Green insurance sprouts from sustainable building demand

Novato, Calif. — The growing momentum to bring sustainable building practices into the mainstream prompted an insurance company here to offer what it claims to be the only coverage for green-certified commercial buildings.

The company, Fireman's Fund Insurance, began researching the green building movement about four years ago by attending trade shows and reading industry publications to identify issues and trends, according to Steve Bushnell, a product director for the company.

After speaking with members of the U.S. Green Building Council and building owners, the company began seeing green building as more than an environmental issue, Bushnell said.

“It became clear that green was something that was really just starting to bubble up to the surface three years ago as a trend that real estate owners probably would be thinking about as time went on,” he said. “There's a big dollars and cents component that we know real estate owners, managers, developers and contractors are going to be looking at.”

Bushnell said today, an even greater number of building owners are looking to invest in state-of-the-art and energy-efficient plumbing, HVAC and electrical systems.

“As we look at the green building movement, it's moving into the mainstream,” he said. “It becomes the industry standard at a certain point, and plumbers and HVAC contractors are right at the heart of what green is.”

But despite the potential that green buildings have to be profitable, not many building owners or contractors are aware of the risks that are unique to sustainable design, Bushnell said.

“I think that a good contractor or subcontractor is going to have to be able to read the tea leaves and look at the future a little bit more about protecting themselves,” he said.

Bushnell warned those involved in sustainable construction against overstating the benefits of energy-efficient systems and devices.

“That's one of the things about the green movement,” he said. “The people who believe in it are almost evangelical. They get so excited and they get so intent that they can start making claims that their work or materials are going to produce energy savings, lower HVAC costs or water savings that really can't be obtained.”

Bushnell's company introduced its coverage specifically for green commercial buildings a little more than a year ago in response to the growing demand for reliable energy-efficient building systems.

The company's Green-Card suite offers three separate levels of coverage. Its specific coverage for certified green buildings pays to rebuild and replace features such as alternative power and water systems following a loss.

The company also says it will pay up to $25,000 for a professional accredited by the USGBC to oversee repairs or reconstruction. The coverage includes a 5% discount on general business insurance for green-certified building owners.

According to Fireman's Fund, the top causes of property loss in commercial buildings are electrical fires, malfunctioning HVAC systems and plumbing problems. The company says the certification process for green building ensures that the electrical, HVAC and plumbing systems are all working at the highest levels of efficiency, reducing the possibility of a loss.

“We include a rate discount, recognizing that we believe green buildings are going to be safer risks for us,” Bushnell said.

Fireman's Fund also offers upgrade coverage for traditional buildings without the USGBC's Leadership in Energy and Environmental Design certification. The coverage allows building owners to rebuild their property with green features such as water-efficient interior plumbing or Energy Star-rated electrical equipment following a covered loss.

The company also says it will cover the cost to build a green-certified, fully sustainable and energy-efficient building following a total loss. The coverage includes up to $25,000 in certification fees with the USGBC, plus the cost to hire a USGBC-accredited professional to oversee design and reconstruction.

Under the company's commissioning coverage, Fireman's Fund will pay for a professional commissioning engineer to oversee building repairs and inspect new or repaired systems after any loss that exceeds $10,000.

The coverage also provides up to $25,000 for an engineer to test and balance a building's HVAC systems, whether or not they suffered any damage after a loss.

Bushnell still attends trade shows hoping to spread the word about the company's various types of coverage. He was at this year's Greenbuild International Conference and Expo in Chicago, which drew 22,835 attendees.

Fireman's Fund currently has several hundred clients who have purchased its “green” coverage, a number that Bushnell said will steadily increase along with the popularity of the green movement.

“Kind of like Greenbuild attendance, the number grows,” he said. “We expect that we'll have clients in the thousands a year from now, probably more than that.”