While some may dismiss the move toward green building and sustainability as a fad, insurers of buildings think otherwise.

In fact, says Stephen Bushnell, senior director, emerging industries, commercial insurance at Novato, Calif.-based Fireman’s Fund Insurance Co., today’s green buildings are a harbinger of the future. “Energy efficiency and green building are not just about the environment,” Bushnell said, speaking at a recent Web seminar. “We believe they have a profound economic advantage that has captured the attention of many segments of the business community. We see some indications from retailers like Wal-Mart that sales improve in green buildings.”

Bushnell says Fireman’s Fund offers incentives for green buildings and sustainable practices, noting the company launched coverage tailored for green buildings in 2006.
But as with any new technology, insurers need to consider the unique risks presented by these buildings. “There are many elements of green and sustainability that are not understood from a risk standpoint,” Bushnell said.

Indeed, one of the challenges of insuring a green building is that it may incorporate a host of novel technologies, from alternative energy and water systems to insulation and vegetative roofs. Something as seemingly innocuous as cork flooring, if not properly sealed, may be prone to losses from mold damage. 

“Policies may extend the definition of insured properties to make sure that we are covering all of the green features in a building, such as a green roof,” Bushnell said. “We don’t know how materials in the building are going to interrelate.”

In addition to insurers, architects, building owners and contractors need to be cognizant of the peculiarities of sustainable design. Many public and private contracts will require construction that meets the standards of the U.S. Green Building Council's (USGBC) LEED program.

“Another concern is whether contractors understand what it takes to build a LEED-certified building,” Bushnell said. “What are the standards of performance that they’ll be held to in court? The liability arena is unexplored.”

Yet despite these concerns, Bushnell said the company remains bearish on green building. “Fireman’s fund believes that energy efficient buildings are better risks.”

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