Construction Industry Update – The Liability Implications of Sustainable Design

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March 2010

The Liability Implications of Sustainable Design

By Jeffrey W. Cavignac, CPCU, ARM, RPLU, CRIS President/Principal, Cavignac & Associates

It seems everyone wants to go “Green.” Almost every major public project and a significant percentage of private projects are seeking some type of environmental certification.

The Sustainable Design Movement

The sustainable design movement, which is about 15 years old, has exploded in the last five years. The Leadership in Energy and Environmental Design (LEED) Green Building Rating System was developed by the U.S. Green Building Council (USGBC) in 1998. Since its inception, more than 14,000 projects have been “LEED Certified” in the U.S. and 30 other countries, encompassing over 1 billion square feet. It is estimated that the Green Building market is worth $30-$40 billion annually.

LEED was created to accomplish the following objectives:

● Define “Green Building” by establishing a common standard of measurement

● Promote integrated whole-building design practices

● Recognize environmental leadership in the building industry

● Stimulate green competition

● Raise consumer awareness of Green Building benefits

● Transform the building market

In LEED 2009 there are 100 possible base points, plus an additional six points for Innovation in Design and four points for Regional Priority.

Buildings can qualify for different levels of certification depending on how many points they accumulate.

Sustainable Design Category                            Points Possible

Sustainable Sites ————————————-26

Water Efficiency ————————————–10

Energy and Atmosphere ——————————-35

Materials and Resources ——————————14

Indoor Environmental Quality———————— 15

Innovation in Design————————————- 6

Regional Priority—————————————— 4

 

Total————————————————— 110

Certification Level ————————–No. of Points

Certified ——————————————–40-49

Silver———————————————— 50-59

Platinum ——————————————80 and above

Gold ————————————————-60-79

The Issues

The advantages of a

LEED certified building are numerous. They should use resources more efficiently than conventional buildings, and should also provide a healthier work and living environment. The USGBC has generated a laundry list of benefits arising out of LEED certified construction ranging from improved air and water quality to reduction of solid waste.

However, these benefits are offset by some additional costs inherent in “Green Construction.” In addition, sustainable construction principles are not understood by many design professionals or contractors. This can require additional research, and the confusion can lead to disagreement between owners, designers and contractors.

Availability of building components which meet LEED standards could be a problem, not to mention that many of these “green materials” can be more expensive. Then there is the added cost of having the building “certified.” Added costs come in the form of correspondence with the USGBC, the cost of LEED design-aide consultants, and the hiring of the required

Commissioning Authority.

The USGBC will point out that these higher initial costs will be more than offset by lower operating costs over the life of the building and employee productivity gains incurred as a result of working in a healthier environment. In addition, there are potential tax credits for developing a Green Building as well as possible variances from local building codes.

Whether or not Green Buildings will generate the savings owners are looking for remains to be seen. Tim Corbett, a risk management consultant to the design community, pointed out that the National Renewable Energy Laboratory (NREL) in Golden, Colorado (a unit of the U.S. Department of Energy) is midway through construction of a $64 million project that lays claim to the title of being the “Greenest Building in America.” Architects and engineers have spent hundreds of hours calculating the energy use of every aspect of the building, from the elevator to the exit signs. They have tweaked the design again and again with the aim of getting the 218,000-square-foot building to perform at net zero — meaning it will consume so little energy that it won’t need to draw a single electron from the grid.

All of these techniques cost money. A run-of-the-mill office tower in Denver costs about $140 per square foot to design and build, according to an analysis by RS Means, a unit of Reed Construction Data. The NREL building will cost twice that, at $280 a square foot unfurnished, according to Haselde Construction. But… NREL says its “building meets federal guidelines for government construction costs,” stating federal buildings generally cost more because of added safety and security requirements.

Rob Watson, editor of GreenerBuildings.com, is well known for developing the USGBC’s Leadership in Energy and Environmental Design rating system (LEED). Recently Watson issued a report which identifies market trends, water efficiency and energy use for LEED projects. The data is discouraging. “Some LEED buildings are not performing as expected given their design and technology elements,” states Watson.

Another report released in October 2009 by USGBC’s Chicago and Partners evaluates efficiencies of LEED certified buildings in Illinois. What they learned was LEED buildings were performing only 5% better than non-LEED buildings throughout the region. Platinum and Gold LEED structures were found to be “no more efficient” than Silver or basic LEED certified buildings.

