Green construction continues to be a bright spot in a depressed industry.

As many as 25 percent of all new construction projects begun in 2010 were green, including 35 percent of all nonresidential proj-ects, according to a McGraw-Hill Construction report. By 2015, it

is predicted this industry segment will reach $135 billion.

Education, health care and office projects are especially strong. Retrofits are also expected to increase three to five times over the next several years, to an $18 billion market.

Despite the recession, continuing high energy costs, government incentives and sophisticated clients with an eye on long-term benefits are driving the move toward green. In addition to the cornerstone of energy efficiency, grow-ing segments include LED lighting, water efficiency and green roofs.

These trends certainly appear to benefit both the construction industry and

building owners. But whenever standards and the bar for expected outcomes are raised, the potential for new types of loss and liability

is often the result. And so it is with green construction, especially those projects that try to attain LEED certification.

LEED, or Leadership in Energy and Environmental Design, provides third-party verification that standards are met in categories including site selection, construction practices, water and energy efficiency, and air quality.

Each year, the standards are revised and expanded, creating new possibilities for projects to come up short in construction or performance. LEED certification is valuable to building owners, often translating into tax credits and other incentives, or premium pricing on rental units or real estate sales.

The first lawsuit to reveal the inadequacy of standard construction management practices and insurance coverage for green projects was Shaw Development vs. Southern Builders.

In 2006, Southern built a $7.5 million condo project for Shaw in Crisfield, Md. The builder was first to file, claiming $54,000 in mechanic’s liens. The $1.3 million countersuit by Shaw claimed, among other assertions, that the developer lost more than $600,000 in Maryland tax credits because the building was not completed in time and was not up to LEED specifica-tions. The case was settled out of court, but it managed to raise many important points.

Risk begins with design. An architect’s potential liability issues

See Green construction on page 2

As the cost of providing healthcare insurance to employees has continued to rise, many employers have resorted to aggressive strategies for cost containment.

These include wellness programs, health risk assessments, incentives and disincentives for healthy and unhealthy lifestyle behaviors. You need to be aware that some of these strategies can run afoul of federal laws.

The Americans with Disabilities Act (ADA) stipulates that an employer may require medical exams and ask disability-related questions of employees only when they are “job-related and consistent with business necessity.”

In other words, these requirements can apply only if a medical condition could pose a threat to the employee or others, or prevent employees from performing the essential functions of their job.

The questions a health risk assessment asks rarely meet these criteria. The assessments must be voluntary. Participation can’t be required of employees to receive healthcare benefits, nor can employees be penalized in any way for not participating.

The Genetic Information Nondiscrimination Act (GINA)

prohibits discrimination based on employees’ genetic information, which includes family medical history. Under GINA, health risk assessments that ask for this information must be voluntary.

The employer must make it clear that employees do not have to answer any questions pertaining to family medical history, and that choosing not to answer will not disqualify them for any incentives they would otherwise receive.

The Health Insurance Portability and Accountability Act (HIPAA) states that an employee cannot be denied coverage or charged more for it because of a health factor. These include medical and mental conditions, healthcare claims history, disabilities and genetic information.

HIPAA generally prohibits health plans from charging different premiums or imposing different deductibles or copayments based on a health factor.

However, HIPAA does allow a wellness program to offer a reward based on the participant satisfying a standard related to a health factor when a number of specific conditions and limitations are met. – Jeff Van Pelt, Ed.D., SPHR

Green construction: It has its own set of insurance issues

I n s i d e

I n s i d e

July/August 2012

➜Bad weather: Its impact on homeowners’ insurance coverage

➜How far can you go in regulating employees’ off-duty behavior?

An architect’s potential liability issues include functional problems with the finished building, inability to obtain LEED certification, poor energy performance and failure of the construction company to build to specifications.

SOME healthcare and wellness practices could be discriminatory

Building For Success

An information bulletin to contractors from:

The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS. © 2012 CPAmerica International

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701 | (727) 821-6161 | www.gsscpa.com

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701www.gsscpa.com | gss@gsscpa.com

(727) 821-6161

If we may answer any of your questions on the information contained in this publication, please contact us.

Global warming may still be debatable, but the rise in natural disasters is not.

Over the past 30 years, the number of tornados has been on the rise. The month of April, 2011, saw a record 758 tornadoes across the country, and April 27, 2011, set a new U.S. record when 200 twisters were reported in one day, according to the National Oceanic and Atmospheric Administration.

