Professionals are a great resource in analyzing the costs, reconstruction processes, and impact of a claim involving a LEED-certified property or a property 'upgrading' to green in its current policy. Additionally, these professionals work continuously with engineers, construction managers, and architects within the green building industry and have knowledge to address claim details at these sites.
Keith Pokorny, LEED AP, Vice President of Environmental Services, has more than 25 years of experience in Environmental, Engineering, and Construction Management services. He specializes in large project coordination and assists clients in implementing construction-related capital improvement programs.
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