What does this mean for designers and constructors? Most likely some unhappy clients and increased risk. Many clients are expecting to recoup increased costs for design and construction of a LEED building through better performance and energy savings. To the extent these expectations are not met, fingers will be pointed.

The Challenges

 Owner Expectations – If an owner expects a “Gold” certified building and receives a “Silver,” he may want someone to make changes so it can rise to the “Gold Standard.” Similarly, if an owner expects energy savings to offset increased construction costs and those savings are not there, disputes may/will arise.

 Scope/Schedule – Green Buildings may require additional research, approvals and unique coordination challenges. Unless you have built these into your fee and schedule, you may end up underpaid with a schedule that is impossible to meet.

 LEED Reporting Requirements – LEED 2009 requires that certified properties share data on energy and water usage in their building for at least five years. Although this is the owner’s responsibility, the owner could transfer the research to the design professional or design/build contractor. This 5 year reporting requirement also creates uncertainty: What if a building initially qualifies for certification but subsequently fails to comply with LEED requirements?

 Guarantees – You may be asked to “guarantee” a certain level of certification, or your marketing materials may imply that you are an expert in LEED Design or Construction. Recognize that professional liability policies only cover your negligence, not risk you assume contractually that goes beyond the standard of care.

 Unique Building Systems and Materials – LEED Certified Buildings require the use of “Green” products. Many of these are new and untested. In addition, it is unclear how some of these products will perform with existing building systems.

 Project Team Capabilities – A LEED accreditation doesn’t make one an expert. It is not that difficult to become “LEED Certified.” An inexperienced project team might not know what they don’t know.

 Maintenance and Operation – The payoff of a Green Building is often decreased maintenance and operation costs. But if the owner doesn’t understand how to maintain and operate the building, and if the savings are not there, both designers and builders will be involved with solving “the problem.”

The Solutions

 Manage Owners’ Expectations – You need to be the reality check. Insist on a “pre-bid” LEED Meeting or Charette. This is a session in which the  owner, designers and constructors discuss the project and specifically the unique aspects of the green construction. Make certain the owner understands that building a Green Building requires additional time, innovation, and planning – and in many cases a higher fee. In addition, achieving a certain LEED level does not guarantee savings.

 Negotiate a Fair Contract – Review your contract carefully, specifically guarantees, timelines, and indemnities. Don’t promise something contractually that you can’t provide. You should not guarantee performance. The law only requires you to perform to the Standard of Care. You can endeavor to achieve a certain level of LEED Certification, but you should avoid guaranteeing it. LEED Certified buildings will also take longer to design and build. They require research, and in many cases additional time to satisfy the LEED reporting requirements mentioned above. These issues are compounded by unique aspects of green construction, which inevitably will extend the construction schedule. Make certain the schedule or timeline is reasonable. Finally, beware of any specialized indemnity agreements or insurance requirements. An example of a contractual provision you might consider inserting in to your contracts is included in this article.

 Research and Document – Understand what you are designing and what you are building. Make time to do appropriate research. If you are asked to specify products you are unfamiliar with, or if you are not confident the product being used is appropriate, call this to the appropriate parties’ attention and document it. Where possible, get assurances from manufacturers and suppliers.

 Experienced Project Team – You should only pursue LEED Certified projects if you know what you are doing. If you don’t have the expertise, get it. If you are subbing out work that requires LEED experience, make sure your subconsultants or subcontractors have the requisite expertise.

 Maintenance and Operation – It is imperative that there be a “commissioning process” to educate the owners on how their building works, and what their responsibilities will be to maintain and operate the facility.

Final Comments

Sustainable design and accreditation are moving targets. Problems will arise with Green Construction. This is a risk, however, that lends itself to being managed.

You need to make certain your client understands the unique requirements of building green. Your contract should have a clear Scope of Services, outlining not only what you will do, but also what you are not doing and what you can do for an additional fee, as well as the owners’ responsibilities.

Particular attention should be focused on fee, construction budget, and scheduling aspects of the contract. Make certain the client understands that designation of a certain level of LEED Certified Building is outside your control. You can make reasonable efforts to achieve the LEED objectives on the project ,but you cannot guarantee a certain level of LEED Certification. Nor can you guarantee actual performance of the building or dollar savings.

The Green Building Boom appears to be here to stay. As mentioned earlier, this will create opportunities and challenges. It is important to remember that these projects require additional attention and should not be considered “business as usual.” Proactive risk management can not only help you identify the challenges, but it can help you manage them as well. 

