Top Risks and Exposures When Building Green – Part 2
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.
Contractors and builders are at risk of contractual liability during green building. Liabilities in this area include:
- Failure of green systems to perform throughout the expected lifetime
- Failure of systems to reach promised level of LEED certification
- Improper installation of green systems
- Failure of the building to qualify for tax credits or meet loan or incentive program requirements
- Failure to stay within the allotted budget or time restrains due to greater than anticipated costs of green building
In short, for anything that your company promises to a client via contract, you must be able to deliver. Because green technologies are still relatively new, they may not function as efficiently or for as long as you anticipate. Therefore, you open yourself up to the risk of being sued by building owners for breach of implied warranties of materials, workmanship and purpose.
- What It Means to Go Green for Contractors – Part 1
- Stay tuned for Five Ways to Protect Your Construction Company when Green Building – Part 3
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