Cover Your Green Bases

Now that developers in the lodging industry are starting to embrace the green building concept, it's no surprise that auxiliary businesses are jumping on the sustainability bandwagon as well.

Take insurance. Fireman's Fund Insurance Company recently created what it touts as the first insurance policy specifically for green commercial buildings, and claims that this policy can save building owners money. Because green buildings are generally built more soundly, insurance coverage for those buildings can actually be less costly, it suggests.

“Fireman's Fund spearheaded the effort, and as it picks up speed, it's having an effect on the insurance industry and we need to tailor our products to fit what's coming down the road,” says Brian Burns, senior risk consultant for the hospitality division of Wells Fargo Insurance Services, which provides insurance brokerage and financial and consulting services.

“Insurance companies are concerned with things like water leaks, electrical fires and employee sickness — that's what they're insuring. And if an employer is going to invest in a building to mitigate those perils by going green and being held to higher engineering standards, then insurance companies are going to reward them for doing so.”

On the other hand, many aspects of a green building may not be covered by a conventional insurance policy. For those risks, new coverage products are becoming available. “The real estate industry is generally aware of the benefits of ‘going green,’ but building owners and managers should also be aware of the risks that are unique to sustainable design,” says Steve Bushnell, product director at Fireman's Fund. “Green building owners have an evolving set of ‘green risks’ that are specific to the sustainable building industry. At Fireman's Fund we support and financially cover property owners who are green or would like to go green.”

Those risks include things like a vegetated roof, for example. “A typical insurance policy only provides $5,000 to $10,000 to cover trees, plants and shrubs,” says David Cohen, product director, Fireman's Fund. “That just wouldn't be sufficient for a full-blown vegetated roof that can cost hundreds of thousands of dollars.

“Also, many of the alternative water systems, for example, have underground pipes and tanks that extend well beyond the typical policy's 100-foot coverage. “Our green policy covers underground coverage up to 1,000 feet from a building.”

This latest offering of coverages from Fireman's Fund protects buildings that are green-certified as well as buildings and facilities whose owners would like to capture green benefits. The coverage for Leadership in Energy and Environmental Design (LEED)-certified buildings offers a discount due to lower risk factors. Conventional insurance policies only cover the cost to restore a building to its original condition.

For example, under Fireman's Fund Green Building Replacement, Green Upgrade and Commissioning coverages commercial property owners and managers are able to rebuild and replace with green alternatives such as:

  • Non-toxic, low-odor paints and carpeting
  • Energy Star-rated electrical equipment
  • Interior lighting systems that meet LEED or Green Globe requirements
  • Water-efficient interior plumbing
  • Energy Star-qualified roof and insulation materials
  • Commissioning — Engineering inspection of systems such as HVAC

Fireman's Fund worked closely with the U.S. Green Building Council's LEED program as well as the Green Building Initiative's Green Globes program to ensure that its coverage and upgrade options align with the industry's major green certification processes.

For buildings that are green-certified by the USGBC or the GBI, Fireman's Fund will cover sustainable building elements such as vegetated roofs and alternative energy and water systems. In case of a total loss, the company will cover for the rebuilding to also be green-certified.

For buildings that aren't quite there yet, but are looking to go green, Fireman's Fund provides an upgrade package as part of its green product.

For example, if there is a fire in the building, the insurer will pay for the upgrade to replace the carpet with green-certified carpet and Energy Star office equipment. Again, if there is a total loss, the policy will cover for the entire rebuild to be green-certified. Commissioning is offered for both types of buildings. Engineers are commissioned to inspect systems such as HVAC after they are installed to ensure that they are running properly and are truly energy-efficient.

“Commissioning is critical to having a green building,” says Fireman's Fund's Cohen. “It's like an extra quality control step. We feel the commissioning process makes it a better risk to insure. One can also have retro or re-commissioning, where the commissioner checks out the systems in an existing building and makes suggestions for improvement.”

“From an insurance company standpoint, if a building owner invests the money and time to go green, there's a good chance that same owner is going to take a serious approach to their risk management program,” says Wells Fargo's Burns. “It's that ownership mentality. And insurance companies are aware of it. A fly-by-night owner won't take those kinds of steps.”


For more information and related articles, go to LHonline.com.

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