In addition to a total of 1,691 tor-nados, disastrous weather events in 2011 included Hurricane Irene, drought, wildfires caused by drought, record snow and flooding from that snow melting. The total damage reached $50 billion.

As a result, homeowner insurance premiums will rise. Or policies may be cancelled entirely.

Between 2003 and 2007, more than 3 million homeowners along the East Coast and in the South lost their coverage due to weather events. Many large companies such as Allstate and Farmers are limiting exposure by curtailing coverage in certain states and coastal areas, according to “The Greening of Insurance in a Warming World” study by the Lawrence Berkeley National Laboratory.

Financially, it’s understandable. Allstate reported a loss equal to 75 years’ worth of profits due to Katrina and other hurricanes. State Farm pulled out of Florida entirely.

Homeowners dropped by their insurance carrier can seek coverage under the Fair Access to Insurance Requirements (FAIR) programs. Specifically created by the federal government for high risk homes in the 1960s, a FAIR plan will cost more and

cover less. Some states, such as Florida, offer special wind protection plans.

This situation has many implica-tions for the real estate and construction industries.

Lenders require insurance to pro-tect their investments, and most houses are purchased with mortgages. There is the question of who pays for repairs to underinsured or uninsured homes.

Will some areas be abandoned or will people continue to build their

dream homes in storm zones and hope for good weather? Perhaps new building technologies can make homes resistant

to hurricanes or tornados, as they have in earthquake country. Whatever the cause of increased storms, the challenges they pose are not likely to clear up soon. – Elizabeth Penney, M.B.A.

Am I allowed to monitor my employees’ off-duty behavior and fire an employee because of it?

Chances are that most managers have wondered about some form of this question.

The behaviors might include drinking, smoking, working for a political party or candidate, using a competitor’s product or services, displaying certain bumper stickers, engaging in dangerous sports, cross-dressing, having extramarital affairs or cohabitation.

The answer is complex. In general, unless there are state laws tying your hands, there are no federal laws that prohibit you from firing employees for their off-duty behavior. Of course, you cannot discriminate on the basis of a protected category, for example, age, race, sex or disability.

You can fire an employee for any reason – with a few exceptions (see below). This is an upshot of the “employ-ment at will” doctrine, which states that either the employer or the employee may end the relationship at any time, without having to prove cause.

That said, there are exceptions to “at-will,” and there are other reasons you might not want to fire an employee for off-duty activities.

First, a growing number of states are enacting so-called “lifestyle statutes” that prohibit firing employees for engaging in certain legal behaviors or using legal consumable products on their own time.

Smoking is the most widely protected of these lifestyle behaviors. Some states go as far as to prohibit discrimination against employees for any lawful activities on their own time, even if employers do not approve of those activities.

However, there are exceptions even to lifestyle statutes. For example, while drinking alcohol may be protected, if it affects job performance, it is not. This is especially the case in safety-sensitive jobs, such as transportation and operation of heavy equipment.

Federal laws do protect certain off-duty behaviors. These include whistle-blowing, reporting potential safety violations, union organizing and filing a workers’ compen-sation claim.

Most collective bargaining agreements specify that union employees may not be terminated without “just cause” and provide for a multi-step grievance procedure, plus arbitration.

Other considerations that can limit an employer’s ability to terminate an employee for their off-duty behavior include an employee handbook or written employment contract that states that employees will not be terminated without cause.

Finally, there are some less tangible things to consider. Even if you are not prohibited from firing employees for their off-duty behavior, how will it affect the morale among your other employees? How will your image in the community be affected if it makes it into the media?

There is a general assumption of indi-vidual freedom in our society. The extension of that into the work-place is the belief that employees should not lose their jobs as a result of lifestyle choices as long as those choices do not affect the business or workplace.

If you are thinking about terminating an employee for off-duty behaviors, it might be prudent to consider whether that behavior affects the employee’s job performance, the workplace or the business. If not, you may want to reconsider such an action. – Jeff Van Pelt, Ed.D., SPHR

Its impact on homeowners’ insurance coverageBad weather:

How far can you go in regulating employees’ off-duty behavior?

include functional problems with the finished building, inability to obtain LEED certification, poor energy performance and failure of the construction company to build to specifications. Architects can now obtain additional insurance from Lloyd’s of London to mitigate their professional liability.

Green construction has also created new risks in the building phase. The first is making sure material sourcing and handling meet green standards, including recycled and non-toxic content, local purchasing and recycling of waste materials.

Subcontractors need to be properly trained and certified in their areas of expertise so that building components and systems meet efficiency requirements. In the Shaw vs. Southern case, the project needed to be completed by a certain date to qualify for tax credits. Delays are not necessarily the builder’s fault.

