Insurance Coverage Slow to Develop for Green Projects

Green building projects are hot across the United States, but many insurance companies are "remaining on the sidelines as they work to determine the extent and types of exposures that might evolve from these new projects," insurance broker and risk advisor Marsh Inc. recently reported. The Marsh report says the property and design professional liability insurance markets have been the first to develop enhanced coverages or provide specific risk management advice for the green-built environment.

"By and large, insurance companies are carefully monitoring the progress of green construction, the evolution of the contracts that define roles and allocate risks on these projects, and the reliability and durability of green materials and systems," said Catha Pavloff, a senior vice president in Marsh's Construction Practice and leader of the firm's Green Building Risk Management initiative.

Because the American Institute of Architects has supported the U.S. Green Building Council's LEED Certification, "insurers are watching this sector to determine whether the certification may be an effective risk differentiator for architects and engineers involved in green projects," the company said. "At the same time, professional liability insurers already have received claims brought against architects and engineers involved in green building for a range of issues, including failure for a building to achieve desired LEED certification, leaks associated with green roofing, indoor air pollution, and mold associated with cork flooring."

Businesses seeking insurance for green facilities must ensure they determine proper values to avoid being underinsured or being charged too much premium, according to Marsh. "Despite concerns about green roofs and the potential for water damage and structural problems, many property underwriters are beginning to recognize the potential benefits of green buildings," Pavloff said. "For instance, the green building certification process helps to verify that the electrical, HVAC, and plumbing systems are working at high levels of efficiency, thus reducing the possibility of a loss. Looking ahead, what happens in the surety market is likely to depend on sureties' actual experience, the experience and qualifications of the firms working on green projects, and the contractual allocation of risk."

To request a free copy of "The Green Built Environment in the United States: The State of the Insurance Marketplace," make a request through http://global.marsh.com/GreenBuilding.

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