Green Building Gains and Risk Management Improvements
Environmental Leader reports that in five years the total US green building market value is projected to increase from $71.1 billion to $173.5 billion. This represents a Compound Annual Growth Rate (CAGR) of 19.5%. The commercial green building segment of this market is expected to increase from $35.6 billion to $81.8 billion. According to the report, this surge in green building has the potential to create 2.5 million American jobs, about a 30% increase in jobs within the construction industry.
This remarkable surge of green building activity will be accompanied by a surge in the risks associated with green building. As discussed in some of our prior blogs, the key to managing these risks is to contract carefully and make sure that expectations are defined and responsibilities for those expectations are specifically assigned to the parties in the contract documents. To address some of these risks, the insurance industry offers some niche coverage for green building projects. For example, Chartis Insurance offers "green reputation coverage", designed to address the threat or reality of adverse publicity when a building fails to meet green industry standards. Coverage includes access to crisis consultants and a range of other services to mitigate adverse publicity. Chartis also offers "green indoor environment coverage", providing coverage for bodily injury claims resulting from specialized equipment and products used to improve air and water quality in green buildings.
Similarly, Fireman's Fund recently began offering a five percent discount to policyholders with Energy Star buildings, and offers "green financial incentive coverage" for policyholders that paid for green improvements to their property with help from a tax incentive or financial grant and then suffered a loss when the building did not achieve the targeted rating and the policyholder is obligated to return the benefit received. These coverages are described in more detail in an article from Rueters.
Careful contracting and thoughtful insurance coverage will help reduce the risks and enhance the benefits of green building for all contracting parties and end users as green building in public and private construction continues its exponential growth.
