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Owners must use care in approaching contracts they sign with architects, engineers and other professionals who help with their green building projects, experts warn.
These professionals are not covered under their professional liability policies if they provide warranties or guarantees in their contracts. This could leave the owner without recourse if the building does not perform up to expectations, experts warn.
Professional liability coverage would respond if the professionals failed to meet their contractual performance requirements that do not include a guarantee or warranty.
“The big issue for them is to avoid making guarantees and warranties,” because these are not covered under their professional liability policies, said Dan Knise, president and CEO of Ames & Gough, a McLean, Va.-based insurance broker and risk management consulting firm. “They're only liable for not meeting the so-called standard of care,” unless they agree to greater liability in their contract, he said.
Keith Jurss, Chicago-based senior vp of professional liability for the national construction practice of Willis North America Inc., said exclusions in their professional liability policies is a “dangerous thing” for a green building owner from a contractual standpoint.
If a platinum certificate is guaranteed under the Washington-based U.S. Green Building Council's Leadership in Energy and Environmental Design program but is not granted, it is a financial loss to the owner.
“The last thing an owner wants to get is a guarantee and not have an architect or engineer have the ability to deliver on that, and have no means to go after them for the financial loss they may have incurred,” Mr. Jurss said.
At that point, if the professional is not covered, the owner must look at assets that can be recovered, but these “tend to be limited” with architects and engineering, he said. “Their biggest asset is their people. They don't have a lot of assets,” Mr. Jurss said.
While contractors may have more assets to attempt to recover, “many are in the same ballpark,” he said. Their assets may not “make any appreciable difference to an owner if they have to go after them.”
Entities that have demonstrated their ability to deliver a green construction project as planned are essential, “because if you're going to hold to that kind of standard of care issue, they have to have the ability to deliver those design...and construction services,” Mr. Jurss said.
Rod Taylor, Windermere, Fla.-based managing director of Aon Corp.'s environmental services group, said an owner or owners could wind up making an errors and omissions-type claim against professionals involved in a green building project “in which you asserted that they failed to meet the standard of care for somebody providing construction services.”