There Are Risks to Being Green
Avery famous frog once said, “It’s not easy being green.” Perhaps he foresaw that, while there are advantages to implementing green measures, there are also risks and liabilities associated with the implementation of green measures and green construction. The reasons owners and operators implement green measures include energy efficiency, cost savings, marketing, societal pressures, government mandates, and incentives. As data centers and other mission-critical facilities continue to implement energy-efficiency measures, they need to be aware of the specific risks and liabilities of implementing green measures in order to take appropriate protective steps.
In a 2009 study undertaken by Marsh & McLennan entitled “Green Building: Assessing the Risk–Feedback from the Construction Industry,” 55 construction industry executives identified their biggest concerns with respect to green building projects. The top five risk categories identified were:
Financial. Impact of green measures on profitability and cost.
Standard of Care/Legal. Opportunities for liability from failure to achieve goals and potential for liability.
Performance. Ability of measures to meet expectations.
Consultants/Subconsultants and Subcontractors. Concerns surrounding skills, training, expertise, and ability to replace.
- Regulatory. Uncertainty regarding the regulatory environment.
It is not coincidence that each of these five categories represents an area of potential liability in the implementation of green projects.
A primary concern is that the green measures will fail to achieve the intended results. Among the reasons that green measures fail to achieve expected goals are incorrect assumptions, improper installation, faulty equipment, improper operation of equipment, or inaccurate performance claims by equipment manufacturers. Responsibility for the failure to achieve results may require corrective action or compensation to damaged parties for losses.
Other problems caused by green measures can include unexpected project delays, repairs, or legal liability for the unexpected costs. For example, a government contractor providing military systems designs invested in an extensive daylighting system featuring large windows and skylights only to have the government determine that the windows and skylights presented a security risk. The government contractor could have lost its government security rating along with all of its existing and future contracts. The government contractor had to sell the building to keep its business and then sued the architect for negligence damages.
Mandatory federal and local green construction schemes may also increase liability risks. Many jurisdictions have implemented or are considering implementing mandatory standards such as ASHRAE standard 189.1, D.C. Green Building Code, the California Green Building Code, the New York City Greener Greater Buildings Plan, and various local and federal regulations that place requirements on owners and facility managers. Violating these codes could lead to civil liability, possible fines, or project delays. For example, failure to comply with mandatory regulations could lead to liability under a theory of negligence per se where an act is considered negligent due solely to failure to comply with a statute. Some statutes and regulations may also lead to strict liability where the failure to comply with the statute leads to liability directly.
Still other regulations may require specific mandatory disclosures. If these disclosures are not made or the disclosures made are later found to be inaccurate, liability may result under fraud or misrepresentation claims made against the owner or operator. In addition, securities regulations may require certain disclosures, or companies may make voluntary disclosures in securities filings that may later be found to be exaggerated or inaccurate, yielding potential liability for securities fraud claims, or, at the least, public embarrassment.
So does all this mean that owners and facility operators should avoid green projects in order to avoid liability and risks? The risks and liabilities faced by building owners and operators arising from green projects are not unlike the risks and liabilities faced by owners and operators from any construction project and can be managed.
There are often substantial financial advantages to the implementation of green projects, and local or federal law may even require such measures. Owners and operators will also often desire to implement such projects for various “soft” reasons such as public and employee relations.
Green projects can be successfully implemented without an undue risk of liability. However, owners and operators must be aware of the potential risks and liabilities and manage their projects to minimize these risks. Some steps that operators should consider in the development of projects to minimize the risk of liability include:
- Utilize experienced partners and counsel. Such partners will be aware of specific laws and regulations and developments in the area and will be familiar with the performance and reputation of manufacturers.
- Ensure that project contracts allocate risk accordingly. The various risks of the project should be clearly allocated to the responsible party and to the party most capable of bearing and controlling the risk.
- Ensure that operators are adequately trained on the use and operation of equipment and the efficiency goals to be achieved.
- Obtain insurance against insurable risks. While “green” insurance is a new area, underwriters are becoming more familiar with the area and have started to offer products that provide protection against several of the risks and liabilities involved in green projects.
While it may not be easy being green it is certainly possible, and with some advance preparation and planning, the benefits certainly outweigh the potential risks and liabilities.