Green Building Law Blog : Green Building Lawyer & Attorney : Shari Shapiro: Calliope Communications, LLC

CLARIFICATION:

I reworded my original post on this subject to clarify my intent. In my original post I noted that most of the conclusions of the Harvard study had previously been made by other commentators in the field. Similarly, the post noted that important sources appear not to have been considered by the authors of the study. I stand by those criticisms. My post also suggested, however, that the presentation of the study's conclusions seemed "to be nothing short of plagiarism." That was an unfortunate choice of words. I did not mean to impugn the academic honesty of the authors or their supervisors or the institution that published the study. To the extent that my words conveyed that impression, I apologize to each of them.

On May 29, 2009, Green, Inc., the New York Times' green blog announced a truly startling revelation--"Building green can open the door to plenty of legal pitfalls, a new study warns." 

To readers of this blog, this may seem to be...old news.  But not to the blogosphere and the Twitterverse.  News of the Harvard revelation spread fast and furious, as though Clarence Darrow himself had spoken on green building law from beyond the grave.

And what pearls of wisdom were revealed from the venerated halls of Cambridge? Frankly, nothing that had not been written about in hundreds of blog items and articles before. What was astounding, however, was that there was not a single reference to any of those articles or blog postings.  The Harvard piece was written as if the insights and conclusions were original.  This is not the case.

Here are a few examples:

AHRI v. City of Albuquerque

From the Harvard study at 5:

[AHRI v. City of Albuquerque] illustrates potential conflicts between municipal regulation of green building and green building efforts at the state and/or federal level. 

From my article on AHRI v. City of Albuquerque in July, 2008 at Greenerbuildings.com

 Local laws seeking to set higher green standards will be struck down if the federal government has exclusive authority to regulate energy efficiency.

Risks

From the Harvard study at 6:

Project Owners

Failure of project to achieve certification or an anticipated level of certification

Failure to qualify for tax credits

Failure to meet loan or incentive program requirements

Increased soft costs due to delays

Failure to meet anticipated or state claims in marketing or promotional materials

From Greenbuildinglawblog July 1, 2007

Finally, although the green building movement is in its halcyon days, new expectations will inevitably lead to conflict. A multimillion-dollar development project will fail to gain the LEED credits required to secure a government grant, and litigation will doubtless ensue.

From Custom Home Online February 15, 2008

Some mistakes to beware of committing in your marketing of green homes include overstatement of benefits or performance; misrepresentation, non-disclosure, or outright fraud (intentional or unintentional); and making vague, misleading claims or subjective, unverified statements.

From Construction Monthly, 2007

Suppose, for example, that an architect’s LEED Silver building, designed to such a level for the purpose of securing some type of state or local tax incentive, only received LEED Certified because of a credit rejection from USGBC due to insufficient documentation? It is not difficult to imagine the owner looking to the architect or engineer responsible for that particular part of the design for some sort of redress, particularly if documentation responsibilities were not clearly identified by contract.

From the Harvard study at 6:

Design Professionals

Higher standard of care resulting from participation in the building process as LEED Accredited Professionals

Design defects that result in failure to achieve certification or a specific level of LEED certification

Liability due to the failure of systems or components to perform adequately over the structure's lifecycle

Exclusion of warranties and services in the green building context from insurance policies or added insurance costs

From Greenbuildinglawblog, March 9, 2009:

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.

From Sustainable Land Development Today, December, 2008:

Accordingly, the contractual language in the design contract could provide the insurance company with ample opportunity to determine that the architect gave the owner a guarantee or warranty that the building would achieve a particular rating and to possibly deny coverage for claims arising out of the building’s failure to obtain such rating.

I could literally go through the entire publication demonstrating that each and every component has been said elsewhere before.  The Harvard team could have alleviated this situation with the liberal application of footnotes.  Instead, a compendium of a total of 15 articles are listed at the back of the publication, giving the impression that the article contains new insights into green law from Harvard. Shining a little light discovers the truth--the Harvard report is regurgitation from leading scholars in this field almost three years after we started discussing these issues in earnest.

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ACE announced last week that they have created a Green Contractor Insurance Program.  People in the green building risk world have speculated that insurance companies would begin to offer green professional liability products.  The ACE product does not cover professional liability issues, but instead is a pollution liability insurance product. According to ACE

Contractors Pollution Liability program, which addresses the growing risks and potential exposures faced by contractors as they begin to access federal stimulus dollars and experience increased construction activity. This green-specific insurance program is designed to cover contractor and sub-contractor environmental and pollution-related exposures. The product can also be tailored for Leadership in Energy and Environmental Design (LEED)-certified building projects as an Owner-Controlled Pollution Insurance Program (OCIP); a Contractor-Controlled Pollution Insurance Program (CCIP); or a standalone Contractors Pollution Liability Project placement.

The world is still waiting for a professional liability policy to cover green services by architects, contractors and engineers, but the insurance industry may be closer to determining the parameter of risk that green represents.  I have been in contact with ACE, and will find out more about the parameters of this new product.

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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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