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September 29, 2016
Over the past several years, the volume and availability of information regarding the composition of building materials, and how exposure to these materials may impact human health, has dramatically increased.
The design community has considered these risks, including the potential liability associated with obtaining this information and making design recommendations based upon it. Owners and contractors should also analyze how this new paradigm will impact their business and, at a minimum, consider three aspects: the regulatory landscape, contractual terms and insurance.
Many state and local governments have enacted legislation designed to increase both private and public development of “green” buildings. Some of this legislation has incorporated third-party certification systems as either a mandate or as a basis for awarding an incentive. For example, in Washington state, pursuant to the High-Performance Public Buildings statute, certain public projects must be “designed, constructed, and certified to at least the LEED silver standard.”
This incorporation of a third-party certification system into the regulatory framework is important because the entities that develop and administer these certifications also are revising their programs to impose requirements and limitations regarding materials toxicity.
In an effort to standardize information, identify human health impacts and summarize the related scientific research, new declarations, disclosures and certification frameworks have been developed.
These new frameworks and labels are sometimes incorporated into existing third-party certification systems, and by default into the regulatory framework. For example, various third-party certification systems and disclosure methodologies related to materials have been incorporated into LEED v4 as pathways to achieve certain credits.
The practical impact of this multi-layered approach is that in order to comply with laws that mandate third-party certification, projects must also comply with evolving requirements regarding building materials disclosures, and with restrictions on materials that present known or suspected risks to human health.
Increased awareness regarding, and disclosure of, potentially problematic chemicals in building materials may impact key contractual terms that have remained relatively constant. For example, most standard contracts contain a clause that outlines the parties’ obligations if a “hazardous material” is encountered, used, or installed at the project site.
AIA Document A201 2007, a widely used industry contract setting forth the general conditions under which a project will be built, specifically notes that asbestos and polychlorinated biphenyls (PCB) are “hazardous substances.”
PCBs were used in a variety of construction materials until they were banned in the late 1970s.
The Associated General Contractors’ ConsensusDocs 200, another popular contract used in construction, ambiguously defines a “hazardous material” as “any substance or material identified now or in the future as hazardous under any federal, state or local law or regulation.”
This broad language is important because third-party certification systems often characterize materials and chemicals to be avoided with phrases that are very close in meaning to hazardous, including “banned,” “serious risk to human health” or “toxic.”
In light of the increasing number of scientific studies analyzing the long-term, and sometimes permanent impacts to human health and the environment of chemicals commonly found in many building materials including lead, mercury, added formaldehyde, polyvinyl chloride and brominated flame retardants what constitutes a hazardous material is arguably a moving legal target.
Categorization of these substances as hazardous or toxic (either directly in legislation or indirectly through third-party systems) could create a number of legal issues. This is particularly true as the Toxic Substances Control Act, untouched for 40 years, was recently revised to improve the federal government’s ability to regulate chemicals.
To address these issues on the design side, the American Institute of Architects developed contract language that parties could consider incorporating into agreements governing projects where owners request information regarding, or pursue goals related to, “healthier” materials. See AIA Document B503 2007, Guide for Amendments to AIA Owner-Architect Agreements, Section 20.
Among other things, the proposed language clarifies the architect’s role relevant to disclosures, and that impacts to human health should be addressed by a toxicologist or other, similarly trained professional. Efforts to address these issues from the design side should be mirrored on the development and construction side.
Industry professionals will also want to analyze potential insurance coverage issues.
For example, consider the implications of a regulatory entity (and/or third party certification system that has been incorporated into law) enacting legislation that directly or indirectly deems a material “hazardous” or “banned” after a significant amount has been installed within a project. This could trigger a variety of insurance issues, including (1) whether these materials, once incorporated into the project, constitute covered “property damage” and (2) if claims will be excluded under either broad pollution exclusions or newly created exclusions specific to problematic materials.
Historically, the insurance industry has responded to an influx of claims by creating specific exclusions, such as those developed for asbestos and lead in the 1970s and 1980s.
We could see a similar response to other potentially problematic building materials. Smart owners and contractors will want to avoid potential claims and coverage litigation by taking a leadership role with regard to chemicals of concern.
Materials toxicity and the built environment’s impact on human health will be an increasingly significant consideration for owners, designers and builders. A few tips can help project teams prepare to work in this evolving landscape, and build a future where the built environment does less harm to the health of its occupants:
• Educate team members about materials toxicity and disclosures.
• When necessary, retain experts on materials toxicity and impacts to human health.
• Be aware of regulatory changes that may impact standard contract language.
• Analyze how changes to third-party certification systems may impact the regulatory landscape.
• Consider revising form contracts to address issues related to materials. Use the language proposed by industry experts as a starting point.
• Communicate with your insurance broker when projects involve materials-specific goals.
• Support manufacturers that commit to an open and transparent supply chain.
Nicole DeNamur is a lawyer at Pacifica Law Group, a LEED Green Associate and WELL AP, and an affiliate instructor at the University of Washington’s Runstad Center for Real Estate Studies.