Greenbuild Session Review: v3: How Controls, Contracts, and Coverage Protect LEED and Your Bottom Line

This panel took three lawyers and gave them each a group to represent: the owner, the designers/builders, and the insurers. Each counsel then highlighted the relevant issues that party needs to consider, and the emphasis was on how the new LEEDv3 system in particular affects contracts and risk mitigation measures. After an obligatory introduction to some of the changes in the v3 system that I won't cover here, we heard the following:

Risk is defined for this discussion as "anything that causes the project to not meet expectations, to be delayed, or to cost more than planned.

The Owner

There was a great point right up front that despite how 'old' LEED may be to design professionals at this point, the typical owner has still never heard about it. As a result, architects frequently have to 'sell' the owner on the concept and will either overestimate costs (+15-20% premium) or oversell the benefits, but either way they're frequently misinformed.

Another interesting discussion revolved around the notion that in a down economy, the owner can get away with putting pretty much anything in their contracts (i.e., harsh penalties for missing a LEED deadline) and architects and builders will still sign it because they need the business.

The Architect/Builder

The number one issue is "who is ultimately responsible for achieving the desired LEED certification rating?" Couldn't agree more about this, as the default reaction I've seen is that it's no one. Most advice out there says not to guarantee (or imply a guarantee) everything, and if that's the case then it's seemingly the owner.

What is the definition of substantial completion for a contractor in a LEED project, and how does the typical change? The question was raised and is valid, but we never quite got around to answering it.

A scenario was proposed where a project team 'pads' a project with 5 points over the required (let's say by mandate), and 6 points are missed... who pays? The response was that it's likely to be divided amongst the parties ultimately responsible for the credit.

The Insurer

The focus on the insurance perspective is limited to professional liability and surety. Right off the bat we get the top 5 concerns insurers are facing, which have been verified by surveys though I didn't hear any specific reference to a public study:

1. Guarantee of a certification or performance outcome
2. Communication between design and construction team and the O&M Team
3. Evolving Standard of Care
4. Changing regulations and the need to stay current
5. Material Specification and Substitution

Regarding the guarantee, professional liability does not generally cover these clauses, and if you fail you'll be defending yourself and covering any penalties out of your own pocket. A professional liability coverage is only going to cover the architect's negligent acts, and missing a LEED certification does not necessarily constitute the requisite negligence.

Another "evolving risk" issue that deserves consideration is how the litany of unlicensed specialists (lighting designers, LEED consultants, green roof designers, etc.) are covered under conventional policies. There is some concern on the panel that some insurers won't necessarily cover unlicensed professionals.

Please note I'm not a lawyer and have had to type furiously to report the proceedings as best I can. This is not legal advice and may contain factual errors. Please consult with an attorney about the best way for you to minimize your exposure to these issues but I hope the above was helpful all the same.