Green Building Basics

By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE – Assistant Vice President/Media Editor

The green building industry is changing the footprint of the construction trades. Green buildings are less costly to operate, saving money for individual building owners as well as taxpayers. Added advantages of green buildings are that they are designed to be safer for occupants’ health, and use recycled and sustainable materials. However, green buildings also present their own set of obstacles for building owners and risk managers. Helping your clients understand the benefits and challenges of “going green” is another sign of the true insurance professional.

The U.S. Green Building Council ranks New York second in the nation (behind Massachusetts) in the total square footage devoted to green building. New York City has instituted a building energy efficiency grade. Similar to restaurant grading, large buildings will have signs at their entrances showing their rating from A-F. In addition to the letter grade, the sign will include the building’s EnergyStar score. The theory is that more efficient buildings will lead to higher rents and lower vacancies (https://urbangreencouncil.org). In New Jersey, the green building industry added $20.51 billion to the economy from 2015-18 and employs over 241,000 people (https://usgbcnj.org/education).

New York’s Battery Park is home to a number of innovative green buildings. The Solaire, which opened in 2003, was the first high rise residential building in the country. The Verdesian, the first multi-family high rise residential building to achieve platinum LEED status, opened in January 2008, followed later that same year by The Visionaire, which was billed as the greenest high rise residential condominium in the United States (www.nydailynews.com).

The Leadership in Energy and Environmental Design (LEED) certification system was developed to add structure and specific guidelines to the green building process. LEED certification is available in four levels of increasingly more stringent requirements, based on an earned points system: Certified, Silver, Gold or Platinum (https://new.usgbc.org/leed). Minimum criteria include being a permanent building on existing land, and compliance with project size and LEED boundary requirements (https://usbgc.org). Different certification programs are available for all types of buildings, from new construction to updates to existing buildings. LEED-certified buildings are designed to create a healthier environment for both the occupants of the building and the surrounding community. These buildings are known for reduced energy and water usage, and lower carbon emissions.

From an insurance standpoint, valuation is key. Green construction is more costly than using traditional methods. LEED recertification costs may be necessary if there is significant damage to the building. These factors must all be included when developing the proper insurance program.

Vegetative roofs are becoming more popular in connection with green buildings.  The increased weight and risk of water damage of these roofs add important elements for consideration in the insurance discussion. In addition, coverage for plants and trees is generally excluded or severely limited in standard insurance contracts, so this is another suggested area of policy modification.

Business income loss must also be addressed, both for the extended period it may take to rebuild to LEED certification requirements, as well as any income lost from selling energy back to the power company.

Extra expense is another key element to a green building’s insurance program. There may be added costs to ship specialized materials, or to bring in custom installation equipment. Standard insurance policies do not provide coverage for LEED recertification. Recertification costs differ depending on the level that is involved. In addition to coverage to repair a “green” building, upgrade coverage is available for those building owners who wish to convert to “green” after a loss, or want to upgrade their LEED certification level.

Debris removal requirements may present added costs for green buildings. Debris must be sent to recycling centers rather than landfills. Income received from recycling may offset the increased debris removal cost.

For a building to be truly “green,” the contents and equipment must also be considered. Features of “green” furnishings include reduced emission of VOC (volatile organic chemical) gases, constructed using recycled or renewable materials, durability, and compatibility with green cleaning methods and products (www.buildings.com).

Sustainability and efficiency are growing trends in building. Helping clients understand the benefits as well as potential problems with, green construction, is another value-added service of the professional insurance agent.