Greening the Standard of Care

This post was co-authored by Shari Shapiro and Christopher Hill

Contractors and design professionals have long been held to a standard of care to provide services in a “workman like” or “professional” manner. The general test, subject to some detail below and absent contractual language to the contrary, is “Will the building built by the contractor and contracted for by the owner stand up and work to the purpose intended?’ In short, will the building fall down and do the lights turn on? If the answer is “Yes” and the building meets minimal guidelines, a contractor meets this standard.

What are the components of this standard? A contractor or design professional is required to have an understanding of the historical standards of workmanship in its segment of the industry—in other words, to design or build as a reasonable professional in his/her area of expertise would do. These include knowledge of building codes, some expertise in its field, and the methods by which work is performed.

Most insurance contracts and standard building contracts assume this type of standard of care. A project owner can assume, for legal purposes, that the contractor it hires (and any other workmen on the project) meets this standard. While this can be of comfort to owners and contractors, unfortunately, without a contractual provision setting the standard of care, the state court system gets to decide what the standard is and whether that standard is met. In other words, everyone at the site may believe that they know the standard and what is necessary, but a court or insurance company could look at it differently.

Determination of all of these factors is difficult enough when the parties to the building contract are the only ones setting the standard of care. Enter LEED and green building where a standard is set by a third party, incorporated into some municipal and state building codes and interpreted by yet another third party. The question which is on the lips of lawyers, insurers and design professionals is whether and how green changes the standard of care.

Many insurers say that while they are keeping a close eye on whether green projects present risks above and beyond the traditional claims made by construction projects, they have not yet recognized green buildings as a unique category of risk. This is good, because it means that a design professional’s liability insurance probably covers their green building endeavors.

However, the answer is not as clear for professionals who hold themselves out as a LEED Accredited Professional, or who provide additional green services, like commissioning and energy modeling. There is a credible argument to be made that a LEED AP should be compared with what a reasonable LEED AP would have done with respect to building a green building, not just what a reasonable architect or other design professional would have done under the circumstances. Further, it is not clear that a professional liability policy which covers specific design or contracting services covers negligence in providing additional green services like commissioning and energy modeling.

So what is the beleaguered design professional to do? First, don’t overpromise. Ensure that you are able to provide the services you are asked to do in a reasonable and workmanlike manner. Second, communicate with your insurance provider. Ensure that your green services are included in the list of covered services for liability. Finally, to the extent that you employ subcontractors to provide green services, ensure that they are properly qualified and obtain adequate liability coverage, as well.

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Mark Rabkin - March 9, 2009 10:06 AM

This is a fantastic post. I couldn't have said it better myself. One product note to consider - the same type of professional liability carried by design professionals is available to trade contractors. Professional liability is coverage for financial injury caused by negligence as a result of advice provided by an entity that is held to a "higher standard of care" because of their unique experience, training or certification. Trade contractors are more susceptible to the unique liabilities created by their representations as "green specialists" by having LEED AP's on staff as mentioned in this post.

Thanks guys.

Christopher G. Hill - March 9, 2009 10:31 AM

Thanks for posting and working with me on this Shari!

Steve Sacks - March 9, 2009 12:59 PM

Great post Shari and Chris! And a very worthy comment, Mark. I would add that some clarifying language in the contract may also set expectations for the standard of care. Perhaps add something that states LEED AP status does not elevate the standard of care, but does assure the developer the design professional or contractor is experienced with LEED terminology and requirements. Cheers from California.

Christopher G. Hill - March 9, 2009 1:32 PM

Great ideas Steve and good insight Mark. I appreciate your both joining the conversation.

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