ACADEMIA Letters Litigation and insurance limitation within sustainable construction in the U.S Amer Hamad Issa Abukhalaf, Florida Institute for Built Environment Resilience, M.E. Rinker, Sr. School of Construction Management, College of Design Construction and Planning, University of Florida Abstract Over the past two centuries, various human activities have significantly impacted the global environment. As a result, the laws and regulations in many industries have changed in order to ride the new wave of the global green movement. Consequently, various measures in the construction industry are becoming the new norm, such as controlling dust levels and vibration, noise limitations, restrictions on waste disposal, to mention a few. However, the new laws and regulations are leading to a great deal of ambiguity and confusion among the different parties involved in the single construction site, while everyone is trying to answer one main question ‘Who is legally responsible for this?’. Significance This paper sheds light on an area that was not well-researched before, contributing to an increased and better understanding of the complexity of the emerging legal disputes in green construction. This paper explores the common legal issues that happen on green construction sites due to the new environmental laws, and offers practical insights that help avoid conflicts within green construction projects. Academia Letters, August 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Amer Hamad Issa Abukhalaf, eng.amer_hamad@live.com Citation: Abukhalaf, A.H.I. (2021). Litigation and insurance limitation within sustainable construction in the U.S. Academia Letters, Article 3194. https://doi.org/10.20935/AL3194. 1 1. Introduction The recent public awareness of the environmental challenges was a major factor in the popularization of sustainable construction (Abukhalaf, 2021b). However, with the various benefits that sustainable construction offers, there are new liability risks and more possible litigations (Lavers & Shiers, 2000). As a result of the heavily advertised sustainable construction, owners and end-users tend to develop much higher expectations for performance, return on investment, healthy work environment, quality of indoor air, and improvements in staff productivity (Wisconsin Law Journal, 2008). Due to the high expectations coupled with the lack of knowledge among some of the stakeholders, many disputes have been arising between the different parties in the construction industry. In one of the lawsuits in the U.S, the owner of an office building, which has a LEED-Silver certificate, filed a claim against the architect because the tenants of the building demanded lower rent as the building was falsely advertised. The architect promised healthier quality of indoor air, an increase in employees’ productivity, and effective indoor lighting; however, the employees’ sick days increased, and many employees complained from eye strain (Shaw Development, 2020). This case remains unsolved. Another lawsuit included a luxury condominium housing complex in New York, where the owner took developers to court as he filed a claim for $1.5 million for breach of contract and fraud, claiming that the buildings were not as green as were advertised (Wisconsin Law Journal, 2008), knowing that this case remains unsolved. In another lawsuit, the owner promoted his building as LEED-Gold certified building to attract tenants, based on the promise of the architect. As a result of money and schedule constraints, the building did not satisfy the requirements of LEED-Gold, and so the owner sued the architect (Shaw Development, 2020). This case also remains unsolved. Despite the accelerated growth in the number of green projects, most disputes regarding defective green products that make it to court remain unsolved (Viator, 2020). The whole idea of economically and sustainably conscious design and construction is relatively new, and the available information is most of the time inadequate to prove that the green projects reached their sustainable goals. Most of the states in the U.S do not require any reporting on environmental footprint for newly-built projects (Konkes, 2017), but when more information and energy-saving requirements become available, many of the outstanding lawsuits in U.S courts are expected to be resolved once and for all. Academia Letters, August 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Amer Hamad Issa Abukhalaf, eng.amer_hamad@live.com Citation: Abukhalaf, A.H.I. (2021). Litigation and insurance limitation within sustainable construction in the U.S. Academia Letters, Article 3194. https://doi.org/10.20935/AL3194. 2 2. Important statistics about green construction disputes in the U.S More than 85% of construction companies in the U.S are involved in sustainable construction projects, of which, 48% have experienced major disputes with regards to green aspects (Shrestha, 2012). Various issues are frequently reported in green projects; 31% of the issues reported are performance issues, 24% are construction-related issues, 26% are certificationrelated issues, 22% are design-related issues, 9% are cost-related issues, 9% are incentivesrelated issues, 6% are contractual issues, 6% are energy-related issues, and 6% are materialsrelated issues (Shrestha, 2012). When it comes to projects delivery methods, 39% of the green projects with disputes were found using the Design/Bid/Build method, compared to 32% who are using the Design/Build method (Shrestha, 2012). Among the parties involved in green construction, the available data shows that architects/designers have the highest awareness level of legal issues, while the suppliers have the lowest. At the same time, contractors are most often found to be responsible for all the additional expenses incurred in the green construction project (Maus et al., 2012). On the other hand, when it comes to the contract type among green projects with disputes, GMP (Guaranteed Maximum Price) is the most common with a rate of 32%, followed by lump-sum with a rate of 26%, followed by unit-price and cost-plus, with rates of 21% and 19% respectively (Shrestha, 2012). Moreover, 42% of green projects with disputes face complications during the construction phase, followed by 30% for the design and startup phases, compared to 13% for the maintenance, knowing that the last percentage is expected to increase in the future as the age of green projects increases (Shrestha, 2012). 