Sample

LEED Certification Contract Clause

The Client and Contractor/Consultant mutually acknowledge that a Project Goal is to achieve certification under the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design (LEED®) [or other] Green Building-rating system. The Client understands that the Project cannot achieve LEED certification until after substantial completion of construction and will be subject to the LEED-certification processes and procedures as determined by the USGBC. These procedures are outside the control of the Contractor/Consultant, may not be uniformly implemented, and may be subject to change at any time. Further, LEED certification will require input and effort from the Client and the Contractor/ Consultant as well as other consultants, contractors and other parties associated with the Project that are not parties to this Agreement.

The Contractor/Consultant will make reasonable efforts to facilitate and coordinate the LEED certification for the Project, subject to the scope of services and the terms and conditions of this Agreement. The Contractor/Consultant cannot, however, guarantee LEED certification or the actual performance of the building, nor can it guarantee certain performance levels anticipated through the LEED-certification process. 

Disclaimer: This article is written from an insurance and surety perspective, and is meant to be used for informational purposes only. It is not the intent of this article to provide legal advice, or advice for any specific fact, situation or circumstance. Contact legal counsel for specific advice.

 

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“No Accidents” Doesn’t Mean Safe Employees

By Stuart Nakutin, CSA, COA, CET, WCCP, CHMC Director of Claims and Loss Control Services, Cavignac & Associates © 2010 Cavignac & Associates — All Rights Reserved

Many companies proudly count their days without a lost time accident. On the surface, this isn’t necessarily a bad thing. However, if your lost-time accident statistics are your sole way of gauging how safe your workplace is, you may well be missing the boat.

When confronted with a near-miss at the workplace, if they learn of it at all, many employers respond with relief, and the matter ends there. This is a huge mistake.

Proactively investigating and analyzing near-misses can improve your safety program and prevent catastrophic accidents. It can also save you time and money — it’s much easier and cheaper to investigate a near-miss than a full-blown incident.

Quite often in safety, there are many “almost accidents,” or near-misses, that occur before the big one hits. A near-miss is when, but for a fortunate break in the chain of events, you would have had a serious injury or fatality occur – for example, “another inch to the left and that saw would’ve taken his hand off.”

According to various sources on safety statistics, somewhere between 200 and 300 near-misses tend to occur before a workplace accident that results in serious injury or a fatality. When you use lost time accidents as your only data point, you’re only counting the big ones — and you’re missing an opportunity to prevent a lost-time incident in the first place.

If you think a near-miss is a lucky break, you’re right. However, if you think you don’t need to stop and take action when one happens, you’re wrong. If you decide to utilize near-miss reporting as part of your safety evaluation system, here are some important points to remember :

 The same processes, systems, and activities that cause near-misses also cause accidents. Do not discount a near-miss as a fluke or anomaly without really examining it.

 Even though human error is generally the most visible factor when it comes to the near-miss event, it’s often not the sole initiating event. Be sure to stretch beyond the obvious and look at the processes and systems surrounding the near-miss to determine if they either allowed or exacerbated it. Generally, this requires that near-misses be subjected to root cause analysis.

 Using near-misses as learning tools is a lower cost method of learning what’s going on with your safety system than using accident analysis. They are more numerous than serious accidents, which give you more opportunity for analysis and correction, and they haven’t resulted in workers’ comp or other accident-related costs.

 Good near-miss reporting systems include both mandatory reporting for high-loss-potential and high -severity near-misses, as well as voluntary reporting for incidents that don’t fall into the high-loss/highseverity category. Focusing only on high-loss/high-severity incidents ignore the near-misses that precede frequent, but less severe, incidents (which often generate most of a company’s workers compensation costs).

An effective near-miss reporting system should include a systematic means of follow up to ensure that lessons learned from the near-miss evaluation have been implemented. If the system merely collects reports of near-misses without taking action, then near-miss reporting will add nothing to your workplace safety system. 

Near-Misses: Great Training Opportunities

Why Reporting Near-Misses Matters

● According to the National Safety Council, 75% of all accidents are preceded by one or more near-misses.

● Close calls should be a wake-up call. They’re saying, “something’s wrong — you need to fix it now!”

● Employees may not realize that they are expected to report near-misses, or that these incidents could result in future accidents.

By recognizing near misses and taking action to correct the underlying problems, you’ll not only reduce the number of near misses but, far more important, also the number of real accidents .