Green construction also adds complexity to casualty loss payouts, with requirements to bring the building back to a

certain level of performance. Surprisingly, a 2008 report

by Marsh, a leading risk man-agement company, showed the insurance industry to be slow in responding to these new risks.

Since then, several companies have stepped forward to pro-actively address the special needs of green construction, including Fireman’s Fund, ACE, Lexington and Zurich. Fireman’s Fund has gone on to make a specialty area of green

insurance, including coverage for businesses, homes and hybrid vehicles.

In an attempt to standardize coverage, the American Association of Insurance Services (AAIS) has issued a set of standards for builder’s risk insurance. Traditionally, builder’s risk covers losses incurred during the construction phase of a project.

AAIS recommends that green building endorsement cover restoration of air quality, losses due to renewable energy or water conservation systems being down, recertification and debris recycling. The AAIS also created a revised delay-in-completion form to cover costs specifically associated with green aspects of the project.

General liability policies are also impacted by the move toward certification.

According to Chicago architect and attorney Gary Cole, “unfulfilled expectations” could be the basis for litigation related to green building performance.

Liability insurance doesn’t generally cover breach of warranty or the type of economic loss an underperforming green building might incur. Although many in the industry feel standard policies should be adequate for green buildings, it is evident that the complex and ever-changing arena of green certification is giving rise to many possible under-insured situations.

Green construction is a valuable and growing segment. Be sure that your company’s exposure is limited with clear and thorough contracts and appropriate insurance coverage. – Elizabeth Penney, M.B.A.

Green construction continued from page 1

The CPAmerica AdvantageOur firm is an affiliate of CPAmerica International, one of the largest associations of CPA firms

in the world. Through CPAmerica, we put the talents of thousands of CPAs to work for you. You truly receive the best of both worlds:➤ The personal attention and sincere concern of a local CPA firm➤ The knowledge and resources of a worldwide associationOur firm and CPAmerica – working together for you!

Visit: www.cpamerica.org.

“Unfulfilled expectations” could be the basis for litigation related to green building performance.

Smoking is the most widely protected of these lifestyle behaviors.

July/August 2012 Building For Success2 July/August 2012 Building For Success 3

Global warming may still be debatable, but the rise in natural disasters is not.

Over the past 30 years, the number of tornados has been on the rise. The month of April, 2011, saw a record 758 tornadoes across the country, and April 27, 2011, set a new U.S. record when 200 twisters were reported in one day, according to the National Oceanic and Atmospheric Administration.

In addition to a total of 1,691 tor-nados, disastrous weather events in 2011 included Hurricane Irene, drought, wildfires caused by drought, record snow and flooding from that snow melting. The total damage reached $50 billion.

As a result, homeowner insurance premiums will rise. Or policies may be cancelled entirely.

Between 2003 and 2007, more than 3 million homeowners along the East Coast and in the South lost their coverage due to weather events. Many large companies such as Allstate and Farmers are limiting exposure by curtailing coverage in certain states and coastal areas, according to “The Greening of Insurance in a Warming World” study by the Lawrence Berkeley National Laboratory.

Financially, it’s understandable. Allstate reported a loss equal to 75 years’ worth of profits due to Katrina and other hurricanes. State Farm pulled out of Florida entirely.

Homeowners dropped by their insurance carrier can seek coverage under the Fair Access to Insurance Requirements (FAIR) programs. Specifically created by the federal government for high risk homes in the 1960s, a FAIR plan will cost more and

cover less. Some states, such as Florida, offer special wind protection plans.

This situation has many implica-tions for the real estate and construction industries.

Lenders require insurance to pro-tect their investments, and most houses are purchased with mortgages. There is the question of who pays for repairs to underinsured or uninsured homes.

Will some areas be abandoned or will people continue to build their

dream homes in storm zones and hope for good weather? Perhaps new building technologies can make homes resistant

to hurricanes or tornados, as they have in earthquake country. Whatever the cause of increased storms, the challenges they pose are not likely to clear up soon. – Elizabeth Penney, M.B.A.

Am I allowed to monitor my employees’ off-duty behavior and fire an employee because of it?

Chances are that most managers have wondered about some form of this question.

The behaviors might include drinking, smoking, working for a political party or candidate, using a competitor’s product or services, displaying certain bumper stickers, engaging in dangerous sports, cross-dressing, having extramarital affairs or cohabitation.

