going green: risk management insights

go green

By Jana Solis, VP Risk Management, Fournier Group

As Earth Day 2019 approaches, we are inspired to think about how we can make our world more sustainable. For the hotel industry, this important question continues to present challenges. According to the U.S. Green Building Council, more than 200 hotels have met some level of LEED certification.* 

But is going green the new black or the new red (ink on the income statement)?  What are the pros and cons? The benefits and risks? If I decide to go green, how do I protect my property and business? Here are some thoughts and recommendations. 

Identifying exposures

The many benefits notwithstanding, hotels that decide to pursue coveted LEED certification continue to face several challenging exposures to their financial, regulatory and legal wellbeing.  

On the regulatory side, the growing number of federal, state and local rules hotels must meet add to potential risks. Legal or reasonable-care issues include architects and engineers who participate in the project and make certain guarantees, which may not be covered under their professional liability policies. This leaves the hotel owner/manager with little-to-no recourse for any unfilled commitments.

Fortunately, the insurance market has followed suit and to a large degree will provide coverage for green-related risks; however, don’t expect to find a green policy.  Coverage is most typically found in the form of endorsements to the property policy, but you still need to watch for gaps.

Minding the gap 

When contemplating insurance coverage for going green, know the markets and key areas of coverage. At a minimum, be sure the following three are part of your program:

1| green certified coverage
This covers a loss to a green-certified building and applies not only to rebuilding, but also to the additional expenses driven by reestablishing green certification. It also covers a loss of the ever-popular vegetative roof, as long it is green certified.

2| green upgrade coverage
This pays the extra expense when a non-certified building opts to go green after a loss. Added costs might also result from use of Energy Star equipment, eco-friendly lighting, painting and carpet, or water-efficient plumbing fixtures.

3| green commissioning expense
This provides for a commissioning engineer to inspect a newly built or repaired system after a covered loss to confirm operation at peak performance and expected efficiency.

*LEEDing the way

LEED (Leadership in Energy and Environmental Design) certification is the world’s foremost green building rating system. The nonprofit U.S. Green Building Council certifies buildings on a four-level system:  Certified, Silver, Gold and Platinum. LEED certification is available for all building types, including new construction and major renovations, from offices to schools, homes and hotels. LEED standards cover not only building materials and design, but also building management regarding such activities as recycling, waster disposal and energy and water use.

sam shelhorse