Page 295 - The Green Building Bottom Line The Real Cost of Sustainable Building

THE FINE PRINT: LEGAL ISSUES IN GREEN BUILDING PROJECTS 273

3. Insurance and Bonds
Even if a contract says that an architect or contractor will be liable for damages, what
if it cannot pay? Damages related to a large building project are potentially so large
that many design or construction firms would not be able to pay them even if required
to do so. Contracts typically address this difficulty in two ways—insurance and per-
formance bonds.
There are many different types of insurance policies. Architects and engineers typ-
ically carry an errors and omissions policy that covers defects in design, while com-
mercial general liability policies carried by contractors cover construction defects.
Insurance policies come with many limitations, however. Of particular concern in the
green building context, policies often insure only that the architect or contractor per-
forms to the standard of care described above. If a design or construction contract
includes obligations that exceed the standard of care, developers need to pay close
attention to the extent of the insurance coverage carried by the professional. If the
insurance policy will not cover the obligation and there is no way to amend or sup-
plement the policy to include the desired coverage, then the developer needs to be
aware of that risk before signing the contract with the architect or contractor.
Performance bonds are agreements by a third party to guarantee a contractor’s per-
formance on a project. Since some green building technologies are still relatively
untested, the issuers of bonds, like insurance companies, may be reluctant to guaran-
tee enhanced contractual obligations by the contractor on a green building project.
This is likely to change as green building practices rapidly become mainstream.

Conclusion
Building construction is inherently risky, and developing a green building, because it
can require a project owner to make additional promises to investors or occupants
about a building’s performance, can be even riskier. Since it can be difficult for a proj-
ect owner to be made whole in the event that there are problems with the design or
construction of a building, taking steps to prevent problems from occurring is critical.

Permitting and Incentives

Before constructing a building, of course, a developer has to obtain the necessary per-
mits. The permitting process can deeply affect a green building project in both posi-
tive and negative ways.
In many cases, existing building and development codes can stand in the way of mak-
ing construction projects more sustainable. Local officials may be unwilling to approve
technologies they view as risky or be bound by outdated laws. The re-use of graywater,
for example, is often resisted by local building authorities. Development codes require
a minimum number of parking spaces for any project, but the minimum might be more
than the green building developer, anxious to develop in a dense area where building
occupants could use public transit or walk to a building, would prefer to install. Building
codes and homeowners’ or community associations might prohibit wind turbines or