|Holly J. Newmann
Attorney at Law
Mackall, Crounse &
A substantial amount of money is being spent to entice people to tread lightly and leave a carbonless footprint. Yet, a lot of the onus for environmental success is being placed on the construction, energy and transportation industries. A Minnesota attorney, who primarily represents companies in construction litigation, agrees that while it is nice to have an infusion of money available to help fight the noble cause of ‘green’, ($4 billion was earmarked by the government in the last stimulus bill), there is also cause to be prepared for potential problems.
Let the builder beware
Holly J. Newman, Attorney at Law, Mackall, Crounse & Moore PLC, Minneapolis, feels that the biggest risk facing businesses is, “putting something out there that isn’t time-tested.”
Ever hear of a wonderful product called asbestos? It was great stuff when first introduced. Then time passed and things turned ugly. Before long the lawsuits were flying.
By and large, the manufacturer is most at risk in situations like this, but liability issues can extend to parties who are either promoting, marketing, installing, selling or distributing products that turn out not to have the performance people were touting, or have nasty side affects people didn’t expect.
“This isn’t something that manufacturers are just learning,” Newman realizes, adding: “But I think there’s a much faster time track from the development of an idea to the end product to meet a particular need. In an ordinary marketplace, I think there’s a lot more research and development, a lot more time spent from an idea to the marketplace. And I don’t think those timetables are extending, I think they’re compressing.”
3rd Party Certification
Another concern to Newman is the press for third party certification. “There is a push both by government and the owners [of building projects] to achieve a third party certification,” she says, explaining that today’s mandates or incentives are often tied to certification. But who will benefit most by the certification and who should be liable for getting it? The fact is: “You don’t have control over when those third party certifications are going to happen, or if they do,” Newman says. So, if the owner is the one to reap the most benefits, it is wise they should bear the most risk. In essence, be careful what you promise. “I’ll just use LEED as an example because it’s one of the most popular,” Newman says. “The U.S. Green Building Council has a tremendous backlog of applications for certification of buildings … There is no builder on this planet who can have the power to move the U.S. Green Building Council faster.” Builders who take on the risk may later face delay claims.
Builders also need to avoid language that might promise certification for a particular design element. “There’s LEED points on new construction available for properly disposing or recycling of debris or demo materials and the builder would likely have control over that aspect of the project,” she says. “But they wouldn’t have control over, say, whether a particular irrigation design for landscaping qualifies [for LEED points]. The builder doesn’t have any control over whether or not that’s accepted.”
Even when the customer does take on the certification process, builders should beware of contract language that promises a time frame to assist with certification. “Sometimes the timing isn’t just about [the builder] getting certifications, but because the owner says, ‘well, we have to be done by this time because I’ve built in this time period for certification.” If a delay does occur, “the builder might be in trouble now for some kind of damages for not helping to achieve that certification in the owner’s time frame,” Newman explains.
How can this be avoided? “You’re Number One way to protect against those types of issues is to include specific contract provisions to assign responsibility. Keeping in your waiver of consequential damages is also a good idea,” Newman contends. “A lot of the standard forms that people use in the industry contain that provision, but it’s the most often struck provision by owners.
“Just like builders have been doing for a very long time, they’ve been reading their contracts and understanding what their requirements are so they can properly price their work. Now they have to understand what they are responsible for and get rid of what they just don’t have any control over. Or, at an absolute minimum, get some added money for taking on the risk.”
Newman’s third concern is inadequate insurance protection. “If you’re going to do a lot of [green] work, maybe you should start thinking about buying a different insurance product, or at least ask your insurance agent what’s available and how to cover yourself that way,” she suggests.
Her concerns were accentuated recently while talking to an attorney at another firm. The lawyer told her that most of his business is currently pursuing green claims and the number is growing. “Sometimes insurance companies haven’t quite defined green,” Newman says. “They’re trying to smoosh green claims into existing exclusions for hazardous waste or for mold or other things that already exist. So if you have a builder that’s really going to get into innovative, sustainable designs, they should at least think about what those risks are and do a double check back to see if they’ve got the kind of insurance coverage they want.”
Another problem Newman sees more frequently is a buyer who does not realize the sophistication of some of the newer, more efficient systems they have installed. This can especially be true with HVAC systems. “It may not be that the product itself is faulty or inappropriately marketed or problematic,” she points out, “but … they are highly commissioned and need a lot of appropriate attention to how they are operated and maintained in order to achieve the efficiencies they can.”
The solution? “It occurs to me that what should be happening is a really good conversation with the owners on the front end: ‘Listen: we can get you what you need; you want to have ‘x’ amount of savings on your energy costs, you want to do things to make your HVAC system more efficient. But you really have to dedicate someone to go through some pretty extensive training to have them operate and maintain this system properly or you have to set aside some funds for a consultant to help you.’”
Even simple systems can cause an issue. “I’ve seen a fair amount of claims for putting in innovative wastewater treatment systems,” she says. “The issue there is those systems, in some cases, are fairly delicate and not very easy to get to work if you even deviate just a little from the tolerances that are provided. So if you are going to take on that kind of work, make sure your subcontractors are very experienced. You don’t want two guys and a backhoe doing that work.”
Despite all the caution, Newman sees the ‘green’ in the green movement, in money available to the construction industry, to the actual earthly benefits of sustainable living. Her final word: “From my individual prospective, one has to think carefully about what has a benefit versus what doesn’t. Energy consumption is kind of easy. Yes that would have a real benefit: reducing the amount of energy we use. Does everything being touted as green have a real benefit? Maybe, maybe not.” RB
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