Green buildings are designed to be more efficient in their use of energy, water and other resources and to create better working environments for their occupants. Despite the current economic environment and some perceived obstacles to green building, the benefits remain significant.
In addition to reducing energy costs and improving the health and well-being of occupants, green buildings have lower operating costs, higher building values and higher occupancy rates, notes Ann Butterworth, director of property underwriting at Boston-based Liberty Mutual Property. Green builders may also be able to take advantage of continued government incentives, such as tax breaks and abatements.
Even if a company is not yet going green, it can still benefit from green insurance coverage. In many cases, current insurance won't cover the use of green materials if those products are priced higher than non-green materials unless the property owner has an endorsement to cover that risk.
"If you think you'll be incorporating green materials, especially after a loss, you should look into the available coverage options," says Butterworth.
There are two key certification organizations available for property owners looking to begin the green process. The U.S. Green Building Council's LEED® (Leadership in Energy and Environmental Design) program and the Green Building Initiative's Green Globes program provide third-party, independent, international certification of green building projects. While the cost of certification has often been cited as an obstacle to building green, many believe the return on investment far outweighs the initial costs.
"We're seeing more companies getting involved in the green movement," says Lucas Pfannenstiel, account engineer at Liberty Mutual Property. "While most state and local building codes don't yet address green construction, we're seeing interest in the development of a common standard that will make the process much easier to undertake."
Liberty Mutual Property recently introduced a collection of new commercial property coverages designed for business owners interested in undertaking green building ventures. Liberty's Green Select(TM) property policy endorsement was designed to give customers the coverage flexibility necessary to best protect their green investments. In the event of a loss to a LEED or Green Globes certified building, the policy would pay for the costs involved in upgrading to green-certified building products, the fees necessary to achieve the next level higher of certification, debris recycling, vegetative roofing systems and recommissioning costs. In addition, the policy would pay for a delay in operations if, after a loss, the upgrade or rebuilding of a green property took longer.
"Many insureds and prospects are asking, 'do you have a green endorsement,'" says Butterworth. "A number of clients have come to us because we have this endorsement, even though they don't yet have green buildings to cover," she notes.
The demand for green building is currently outweighing the initial costs and concerns about yet-unknown risks.
Because many construction materials and green building techniques are relatively new, there is concern as to whether the materials will work as promised. Butterworth cautions about "greenwashing"--a play off the expression "white washing"--when consumers are potentially conned into incorporating so called "green materials" that do not meet certain standards.
"We encourage people to make sure the products being used are verified, validated and recommended for use by a reputable third-party certification and testing organization. We believe that commercial property owners who develop a practice of a systematic and collaborative design process throughout the green building project might ease some of the property, contractors' and general liability coverage issues," stresses Butterworth.
While the cost of using green products may initially be higher, green buildings are expected to provide less exposure to loss over the long term.
"We work with experienced contractors and engineers who are aware of the new electrical, plumbing and HVAC systems and regulations," says Pfannenstiel. "We believe there will be less exposure and risk down the line due to the state-of-the-art equipment being used. We also value our relationships with risk managers and building owners who look for preventive measures and quality, who see green buildings as an advantage and who are actively looking to reduce their risk."
Because the green building industry is so new, Liberty Mutual is continuing to do as much research as possible to collect data on the pros, and possibly cons, of going green.
"We're gathering as many resources as we can to stay on top of the green movement," says Pfannenstiel. "Our goal is to help our insureds understand the coverage and insurance issues, as well as the technical issues involved in green processes and green systems."
It's a work in progress, stresses Butterworth. "We want to make sure we're meeting the developing needs of our insureds while helping them understand the benefits of going green and, along the way, reassure them that their insurance coverage will protect them, should a loss occur."
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February 16, 2009
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