Insurers are cautiously offering coverage for green building projects, but many carriers remain reluctant to provide this specialized coverage as they continue to evaluate the risks involved, according to a report by insurance broker Marsh.
The report, titled "The Green Built Environment in the United States, The State of the Insurance Marketplace," said the construction of environmentally friendly green buildings is growing at an expanding rate, but "the commercial insurance marketplace is keeping a watchful eye on this trend and monitoring the delicate balance between risk and reward."
Marsh said while many insurers are taking a wait-and-see attitude toward most of the market, the property and design professional liability segment is flourishing. That market has developed enhanced coverages or risk management advice, or both, around the green building 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, Catha Pavloff, a senior vice president in Marsh's construction practice and leader of the firm's green building risk management initiative, said in a statement. She is also the author of the report.
She noted that despite concerns for potential water damage from vegetation-covered roofs, underwriters are seeing potential benefits for those buildings certified by the U.S. Green Building Council as LEED certified (Leadership in Energy and Environmental Design). The certification, she said, helps to verify that the building's systems are operating "at a high level of efficiency."
Casualty writers appear to have the greatest concerns, and the steepest learning curve, because this is such a new risk for them, the report said. Their primary concern was found to be for general liability and products liability coverage.
Their concerns cover contractors and subcontractors whose inexperience could lead to faulty workmanship and construction defect claims; new and untested products, materials and processes that may lack durability and longevity from traditional parts; and increased claim activity from inadequate maintenance impacting construction contractors' potential liability.
Of the insurers surveyed for this report, Fireman's Fund, American International Group and Liberty Mutual are the only three offering various forms of coverage to address clients' needs for green building coverage. Others are considering coverage but went unidentified.
The report is available through global.marsh.com/GreenBuilding.
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