Near-Misses Predict Most Accidents

A near-miss is a red flag — a sign that an accident and injury is likely to occur. They’re warnings that something is wrong, and require your immediate attention. They’re accidents that almost happened – or did happen, but didn’t result in an injury this time.

● An employee trips over an extension cord that lies across the floor, but avoids a fall by grabbing the corner of a desk.

● An outward opening door nearly hits a worker, who jumps back just in time.

● Instead of using a ladder, an employee puts a box on top of a drum. once up, loses his balance and falls to the ground. He’s a little shaken up, but unhurt.

A Near-Miss Is a Call to Action

What you do about these warnings can make the difference between future injuries and a zero-accidents safety record. If you seize the moment and use the close call as a training opportunity, you could very well prevent a future accident.

You Can’t Fix It If You Don’t Know about It

All too often employees say, “Whew! That was a close one!” and then go back to work without mentioning the incident. They figure if nobody gets hurt and there’s no damage, it wasn’t an accident, so they don’t need to report it.

If that’s the way things work at your facility, then that’s the first thing you need to change.

Getting employees to treat close calls exactly the way they treat accidents – including reporting them right away – is the essential first step to finding causes, taking corrective action, and training employees to avoid the real accident waiting to happen. 

Articles courtesy of Cavignac & Associates Employee Benefits Department

Family Dinners Matter!

For many families, eating dinner together has been put to the wayside with busy schedules and commitments. But family mealtime can be more important than you thought.

By eating with your children, it is more likely tha their meals (and yours!) will be healthy and well-balanced.

Because children tend to mimic their parents’ attitudes about foods, what you cook and serve at home has an impact on your children. Not only that, eating dinner together keeps the lines of communication open between you and the members of your family.

Children will not see healthy meal choices as a priority if it’s not something they see you doing. So, make family dinner a dynamic experience – cook together, eat sensible portion sizes, be open to trying new foods and preparing food in new ways. This is a great opportunity to pass on traditions and strengthen family bonds. Sit down and enjoy a meal with your family.

Emphasize Nutrition

Sponsored by the American Dietetic Association,

National Nutrition Month® focuses on the importance of making sound food choices and developing positive eating and physical activity habits. Here are some ways to incorporate healthy food choices and physical activity into your life this month:

● Keep a food diary—Knowing what you eat will help you to make changes where necessary. Write down when you eat, as well as what, how much, where and how you’re feeling when you eat.

● Plan ahead—If you plan your meals for the week, you can save time and money.

● Shop smart at the grocery store—Eat a snack before you leave to shop. Stick to what’s on your list. Shop the perimeter of the store first, as it typically contains the healthiest foods.

● Read the nutrition facts label—Look at the serving size, and try to keep saturated fat, trans fat, cholesterol and sodium at 5% of your recommended daily value or less. Choose foods that have 20% or more of the daily value of fiber, iron, calcium, potassium, and vitamins A and C.

● Snack on healthy foods—Eat small, healthy snacks throughout the day, such as baby carrots or a handful of almonds, to keep you from overeating at mealtimes.

● Make smart choices at restaurants—Consume only half of your meal and take the rest home. Ask for  dressings and sauces on the side.

● Walk—Park farther away from the store or work. Opt for the stairs instead of the ramp. Take a walk during your lunch break. Your steps will add up!

● Aim for 2 hours and 30 minutes of physical activity a week. you don’t have time for 30 minutes of exercise at one time, get moving for shorter 10-minute periods throughout the day.

For additional information on National Nutrition Month, visit www.eatright.org/NNM. 

National Nutrition Month® is a registered trademark

 

Refunds into Bonds

In an effort to help individuals build their savings and retirement funds, a new option allows taxpayers to use their tax refunds to purchase U.S. Series I Savings Bonds.

This year, for the first time, taxpayers can request a portion, or all, of their refund to be used to buy up to $5,000 in low-risk, liquid Treasury I Bonds. These bonds earn interest from the first day of their issue month, and protect owners against inflation. They can be redeemed at any time after a 12-month minimum holding period, and can grow in value for up to 30 years.

To purchase these savings bonds with your tax refund, indicate on your tax return how much of your refund you would like to request for I Bond purchase. Amounts must be in $50 increments. For more information, visit www.irs.gov. 

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2010 Risk Management Series

● Strategic Human Resources for Owners, Officers, Business / Office Managers Who Handle HR Part-Time

Friday, March 19, 2010 Registration: 7:30 am Program: 8:00 – 10:00 am

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