All posts in Construction

Going Green: Protect Yourself


        Thinking About Going Green?

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This may seem obvious, but it is essential that everything is put in contractual form when working with a contractor. That way, if the job is not completed according to your specifications or up to the standards promised by the contractor, you can hold that contractor liable. Green building is quite expensive, so you want to be sure you get the proper return on your investment. You may want to also make sure your contractor and sub-contractors are properly insured in case of a future problem.

A growing trend in new construction and renovations is green building, in an effort to be more environmentally friendly and reduce energy costs. This goal makes sense in the health care industry, as health care facilities tend to use much more energy than the average commercial building.

However, transitioning to a green facility is easier said than done. Health care facilities have unique needs that often clash with green initiatives, such as their 24-hour operation, different lighting requirements in different rooms, large amounts of water usage and the variety of equipment that must be operated continually. However, there are ways to incorporate green features while still maintaining necessary health and safety standards in your facility. It is important that you educate yourself, so that you can make the best decision for your own organization regarding going green.


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Minimize Business Interruptions: Understand Your Insurance Coverage


        Six Steps to Minimize Business Interruptions

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Step 3:

The next step would be to review your insurance coverage. Business interruption insurance generally comes into effect in the case of one of three circumstances:

     • Physical damage to the premises that cause suspended operations.

     • Damage to property that is covered by the insurance policy and
     prevents customers or employees from accessing the business.

     • The government closes an area due to property damage that is
     covered by the insurance policy and prevents the customers or employees
     from accessing the business.

Since business interruption coverage can differ significantly, it is important to understand the policy terms, such as exclusions, coverage limits and waiting periods. Coverage is provided for lost net income only for the duration of regaining operation.

According to the Federal Emergency Management Agency, 40 percent of businesses never reopen after a disaster. Implementing steps to prepare for and respond to disasters can help to reduce loss. In order to protect your business from unavoidable interruptions, it is recommended that you have a plan in place.

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Going Green: Starting Small


        Thinking About Going Green?

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Building a new facility or renovated your existing one to incorporate green features is a huge undertaking. If you decide your organization isn’t ready to make that kind of investment, there are still small steps you can take in the direction of efficiency and sustainability:

     • Institute a recycling policy, if your facility doesn’t already have one.

     • When possible use energy efficient products and machines. This will
     require some investment up-front if buying new equipment, but it will be
     cost-efficient in the long run.

     • Reduce or reuse materials when practical and sanitary. One example is
     using real dishes and silverware in the cafeteria to avoid using paper and plastic.

     • Choose environmentally friendly cleaning and sanitation products.

A growing trend in new construction and renovations is green building, in an effort to be more environmentally friendly and reduce energy costs. This goal makes sense in the health care industry, as health care facilities tend to use much more energy than the average commercial building.

However, transitioning to a green facility is easier said than done. Health care facilities have unique needs that often clash with green initiatives, such as their 24-hour operation, different lighting requirements in different rooms, large amounts of water usage and the variety of equipment that must be operated continually. However, there are ways to incorporate green features while still maintaining necessary health and safety standards in your facility. It is important that you educate yourself, so that you can make the best decision for your own organization regarding going green.


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Defining Responsibility


        Completed Operations Liability and Obligations

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In insurance terms, “your work” as used in an insurance policy is a broadly defined term that includes operations performed by the policyholder or on the policyholder’s behalf, including material, parts or equipment in connection with the operations. Operations or work performed on behalf of the policyholder means work done by a subcontractor is considered the contractor’s work. Therefore, faulty electrical work performed by an electrician that causes a fire or other damage could be considered the contractor’s liability, but would be covered under a standard commercial general liability (CGL) policy.

Even quality workmanship is not immune to potential claims of property damage or bodily injury. All operations carry the risk that injury or damage may occur as a result of the work, leading to costly lawsuits. Considering the complicated mix of contractors and subcontractors that contributes to each project, who is liable for this risk?

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Minimize Business Interruptions: Create a Crisis Communication Plan


        Six Steps to Minimize Business Interruptions

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Step 5:

Create a crisis communication plan in order to provide employees and customers with updates and critical information. The communication plan should have the following:

     • Chain of command: A chain of command allows for information to be
     shared efficiently and ensures that all personnel receive information.

     • Pre-scripted messages: Eliminate confusion by pre-scripting messages
     that will be shared with customers, employees and the public.

     • Bi-directional communication network: Allow for communication to occur
     in multiple directions in order to efficiently pass information.

According to the Federal Emergency Management Agency, 40 percent of businesses never reopen after a disaster. Implementing steps to prepare for and respond to disasters can help to reduce loss. In order to protect your business from unavoidable interruptions, it is recommended that you have a plan in place.

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Contract Requirements


        Completed Operations Liability and Obligations

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Because a contractor or other involved party could be held liable for defects in a subcontractor’s work years after it has been completed, and filing the claim under the contractor’s CGL policy could cause the premium to rise, many construction contracts require subcontractors to provide insurance coverage for claims resulting from their completed work for a finite period of time, typically the one- to five-year range. Typical contracts also require that the subcontractor name the owner, the architect, the general contractor and other third parties as “additional insured” parties, entitled to coverage under the insured subcontractor’s CGL policy. Naming additional insured parties requires a separate endorsement to that policy.

Even quality workmanship is not immune to potential claims of property damage or bodily injury. All operations carry the risk that injury or damage may occur as a result of the work, leading to costly lawsuits. Considering the complicated mix of contractors and subcontractors that contributes to each project, who is liable for this risk?

