ISO’s Green Building Upgrade Coverage Answers an Eco-Friendly Call

ISO recently introduced the insurance industry’s first standard coverage option for commercial property owners interested in rebuilding damaged property with green alternatives.  As many people and businesses focus on managing and reducing their carbon footprints, insurers using the ISO program will be able to offer their customers an innovative way to help them rebuild green after a loss. 

The new coverage has three major components. First, it will augment existing replacement-cost coverage with an additional limit of insurance to pay for repairing or replacing damaged property using more energy-efficient, environmentally sound materials, products, or methods.  The improvements can come in design, construction, manufacture, or operation of the building or its components. A green standard setter — such as Leadership in Energy and Environmental Design (LEED) or ENERGY STAR — must recognize the proposed upgrades.  

The second component is related-expense coverage, which provides an additional limit of insurance for extra expenses related to green upgrades. For example, the coverage would pay extra costs for reuse or salvage of building materials or contents and related extraction and transportation expenses. Professional fees for the design and engineering, as well as certification and equipment-testing fees, would also be eligible, as would expenses for airing out the building and testing air quality.

The third component is a business-interruption option for insureds with an underlying policy that pays for loss of earnings during the time it takes to repair a property. The new coverage recognizes that reconstruction using green standards may take longer than is customary with ordinary construction methods and materials.

The ISO green building upgrade will allow insurers to tap into the growing trend of environmentally friendly rebuilding following a loss. The coverage complements the existing portfolio of options available through ISO’s commercial property programs.