INSURANCE IMPLICATIONS FOR GREEN CONSTRUCTION

One of the most popular types of construction in the United States is green construction. This eco-friendly technique gained popularity because of rising energy costs, global climate change and the United States' dependence on foreign energy providers. People nationwide are taking steps to reduce the carbon footprints of their homes and businesses. However, this type of construction has very important insurance implications, of which all consumers should be aware.

Buildings that are considered green have met several requirements for LEED, which is a certification formally known as Leadership in Energy and Development. LEED was developed by the U.S. Green Building Council in the late 1990s. It was designed to help building owners identify and use construction, maintenance, operations and measurable designs that are better for the environment. In comparison with standard structures, green buildings use water and energy more efficiently. They also have healthier indoor environments and produce less carbon dioxide.

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Several municipalities and states have adopted special building codes that require green construction elements. Stricter water efficiency standards have been enacted in California for new residential structures. Tighter energy use standards are under consideration in New York City. Green building requirements have had a major impact on construction costs, which vary by location. Although green construction demands special procedures and materials, contractors who are up to speed with these requirements are hard to find. This means that the cost of complying with such requirements may be considerably higher than the cost of using standard methods and materials. This cost issue will also affect insurance coverage

These factors influence insurance claims:

• What is defined as a major renovation by the code, and what percentage of the building's area is affected.
• Whether qualified contractors are available in the area.
• Whether green building codes apply to renovations or only to new construction projects.
• How new materials will work with existing components, and whether integrating them will increase the cost and time required for rebuilding.
• How the use of green materials will affect the appearance of the building.
• Delays for obtaining special materials and contractors.
• The likelihood of longer wait times for special contractors after a catastrophe happens.
• The likelihood of waiting for special building inspections and approvals after a catastrophe happens.
• How the building code applies if a natural disaster occurs.
• What standards property owners must meet following a widespread disaster.

Within the next few years, experts predict that the market for non-residential green construction will grow substantially. This means that insurance companies and property owners will have to address serious questions, and the best time to get answers is before losses occur. Commercial and standard Property insurance policies offer very little coverage for ordinance or law losses. These are extra expenses incurred to comply with special requirements. However, additional coverage is available. People who own properties in areas where green building codes exist should discuss these options with an agent.

UNDERSTANDING WHEN ADDITIONAL INSUREDS ARE COVERED

With construction contracts, a general contractor must be added as an additional insured on the subcontractor's Liability insurance policy. Most contracts require liability coverage because there may be claims arising from completed or ongoing work. This also means that the general contractor runs the risk of facing a lawsuit from the flaws in the subcontractor's work. For this reason, subcontractors need Completed Operations insurance.

In the past several years, the insurance industry took steps to remove completed operations coverage from the policy forms commonly used for additional insureds. The ISO Form CG 20 10 of 1985 offered coverage for the organization or person listed on it. The named party was covered for liabilities arising from their work or work performed for them by someone else. Materials and equipment were also covered. From the wording on the form, the courts decided that additional insureds were covered for any completed operations. However, ISO revised the form in 1993. ISO had never intended to extend this coverage, so the form was changed to offer coverage only for the named insured's ongoing projects. At the same time, Form CG 20 37 was introduced. It provided liability coverage for additional insureds helping with the named insured's operations. However, operations were only covered if they were away from the premises rented or owned by the named insured.

To understand how this works, consider an example scenario. Company A is subcontracted to do electrical work, and Company B is subcontracted to do plumbing work for a new project. Contractors from both companies are working at the general contractor's work site on the same day. While a plumbing worker from Company B is installing parts in a bathroom, the electrical contractor from Company A accidentally drops a tool on the plumbing worker. The Company B employee is injured, so he sues the general contractor and Company A. Company A's CGL policy has the CG 20 10 endorsement with the general contractor listed as an additional insured. Since the injury took place during ongoing operations, the policy will cover the general contractor in the lawsuit filed by the injured worker.

However, if an electrical contractor performs work and leaves without intention of returning, it is the general contractor's responsibility to ensure quality work. If the general contractor accepted it and a fire started because of faulty wiring after the job was done, the building owner could sue the general contractor. Since the electrical contractor's work was finished and approved, the CG 20 10 endorsement would not apply. In order for the general contractor to be covered, the policy would have to include the CG 30 37 endorsement. No losses would be covered by either endorsement if the general contractor was at fault. To qualify for coverage, an incident must be at least partially another party's fault.

Since construction is risky business, it is important for all contractors to discuss their insurance questions with an agent. Contractors must fully understand their contractual obligations and what coverage is available to meet their needs. Our agents are able to provide information about policy terms, costs and additional insured options. It is crucial to have ample coverage before taking on a project where losses are likely to be incurred.

TIPS FOR STAYING SAFE WHILE USING A LADDER

Many buildings and homes have ladders for various purposes. Although they are useful, they come with many safety risks, and it is therefore important to take the proper steps to prevent accidents. For example, never leave stepladders or ladders unattended. If a ladder falls, passersby, children and even pets can be severely injured or killed. Whether the ladder falls or someone climbs on it, the results often include a hospital visit. Keep safety in mind at all times while using a ladder, and make sure the ladder is secure before climbing on it. Stabilizing it takes only a few moments, and the result yields a much lower risk for disaster. To make ladder use as safe as possible, consider the following suggestions:

• Carefully analyze the ladder before using it. Look at all of the rungs, and make sure they are sturdy. If they do not have skid-resistant strips, attach some immediately.
• Prop up the ladder in a way that makes the distance between the wall and base one-fourth of its length up to the support point.
• Watch carefully for signs of splits and cracks. If rungs are bent, repair them prior to using the ladder. Bent rungs are very unsafe and should never be present above the lower three feet of the ladder.
• While climbing up or down the ladder, always position the face toward it. Keep at least one hand on it at all times. People who perform ladder jobs requiring both hands should firmly secure themselves to it.
• Although extension ladders offer additional reach, it is necessary to make sure the overlap is at least three feet. Be sure the rung locks are clicked into place securely.
• Avoid using aluminum ladders near sources of live electrical currents.
• Never open a stepladder halfway up. They should always be opened fully, and the braces must be locked tightly.
• Make sure the ladder's feet are on a dry and even surface. If a surface is wet or uneven, the potential for danger is heightened considerably.
• Never climb higher than the ladder reaches. Absolutely avoid climbing so high that the hips are above the ladder's final rung.
• Avoid having more than one person on a ladder. It is also important to ensure nobody is standing directly below the person on the ladder. If the individual climbing it dropped an object or fell, the person below could suffer severe injuries.
• Store all tools and equipment in a sturdy tool belt. This lessens the need to climb up and down the ladder multiple times.
• Always read all of the instructions and warnings accompanying a ladder before using it.