Sustainable Land Development Today - November/December 2008 - (Page 20)

BUILDING DESIGN Managing Risk in the Sustainable Building Frontier Ask for a Green Building Rating Guarantee from your architect and you may get the keys to the store. By: Paul D’Arelli, Esq. and Ujjval K. Vyas, J.D., Ph.D The sustainability revolution is upon us and as owners, developers and the design, construction, finance and insurance industries begin to grapple with the emergence of the unique legal and risk management issues inherent in implementing green building initiatives, deficiencies abound and thoughtful approaches are required. This article examines one example of the owner/developer’s dilemma of how to manage green-building risk when the insurance industry has not yet responded with the full suite of insurance solutions required to cover the attendant risks with green building. Namely, as a developer of a sustainable building, if you succeed in getting your architect to guarantee that your building will attain a specific LEED®1 or other third party rating, you may get more than you bargained for: a designer with deficient professional liability coverage. When an owner or developer hires an architect to design a building with the goal of obtaining a LEED or other green building certification, a necessary negotiation point will be what level of contractual assurance or commitment the architect is making to ensure that the building as designed will obtain the desired rating or certification. If you ask the typical owner, he or she would probably prefer a firm guarantee that the project will achieve the sought after rating. After all, if the owner is seeking the rating or certification, it is because the owner ascribes some level of value to having the rating. On the contrary, most architects would probably prefer to steer as far away from a guarantee as possible since there are many factors downstream of the design itself that affect the potential for obtaining a sustainable building rating, including the lengthy construction and delivery of the project by a chain of contractors, subcontractors, and vendors, a process rife with inevitable change orders, substitutions and value engineering, and ultimately the judgment of a third party rating organization that may have limited accountability. In practice, the relative bargaining position of the parties to the design contract and other factors could result in a myriad of potential contractual outcomes regarding the architect’s duty to deliver a building design that is consistent with or achieves the owner’s sustainable building certification objectives, outcomes limited only by the creativity of the drafters. For example, these contractual outcomes could range from a less stringent obligation that architect “…use reasonable efforts to endeavor to meet owner’s objectives of obtaining a LEED Gold certification…” to the more stringent obligation that “…architect shall design a building that obtains a LEED Gold certification.” There are a significant number of variables that may drive the owner’s decision to seek a particularly high level of contractual assurance that the building will be designed to obtain a particular sustainable building certification. For example, the owner or a prospective tenant may have a corporate mandate to locate only in space that has a particular rating. Or, it may be a requirement of entitlement or financial incentives that the building achieve a certain minimum rat- ing. Finally, a LEED, or other certification may be required as part of the local building or land development code. Similarly, there are numerous factors that influence an architect’s willingness to accept increased degrees of risk that go along with heightened requirement to deliver a building that obtains the desired rating, including the desire to maintain an existing client relationship or perhaps the lure of the marketing cache of participating in a high profile or signature project. As such, this article does not pass judgment on the prudence of any standard upon which the parties choose to agree, but only seeks to elucidate the professional liability ramifications of the decision of the owner to seek a guarantee from the architect as to the rating outcome. According to Robert Connor, J.D., a professional liability specialist with Suncoast Insurance Associates, Inc. in Florida, who has lectured frequently on professional liability issues related to sustainable design, “Typical professional liability insurance policies cover the architect for all sums for which the architect becomes legally obligated to pay as a result of a claim which arises out of a wrongful act. A wrongful act can be defined as a negligent act, error or omission in the performance of professional services.” Therefore, the architect is covered for negligence and, errors and omissions made when acting in the scope of providing “professional design services” as defined in the policy. Given the typical policy language, a wrongful act that occurs in designing a sustainable building 20 November/December 2008 Sustainable Land Development Today

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Sustainable Land Development Today - November/December 2008 Contents Our Voice Editorial Board SLDT Resources The BottomLine Go Forth and Tread Lightly on the Land It’s About Name Recognition Managing Risk in the Sustainable Building Frontier Industry Spotlight Achieving Sustainable Land Development Worthy of Recognition Stormwater Wastewater Erosion Control Innovation Classifieds Advertiser Index Last Word

Sustainable Land Development Today - November/December 2008

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