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comment AIG Insuring for Green Building Risks
Green insurance coverage is not a new concept, nor are the risks associated with green building considered extraordinary. Nevertheless, American International Group (AIG) is now offering two advanced insurance policies for property owners and managers of green buildings via its Risk Management Green (AIGRMGreen) product line: Indoor Environment Coverage and Reputation Coverage.
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The company’s Indoor Environment Coverage guards against claims of bodily injury occurring from substances or odors originating from equipment used to improve air or water quality. “Claims of bodily injury from pollution may occur even with the most careful planning, construction, maintenance, and certification of a green building,” says Joseph Fobert, zone executive for AIG’s commercial risk division.
The Reputation Coverage, on the other hand, covers costs associated with crisis management that result from adverse publicity, providing up to $50,000 per occurrence. More specifically, it “provides funds to employ crisis management specialists to manage adverse publicity; guide and counsel key company personnel; and provide other necessary services to assist in restoring a company’s reputation,” according to AIG’s website. It should be noted that this policy does not cover actual financial loss resulting from damages to a company’s reputation.
“When a green building experiences the threat of adverse publicity, it may be more damaging than what is traditionally experienced by conventional properties,” Fobert said. “Raised expectations and increased public scrutiny may expose the owners of these buildings to negative media coverage should such a building fail to meet green industry standards.”
The policy is one response to lawsuits surrounding green buildings, which are becoming more common. A 2008 lawsuit that was brought by Shaw Development against contractor Southern Builders is one example of many; when the Captain’s Galley condominium building in Crisfield, Maryland, failed to achieve LEED Silver standards, Shaw sued for breach of contract. The Reputation Coverage would have insured the contractor in this case and will cover any team members who are sued when a building fails to achieve certification under LEED or other rating systems.
According to Barbara Batshalom, executive director for The Green Roundtable in Boston—a nonprofit organization that collaborated with AIG to shape its green policies—green projects often involve many independent entities working toward the common goal of certification. This planning model makes liability issues tricky since it’s not always easy to ascertain where responsibility lies, or if it even lies with one party.
But how cost-effective will these policies be? “These forms are available as endorsements to our current insured’s commercial general liability programs and would represent a small additional premium,” says Fobert. “It is very costly for property owners to build or upgrade their buildings to green. Likewise, it is important to make sure they properly protect these investments, and they research all available insurance options to do so.”
Copyright 2009 by BuildingGreen, LLC
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