The answer is complex. In general, unless there are state laws tying your hands, there are no federal laws that prohibit you from firing employees for their off-duty behavior. Of course, you cannot discriminate on the basis of a protected category, for example, age, race, sex or disability.

You can fire an employee for any reason – with a few exceptions (see below). This is an upshot of the “employ-ment at will” doctrine, which states that either the employer or the employee may end the relationship at any time, without having to prove cause.

That said, there are exceptions to “at-will,” and there are other reasons you might not want to fire an employee for off-duty activities.

First, a growing number of states are enacting so-called “lifestyle statutes” that prohibit firing employees for engaging in certain legal behaviors or using legal consumable products on their own time.

Smoking is the most widely protected of these lifestyle behaviors. Some states go as far as to prohibit discrimination against employees for any lawful activities on their own time, even if employers do not approve of those activities.

However, there are exceptions even to lifestyle statutes. For example, while drinking alcohol may be protected, if it affects job performance, it is not. This is especially the case in safety-sensitive jobs, such as transportation and operation of heavy equipment.

Federal laws do protect certain off-duty behaviors. These include whistle-blowing, reporting potential safety violations, union organizing and filing a workers’ compen-sation claim.

Most collective bargaining agreements specify that union employees may not be terminated without “just cause” and provide for a multi-step grievance procedure, plus arbitration.

Other considerations that can limit an employer’s ability to terminate an employee for their off-duty behavior include an employee handbook or written employment contract that states that employees will not be terminated without cause.

Finally, there are some less tangible things to consider. Even if you are not prohibited from firing employees for their off-duty behavior, how will it affect the morale among your other employees? How will your image in the community be affected if it makes it into the media?

There is a general assumption of indi-vidual freedom in our society. The extension of that into the work-place is the belief that employees should not lose their jobs as a result of lifestyle choices as long as those choices do not affect the business or workplace.

If you are thinking about terminating an employee for off-duty behaviors, it might be prudent to consider whether that behavior affects the employee’s job performance, the workplace or the business. If not, you may want to reconsider such an action. – Jeff Van Pelt, Ed.D., SPHR

Its impact on homeowners’ insurance coverageBad weather:

How far can you go in regulating employees’ off-duty behavior?

include functional problems with the finished building, inability to obtain LEED certification, poor energy performance and failure of the construction company to build to specifications. Architects can now obtain additional insurance from Lloyd’s of London to mitigate their professional liability.

Green construction has also created new risks in the building phase. The first is making sure material sourcing and handling meet green standards, including recycled and non-toxic content, local purchasing and recycling of waste materials.

Subcontractors need to be properly trained and certified in their areas of expertise so that building components and systems meet efficiency requirements. In the Shaw vs. Southern case, the project needed to be completed by a certain date to qualify for tax credits. Delays are not necessarily the builder’s fault.

Green construction also adds complexity to casualty loss payouts, with requirements to bring the building back to a

certain level of performance. Surprisingly, a 2008 report

by Marsh, a leading risk man-agement company, showed the insurance industry to be slow in responding to these new risks.

Since then, several companies have stepped forward to pro-actively address the special needs of green construction, including Fireman’s Fund, ACE, Lexington and Zurich. Fireman’s Fund has gone on to make a specialty area of green

insurance, including coverage for businesses, homes and hybrid vehicles.

In an attempt to standardize coverage, the American Association of Insurance Services (AAIS) has issued a set of standards for builder’s risk insurance. Traditionally, builder’s risk covers losses incurred during the construction phase of a project.

AAIS recommends that green building endorsement cover restoration of air quality, losses due to renewable energy or water conservation systems being down, recertification and debris recycling. The AAIS also created a revised delay-in-completion form to cover costs specifically associated with green aspects of the project.

General liability policies are also impacted by the move toward certification.

According to Chicago architect and attorney Gary Cole, “unfulfilled expectations” could be the basis for litigation related to green building performance.

Liability insurance doesn’t generally cover breach of warranty or the type of economic loss an underperforming green building might incur. Although many in the industry feel standard policies should be adequate for green buildings, it is evident that the complex and ever-changing arena of green certification is giving rise to many possible under-insured situations.

Green construction is a valuable and growing segment. Be sure that your company’s exposure is limited with clear and thorough contracts and appropriate insurance coverage. – Elizabeth Penney, M.B.A.

Green construction continued from page 1

The CPAmerica AdvantageOur firm is an affiliate of CPAmerica International, one of the largest associations of CPA firms

in the world. Through CPAmerica, we put the talents of thousands of CPAs to work for you. You truly receive the best of both worlds:➤ The personal attention and sincere concern of a local CPA firm➤ The knowledge and resources of a worldwide associationOur firm and CPAmerica – working together for you!

