Green Building Liability

Starwood recently announced plans to develop one of its element brand hotels in Ewing, New Jersey. The element Ewing will be located just outside Trenton in Mercer County and feature 123 guest rooms with a modern design aesthetic. The project plans to seek an unspecified level of LEED certification pursuant. LEED-standard features in each element hotel include Energy Star-rated appliances and lighting, water-efficient fixtures, low-VOC and recycled-content materials, and priority parking for hybrid vehicles. The element Ewing will offer guests 2900 square feet of meeting space and rooms with modular furniture and a full kitchen. Each hotel that opens under Starwood’s element brand is required to pursue LEED certification, which raises some interesting issues with respect to franchise law.

A green building project without sufficient insurance coverage will never get out of the ground, which is why the recent efforts of Marsh to review current trends in the marketplace with respect to green building insurance issues have been particularly insightful. While I’ve talked extensively here at gbNYC about the potential for green design services rendered by architects and engineers to trigger exclusions in professional liability policies (in relation to the signing of credit submittal templates in connection with LEED projects) the Marsh report did not explicitly discuss this specific risk. However, the report did note the potential liability for design professionals who guarantee or warrant “an outcome without having complete control over things such as construction means and methods, and operation and maintenance.”

We’ve written extensively here at gbNYC about the potential for litigation arising out of green construction projects. To date the issue has been on the radar screens of numerous industry authors, but real-life application of green legal theory has been relatively difficult to come by outside of a handful of green-related claims reported by insurance carriers. However, a (relatively) recent lawsuit that was filed on the eastern shore of Maryland demonstrates that green building risk is real- particularly in light of rapidly increasing regulatory activity at the state and local levels. The suit suggests the critical importance of clear contract language for each stakeholder on a green construction project and posits that the alternative could be massive exposure to unanticipated liability for every project participant.

Albuquerque, New Mexico’s Energy Conservation Codes were signed into law back in January, but their implementation was delayed until July 1 after industry groups voiced concerns during the spring that the Codes were, among other things, preempted by federal law. The Codes purported to raise the standards on the installation of HVAC equipment for all new and retrofit commercial and residential projects to a Seasonal Energy Efficiency Ration (”SEER”) of 15 (for air conditioning) and an annual fuel utilization efficiency (”AFUE”) of 90 percent (for heating). The suit was filed in U.S. District Court for the District of New Mexico by, among other plaintiffs, Air Conditioning, Heating and Refrigeration Institute.

The Department of Energy’s Brookhaven National Laboratory has earned Long Island’s first LEED Silver rating. Brookhaven’s $12.6 million Research Support Building, designed by Farmingdale, New York-based Ehasz Giacolone Architects, earned 34 credits from USGBC, including the maximum possible for recycled-content and locally-sourced materials. General contractor E.W. Howell of Woodhaven, New York also diverted between 50 and 75 percent of the project’s construction debris from local landfills.