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Contract Implications


        Completed Operations Liability and Obligations

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Contract Implications

This means that as a subcontractor, you can be held liable for claims of property damage or bodily injury resulting from a defect in your work. It is also critical to maintain this coverage into the future; failure to do so could lead to a breach-of-contract lawsuit brought by the contractor or other party.

It is important to understand this commitment when signing the contract – the insurance commitment doesn’t end with the project. Further, in the event of a large claim, the subcontractor could be faced with a substantial increase in premiums on the policy.

Reducing Risk

What can you do to reduce the risk of a claim being filed against you for a defect in your completed work? To avoid litigation, it is crucial to know local regulations and adequately document proper performance. Know your company’s documentation practices relative to each subcontract, and carefully keep records of all processes.

Respecting the Contract

It is crucial for subcontractors to respect this requirement if included in the contract. Failure to do so could result in breach-of-contract lawsuits. Naming additional insured parties can be complicated, and it is very important to ensure that your contractual obligations are satisfied.

Even quality workmanship is not immune to potential claims of property damage or bodily injury. All operations carry the risk that injury or damage may occur as a result of the work, leading to costly lawsuits. Considering the complicated mix of contractors and subcontractors that contributes to each project, who is liable for this risk?

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Green Contractors: What it Means to Go Green


        Liability Exposures for Green Contractors

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A large majority of lawsuits against parties involved in green construction stem from the fact that the building does not function as promised after completion. This could be because of faulty energy sources, poor design or higher energy costs than anticipated. Often, the client will claim that because of a contractor’s negligence, the finished product does not measure up to green standards and thus does not give them the return on investment they expected. To avoid these situations, it is first important to understand how the U.S. government arrives at a building’s green rating.

In the United States, the dominant standard is the Leadership in Energy and Environmental Design (LEED) rating, which is administered by the U.S. Green Building Council. Commercial buildings that are LEED certified not only have lower operating costs and provide a healthier, safer environment for occupants, they also allow the owner to qualify for tax rebates, zoning allowances and other incentives. In addition, owners of green buildings receive a reputational boost, as they are publically demonstrating their commitment to the environment and their social responsibility. Clients have a lot at stake and would very likely file a claim if they spend hundreds of thousands of dollars for a green building, only to have it fall short of LEED certification.

Green building is a growing trend, as businesses want to do their part to help the environment while lowering energy costs at the same time. Plus, green building is becoming increasingly more difficult to avoid because federal, state and municipal governments are starting to mandate it for new residential and commercial construction.

Jumping into the green movement might seem like a lucrative and logical step for your business to take. Before you go green, educate yourself to avoid costly lawsuits and common liability exposures for those engaging in green construction.


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Green Contractors: Understanding LEED Certifications


        Liability Exposures for Green Contractors

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As a contractor, you need to understand LEED certification, which measures performance in six areas:

     • Sustainable Sites

     • Water Efficiency

     • Energy and Atmosphere

     • Materials and Resources

     • Indoor Environmental Quality

     • Innovation and Design Process

Rating systems differ depending on the type of building and whether the construction is new or an addition to an existing structure. Each rating system includes its own prerequisites and assigns points to the six performance areas. Buildings that achieve a certain number of points may attain certified, silver, gold or platinum LEED status.

The interesting thing to note about LEED ratings is that contractors and builders have a large amount of latitude on how they reach the certification. LEED does not specify what kinds of technologies or green components must be used to reach each level, and aside from the established prerequisites, points need not be attained in certain combinations. That means two buildings with identical point totals and LEED status may use completely different strategies, techniques and technologies to attain unique green results. One may excel in innovation and the other may focus on sustainability, but they both could ultimately achieve the same status.

Green building is a growing trend, as businesses want to do their part to help the environment while lowering energy costs at the same time. Plus, green building is becoming increasingly more difficult to avoid because federal, state and municipal governments are starting to mandate it for new residential and commercial construction.

Jumping into the green movement might seem like a lucrative and logical step for your business to take. Before you go green, educate yourself to avoid costly lawsuits and common liability exposures for those engaging in green construction.


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Green Contractors: Negligent Misrepresentation


        Liability Exposures for Green Contractors

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With the latitude the LEED certification process allows comes more liability exposure for you. Many contractors are so eager to try their hand in the green market that they forget about the risks. One of the most common claims is negligent misrepresentation.

Consider this example. An extremely lucrative opportunity comes along to bid for a new, multi-million dollar LEED-certified building for a famous client. You want this job but have never taken on a large green project before, so you go above and beyond to present plans for a building that is LEED-certified, highly innovative, a completely sustainable site and will save thousands of dollars in energy costs each month.

You win the bid, begin construction and then realize that what you have planned is impossible to build, given your resources. When you tell your client that you can’t deliver on all of your promises, the client may stick you with an extremely expensive negligent misrepresentation suit. They will claim you had no basis for believing you could deliver on all your design elements and promises in the first place, and, if they had known, they would have gone with another bid.

You can protect yourself from these claims with proper insurance coverage, but you can also avoid them in the first place by learning more about green construction and your limitations, improving project management and carefully managing the client’s expectations.

Green building is a growing trend, as businesses want to do their part to help the environment while lowering energy costs at the same time. Plus, green building is becoming increasingly more difficult to avoid because federal, state and municipal governments are starting to mandate it for new residential and commercial construction.

Jumping into the green movement might seem like a lucrative and logical step for your business to take. Before you go green, educate yourself to avoid costly lawsuits and common liability exposures for those engaging in green construction.


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