Focus on Insurance

May/June 2009

Environmental Risks Abound on Green Construction Sites

Contractors must understand the unseen risks of sustainable projects and learn to apply traditional and innovative risk management techniques

It is difficult to argue against the need or the reasons to build green. The benefits of sustainable construction are being realized with each new project or initiative. Energy ef­ficiency, healthier indoor environments, water conservation, climatological preservation, waste minimization and land reuse are just a few examples.

However, all contractors must not forget that good intentions alone will not absolve their firms from environmental liability. Here are just a few of the ways environmental liability can be found on today’s green jobsites.

From the simple dust generated during demolition—which can contain a variety of pollutants, including silica and naturally occurring asbestos—construction and dirt work create carbon monoxide, carbon dioxide, methane and nitrous oxide from fuel used in trucks, mobile asphalt plants and other onsite construction equipment.

Many times during the past few years, contractors have been sued over third-party exposure to dust that contains asbestos fibers from excavation work and silica dust from the interior demolition of a partially occupied school.

Problems also arise from carbon-monoxide fumes in interior renovations when exhaust from generators and other equipment are not properly ventilated. Of course, the degree of exposure varies depending on the type and location of the project, and emissions from construction projects are greatly overshadowed by those from manufacturing processes. But the exposure exists, along with the potential for third-party liability.

Many devastating environmental lawsuits are produced through unforeseen risks. New environmental issues will no doubt emerge within the next five years as a result of innovative or recycled products and materials used in green construction.

The best example is the current problems with Chinese drywall, which has made numerous headlines in Florida, Louisiana and Texas throughout the past six months. Because of its alleged high-sulfur content, Chinese-made drywall produces a low-grade sulfuric acid and impairs the integrity of internal structures when exposed to moisture.

Whether the drywall will eventually be found to negatively impact indoor air quality or adversely impact human health, it can cause damage. It is an unforeseen risk, just like asbestos, which was considered a breakthrough fire retardant 40 years ago.

Real Estate

The redevelopment of buildings on existing sites is among the most prevalent of environmental risks. According to the U.S. Green Building Council, the LEED program (Leadership in Energy and Environmental Design) is adjusting its scoring structure this year to provide sustainable sites with 26% of the total possible points available under the system. This initiative, along with other green programs and incentives, is likely to increase owner interest in the redevelopment of environmentally impaired real estate.

In addition, while the vast majority of contractors may have a great deal of experience working in contaminated conditions, numerous firms either possess little knowledge of the possible risks or are not aware of all the complexities. Even companies with keen executives who are aware of the problem can be tempted to accept remedial work to appease their clients or expand their business.

Consequently, environmental risks can be catastrophic when properties are not properly investigated or characterized. Even with today’s technology, it is extremely difficult to perform a cursory and cost-effective environmental assessment that yields accurate information.

Unfortunately, too many parties rely on “phase one” and use it as a determining rather than a contributing factor in managing environmental-site risks. This is because environmental assessments performed with little to no intrusive sampling generate reports offering only information already recorded for that property.

What would happen if the property had been used, historically and possibly illegally, for the disposal of waste oil, waste products and other hazardous products? Or, if it is found to contain unregistered underground tanks and abandoned materials causing residual contamination? These details would not be revealed during the assessment process and, in most cases, discovered only after actual development and construction has already begun.

In addition to owner liability, documented case law exists that also exposes the contractor to litigation since his or her services may very well exacerbate the contamination while unknowingly exposing workers to hazardous conditions.

For the past 10 years, owners and contractors alike have worked diligently to prevent water intrusion and the resulting growth of mold. However, it seems recently that the industry, primarily driven by owners and designers, has forgotten about the realities of mold litigation. For instance, “living buildings” are currently being designed and constructed with new green products and systems such as vegetative roofing, rainwater collection systems, permeable walls and exteriors, and innovative ornamental water features.

Unfortunately, while green construction advocates the use of sophisticated design, engineering and construction collaboration, and building information modeling tools help mitigate water intrusion, many new sustainable structures will suffer some form of mold exposure and the resulting liability in later years.

These examples offer a sampling of the environmental exposures of green construction. Even though the greening of America is in everyone’s best interest, liability can occur within structures designed with the best intentions. As a result, owners, contractors and designers all need to fully understand the potential sources of these exposures and explore the coverage options that will best protect their firms from the potentially crippling effects of litigation.