Environmental factors currently focus on efficiencies and reductions of waste and emission (in line with the net zero agenda) as required by policy and supported by the industry.
The Climate Change Committee aims to decarbonize the UK power sector by 2035 with electrification, supported by low-carbon hydrogen. As we strive for a green economic recovery, renewable energy technologies remain a priority.
Particular to construction, this will involve the increased build of renewable energy plants such as windfarms, the increased use of solar panels and new greener materials such as low-carbon concrete, energy efficient UV filtered glass, cross laminated timber and climate neutral bricks.
In addition, the newly established Building Research Establishment Environmental Assessment Method analyses the sustainable value of a construction development against various metrics including land use, construction methodology and as-built energy efficiency.
This method is not yet a legal requirement but is specified as a planning condition by some Local Planning Authorities.
There will also be a push for responsible sourcing of building materials under British Standards BES 6001 and BES EN 8902 and BREEAM certification. Other sustainable certifications now available include Leed, GRIHA, CRRM, GSAS, EDGE and WELL but again, these are not yet mandatory.
All of these initiatives present significant economic opportunity for the sector but they do not come without their issues.
Given the timescales involved up to Net Zero by 2050 and the call for mandatory energy performance disclosures and whole life carbon measurements, we are likely to see an increase in construction claims involving renewable technology, green methodologies (such as MMC) and materials.
Key areas of liability for the following renewable energies include:
- Wind projects - the positioning of subsea cables for offshore windfarms, workmanship in the manufacturer of key parts and completed projects not meeting forecast output levels.
- Waste to energy products - the building and civil and structural engineering design are secondary to the process plan design. Hence, accurate data concerning the process plant is necessary to both the designer and contractor at an early stage to avoid errors and delays.
- Solar projects - despite their increasing popularity, solar projects represent a major area of potential liability (predominantly fire damage). This is particularly so with residential construction projects where liability arises at the installation and ‘use’ phases of solar panels.
Consequently, careful consideration should be given to design and build contracts and insurance policies to ensure contractual obligations fall as intended when relying on all new technologies in general.
Thorough reviews of CAR, EAR and TPL policies need to be undertaken to ensure emerging, sustainable technologies are covered.
Where they are not, the industry is turning to new insurance solutions to supplement traditional coverage.
Parametric insurance, whilst not new, is on the rise. Similar to a financial option, it insures a loss that occurs when a measurable value is exceeded or not reached. Parametric insurance can smooth out volatility and establish more comprehensive protection in circumstances where there is lack of sun for renewable energy or too much/too little wind for electricity generation.
Alternatively, protection/coverage gaps can be plugged by drafting new sustainability clauses in traditional policies. The Chancery Lane Project has brought together insurance lawyers to draft clauses which insurers can look to incorporate in policies, to provide for the repair, rather than replacement, of damaged property and/or use of parametric insurance (where the policy is triggered if certain objective criteria, such as wind speeds, are met).
All the steps outlined above could see the construction insurance sector tackling new claims effectively, while also making positive movements towards a more renewable future.