Visit: www.cpamerica.org.

“Unfulfilled expectations” could be the basis for litigation related to green building performance.

Smoking is the most widely protected of these lifestyle behaviors.

July/August 2012 Building For Success2 July/August 2012 Building For Success 3

Green construction continues to be a bright spot in a depressed industry.

As many as 25 percent of all new construction projects begun in 2010 were green, including 35 percent of all nonresidential proj-ects, according to a McGraw-Hill Construction report. By 2015, it

is predicted this industry segment will reach $135 billion.

Education, health care and office projects are especially strong. Retrofits are also expected to increase three to five times over the next several years, to an $18 billion market.

Despite the recession, continuing high energy costs, government incentives and sophisticated clients with an eye on long-term benefits are driving the move toward green. In addition to the cornerstone of energy efficiency, grow-ing segments include LED lighting, water efficiency and green roofs.

These trends certainly appear to benefit both the construction industry and

building owners. But whenever standards and the bar for expected outcomes are raised, the potential for new types of loss and liability

is often the result. And so it is with green construction, especially those projects that try to attain LEED certification.

LEED, or Leadership in Energy and Environmental Design, provides third-party verification that standards are met in categories including site selection, construction practices, water and energy efficiency, and air quality.

Each year, the standards are revised and expanded, creating new possibilities for projects to come up short in construction or performance. LEED certification is valuable to building owners, often translating into tax credits and other incentives, or premium pricing on rental units or real estate sales.

The first lawsuit to reveal the inadequacy of standard construction management practices and insurance coverage for green projects was Shaw Development vs. Southern Builders.

In 2006, Southern built a $7.5 million condo project for Shaw in Crisfield, Md. The builder was first to file, claiming $54,000 in mechanic’s liens. The $1.3 million countersuit by Shaw claimed, among other assertions, that the developer lost more than $600,000 in Maryland tax credits because the building was not completed in time and was not up to LEED specifica-tions. The case was settled out of court, but it managed to raise many important points.

Risk begins with design. An architect’s potential liability issues

See Green construction on page 2

As the cost of providing healthcare insurance to employees has continued to rise, many employers have resorted to aggressive strategies for cost containment.

These include wellness programs, health risk assessments, incentives and disincentives for healthy and unhealthy lifestyle behaviors. You need to be aware that some of these strategies can run afoul of federal laws.

The Americans with Disabilities Act (ADA) stipulates that an employer may require medical exams and ask disability-related questions of employees only when they are “job-related and consistent with business necessity.”

In other words, these requirements can apply only if a medical condition could pose a threat to the employee or others, or prevent employees from performing the essential functions of their job.

The questions a health risk assessment asks rarely meet these criteria. The assessments must be voluntary. Participation can’t be required of employees to receive healthcare benefits, nor can employees be penalized in any way for not participating.

The Genetic Information Nondiscrimination Act (GINA)

prohibits discrimination based on employees’ genetic information, which includes family medical history. Under GINA, health risk assessments that ask for this information must be voluntary.

The employer must make it clear that employees do not have to answer any questions pertaining to family medical history, and that choosing not to answer will not disqualify them for any incentives they would otherwise receive.

The Health Insurance Portability and Accountability Act (HIPAA) states that an employee cannot be denied coverage or charged more for it because of a health factor. These include medical and mental conditions, healthcare claims history, disabilities and genetic information.

HIPAA generally prohibits health plans from charging different premiums or imposing different deductibles or copayments based on a health factor.

However, HIPAA does allow a wellness program to offer a reward based on the participant satisfying a standard related to a health factor when a number of specific conditions and limitations are met. – Jeff Van Pelt, Ed.D., SPHR

Green construction: It has its own set of insurance issues

I n s i d e

I n s i d e

July/August 2012

➜Bad weather: Its impact on homeowners’ insurance coverage

➜How far can you go in regulating employees’ off-duty behavior?

An architect’s potential liability issues include functional problems with the finished building, inability to obtain LEED certification, poor energy performance and failure of the construction company to build to specifications.

SOME healthcare and wellness practices could be discriminatory

Building For Success

An information bulletin to contractors from:

The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS. © 2012 CPAmerica International

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701 | (727) 821-6161 | www.gsscpa.com

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701www.gsscpa.com | gss@gsscpa.com

(727) 821-6161

If we may answer any of your questions on the information contained in this publication, please contact us.