3. Legal disputes and insurance policies in green construction. The main sources of disputes in sustainable construction emerge from adaptation to climate change, ensuring continuity of performance for energy efficiency, drafting contracts, (not) meeting a required certification, and delays of governmental approvals (Wisconsin Law Journal, 2008). The disputes in green construction are divided into administrative and legal in nature. The administrative disputes do not rely on legal procedures to be solved; instead, they use other procedures, such as mediation, arbitration, contractual changes, or informal procedures for resolution (Abukhalaf, 2021a; Shrestha, 2012). On the other hand, if these disputes were not solved by any of the approaches mentioned before, they become legal disputes, where parties decide to rely on litigation in order to resolve the dispute (Peña, 2014). Litigation is by far the most expensive method for resolving disputes, but it can end at any point if the parties reach a settlement (Peña, 2014). Academia Letters, August 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Amer Hamad Issa Abukhalaf, eng.amer_hamad@live.com Citation: Abukhalaf, A.H.I. (2021). Litigation and insurance limitation within sustainable construction in the U.S. Academia Letters, Article 3194. https://doi.org/10.20935/AL3194. 3 Litigation and insurance are interrelated, and since many green aspects of construction projects are still not protected (Viator, 2020), there are not as many lawsuits brought on green issues. Ensuring green projects raises issues that have not been seen in regular insurance policies. Some of these issues can be seen in meeting particular benchmarks for effective energy and water consumption (Konkes, 2017), which is hard to quantify, and so hard to be included in the policy. Moreover, the effect of a faulty green construction is also hard to be measured, so many insurers will less likely to take responsibility for an unknown amount of risk. Insurance policies are designed to protect against defects found in construction projects (Konkes, 2017); nevertheless, these policies are not designed to protect against the losses due to inefficiencies. Currently, a defect in sustainable construction is treated as in any other construction project, under the general commercial liability policies (Viator, 2020). The more green construction projects we have, the more variations in insurance policies will be offered. In other words, with time, more sustainable insurance products will be available to respond to the unique issues in green projects. 4. Recommendations Paying attention to the different strategies of risk management is critical in order to minimize disputes and conflicts associated with sustainable construction (Shrestha, 2012). It is essential to analyze green construction projects in order to identify all the unique legal issues to such buildings, including the design and construction processes, as well as the operation and longterm maintenance of these projects. Specialized attorneys understand all the different aspects of conventional construction claims; however, few of them are as prepared to approach and tackle issues related specifically to green construction (Viator, 2020). As the numbers of green projects continue to grow, lawyers are expected to become more comfortable in tackling green construction cases. And as the litigation demand for green construction grows, attorneys have to respond and start self-educating on the complexity found in sustainable construction. The Lack of high-quality testing for the new technologies and ideas associated with sustainable construction (Konkes, 2017) might be a major factor in the increasing numbers of novel claims and disputes in the industry. It is also crucial to set a solid platform that identifies the fundamental areas of disputes (Maus et al., 2012), covering contract types and the different types for project delivery methods used in such projects with disputes, which will help in determining their impact on the project schedule and budget, and identifying the phases in which the disputes happened and what kind of procedures were adopted to resolve the issues. Academia Letters, August 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Amer Hamad Issa Abukhalaf, eng.amer_hamad@live.com Citation: Abukhalaf, A.H.I. (2021). Litigation and insurance limitation within sustainable construction in the U.S. Academia Letters, Article 3194. https://doi.org/10.20935/AL3194. 4 5. Declaration of interests This paper received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors. The author also declare that he has no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper. References Abukhalaf, A. H. I. (2021a). Legal Complications in U.S Green Construction. Academia Letters. https://doi.org/10.20935/AL2576 Abukhalaf, A. H. I. (2021b). Legal disputes in Sustainable Construction. Research Gate. doi:10.13140/RG.2.2.27526.50243 Konkes, C. (2017). Green lawfare: Environmental public interest litigation and mediatized environmental conflict. Environmental Communication, 12(2), 191-203. Lavers, A. P., & Shiers, D. E. (2000). Construction law and environmental harm: The liability interface. Construction Management and Economics, 18(8), 893-902. Maus, K. J., Parker, J. F., III, & Hamilton, M. (2012). Raising the roof: What’s hot in construction defect litigation. Defense Counsel Journal, 79(4), 465. Retrieved from https:/ /search.proquest.com/docview/1441086133 Peña, M. (2014). Prejudgment interest in construction defect Litigation—Florida’s loss theory on liquidated damages post-bosemand why every construction lawyer should be familiar with it. Defense Counsel Journal, 81(2), 173-186. doi:10.12690/IADC-14-008 Shaw Development, LLC. Lawsuit Follows Green Construction. (2020). Shrestha, N. (2012). Legal issues in green construction doi: 10.34917/4332609. Retrieved from https://search.datacite.org/works/10.34917/4332609 Viator, M. (2020). Where’s the Litigation in Green Construction?. Retrieved from https:// www.levelset.com/news/wheres-the-litigation-in-green-construction/ Wisconsin Law Journal. (2008). Green Building Could Lead to Lawsuits. Lawyers spot project pitfalls in LEED certification. Retrieved from https://www.lawnandlandscape. com/article/green-building-could-lead-to-lawsuits/ Academia Letters, August 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Amer Hamad Issa Abukhalaf, eng.amer_hamad@live.com Citation: Abukhalaf, A.H.I. (2021). Litigation and insurance limitation within sustainable construction in the U.S. Academia Letters, Article 3194. https://doi.org/10.20935/AL3194. 5 Bio. Amer Hamad Issa Abukhalaf is a researcher at the Florida Institute for Built Environment Resilience (FIBER). Amer is a civil engineer and a structural designer by practice, and he got his master’s degree in executive management from Ashland University in Ohio, and he double majored in project management, and operation & logistics. Currently, Amer is pursuing a Ph.D. degree from the Design, Construction, and Planning College at University of Florida. Academia Letters, August 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Amer Hamad Issa Abukhalaf, eng.amer_hamad@live.com Citation: Abukhalaf, A.H.I. (2021). Litigation and insurance limitation within sustainable construction in the U.S. Academia Letters, Article 3194. https://doi.org/10.20935/AL3194. 6