Understanding what your policy covers
As mentioned in “Green Building Risk Management Obstacles”, there are many potential risks involved in the emerging field of green building. Current insurance policy forms may not provide adequate coverage for all green building risks at this time.
Below is a summary of the types of policies that are needed:
- General Liability: Current General Liability forms may adequately cover claims for negligence resulting in bodily injury and property damage.
- Bonding: Current License and Permit Bonds may provide limited protection against the risk that the project will not be completed per state and local code requirements. Surety Bond forms may adequately protect against the risk that the job will not be completed per the plans and specifications or due to financial problems of the contractor.
- Professional Liability (Errors & Omissions) insurance is needed to protect against pure economic damages (not associated with bodily injury and property damage) in the event that the green goals are not accomplished resulting in financial loss to the buyer in terms of increased annual operations expenses, lack of savings, or loss of resale value. This type of Professional Liability form for green contractors is not widely available in the market and as a result a specialist insurance agent should be approached for placement.
Source: Kenneth C. Gibbs, “Green Building: New Benefits for Society and New Challenges for Risk Management;” Insurance Journal, November 17, 2008; Vol. 86, No. 22.