When it comes to construction, green is the new black. Approximately 35 percent of US construction projects were green in 2013, and that number is expected to increase past 55 percent by 2016. Not only is new construction going green, so are home renovations.
Although green building is becoming increasingly more popular, and also easier, there are still some areas where builders and clients could encounter obstacles. One of those areas is insurance. Because green building is still so new, there are certain risks that could bring certain coverage into question, as they pertain to the usual liability policies.
Contractors are responsible for providing their own liability insurance. However, you should always make sure the contractor has this coverage before you give him the job. If he doesn’t have coverage, get a different contractor; or make it a part of the contract that he is required to get contractor insurance coverage from a reliable vendor before starting the job.
Contractor’s liability insurance protects the contractor and the job site from accidents, injury, and damage. For example, if during the course of the renovation the contractor accidentally breaks an expensive vase, the liability insurance should cover the cost of replacing it. If the client or one of the subcontractors comes through and cuts his hand on the shard of broken vase, the contractor’s liability insurance should cover that as well.
Additionally, the contractor’s insurance should also cover loss of use of the property from an accident or damage, such as water flooding from the addition into the rest of the house, making it unlivable for a period of time.
Contractor’s insurance might also cover damage to the property from faulty work or construction defects, such as roof leaks from improperly-installed chimney flashing or electrical problems from an improperly grounded tankless water heater.
Where you might run into trouble is when trying to apply some of these situations to a green build.
The traditional types of property damage, such as lost or broken items, might not be an issue if you have to make a claim. For the most part, the courts and the insurance companies can easily determine if a broken vase, or broken windows, constitutes covered damage. The same goes for traditional workmanship issues. However, when dealing with green construction, there are issues that the courts and insurance companies might not be familiar with – such as a building that is fully functional, but fails to achieve green status or is unable to qualify for LEED ratings and energy reduction credits. It is possible that a standard liability policy will not cover that event, because failure to achieve green status could be seen as a breach of contract, which is not covered by liability insurance.
Professional Services Exclusions
Some liability policies have professional services exclusions that might not cover some of the highly specialized work by certified green professionals. Which means any property damage caused by this work might not be covered either.
So, if standard contractor liability policies might not cover some of the problems that can occur during green construction, what are you meant to do?
Some companies offer insurance products specific to green construction, which clients can purchase to fill in the gaps that might be left by the standard contractor’s liability coverage. That way, if there is an issue that falls into that green gray area, you will be covered.
Also, as green building and green certification become more mainstream, more contractor liability companies could provide policy endorsements that cover issues specific to green construction