Managing High

Risk. This consideration is at the heart of many decisions in the building design and construction process. Adopting high-performance façade products or new installation methods is often a limiting factor. Insurance is used everywhere to protect us financially against bad outcomes. What role can insurance play in mitigating risk in moving rapidly past current business-as-usual façade systems to needed levels of higher performance?

Designers or façade consultants typically want to see at least a 10-year track record of successful use in buildings to be comfortable specifying products or systems that are new to them. Some want to see 20 years of experience to protect their client. Examples of successful use in specific building sizes, types or climates are also expected.

Accelerating the adoption of high-performance fenestration and façade technology with a step change in thermal and solar control performance is essential to the decarbonization of our buildings, the adaptation to a changing climate and the provision of resilient, human-survivable buildings. The ability for occupants to shelter in place during severe exterior temperature conditions is crucial, especially for the youngest and oldest of our communities, who are most vulnerable to excessive heat and cold. A high-performance building envelope is critical to creating human-survivable indoor conditions.

Understandable Risk Aversion

The owners’ and design teams’ aversion to risk is understandable as the envelope is costly and disruptive to replace or repair, and it has a longer life expectancy than other systems. We also live in a highly litigious society, and the envelope is already at high risk of litigation. According to a 2021 Vertex Engineering study, construction disputes commonly involve the building envelope, with most prominent claims involving water damage from penetration through the envelope. An earlier 2007 survey of the attendees of the annual Associated General Contractors of America Surety Bonding and Risk Management Conference indicated that 69% of claims are due to moisture-related defects in the envelope system, compared to 15% related to the mechanical systems.

David Nelson of Kean, Miller, Hawthorne, D’Armond, McCowan & Jarman LLP wrote in his book Construction Attorney: The Good, The Bad, and The Lawyer that "Construction defect litigation is expensive, lengthy and highly specialized." Along with this trend in litigation, insurance rates have also increased because of the high cost of envelope remediation (and covering litigation costs).

Rinse-Repeat Maintains Status Quo

As a result, contractors and designers repeatedly use the same products and construction methods because they know they have worked before to minimize their costly call-back and litigation risk. "Worked" typically means they have experienced a few issues related to water penetration or other product reliability-related failures. This "rinse-repeat" cycle, managing litigation and call-back risk, continues to build the track record of the business-as-usual façade systems. Yet it hinders building the track record of higher performance systems. This severely limits the speed at which higher-performing systems are adopted and can become the new business-as-usual.

Could Insurance Break the Cycle?

To break this cycle, contractors, architects and owners need financial protection to adopt new high-performance products.

Vertex's 2021 study states, "Alleged building envelope construction defects are increasing." Insurance risk is therefore increasing, even with business-as-usual practices.

What could be the role of insurance in reducing the risk of using new high-performance products and methods for owners, designers and contractors?

Installation and Insurance

The North American Contractors Certification (NACC) program certifies contract glaziers and has already reported that insurers are lowering their rates for certified glaziers. These certified glaziers are perceived to have a lower risk for claims because of the quality management programs and qualified staff that certified contractors have in place.

Building commissioning has already been proposed as an insurance loss-reducing mechanism for insurers of architects and engineers. Since most of the envelope issues identified by Vertex were related to installation (especially sealing, weeping and managing interfaces between systems) and do not pertain to products. Ensuring quality installation seems to be a big lever in reducing envelope performance risk.

The more extensive the commissioning process, extending from design to mockup through installation completion, the lower the risk of post-installation issues.

De-Risking New Products

There remains a risk perception for adopting newer products with shorter track records–such as vacuum insulating and dynamic glass. It is also fair to point out that some manufacturers of products in these categories already have 20 years of project use under their belts. So, while these products seem "new" because they aren't business-as-usual, they are not that new to the market.

Cost is often the most direct hurdle to overcome, but the risk-related objection is the next challenge once addressed. Typically, design teams nervous about reliability risk ask questions like: Where has this product been used? What's the oldest installation? What is your largest installation? Where can I see it installed in a similar climate/building type? Are there any other manufacturers making this product? What is the warranty?

Manufacturers’ warranties are not always sufficient to provide peace of mind for owners and design teams, even if they are given for 10 years or more. Product warranties tend to only warranty parts, not installation labor. The biggest expense for replacement is typically the labor to remove the old and reinstall the new. This transitions risk to the contractors, architects and owners.

Extensive durability testing may have been completed by the manufacturer accompanying the warranty. Still, without a correlation to field performance (which is rarely available), it isn't always sufficient to reduce the perceived risk. The windows group at the National Renewable Energy Laboratory (NREL) is looking at higher stringency testing for insulating and vacuum insulating glass and how it could correlate to field lifetime to support de-risking. NREL has been leading the testing and evaluation of chromogenic glazing for decades.

Certification can also play a role. It is necessary but not sufficient to drive new technology adoption. The National Fenestration Rating Council (NFRC) requires that all its insulating glass units (IGUs) have insulating glass certification from an approved program. This was a requirement pushed by the U.S. Department of Energy (DOE) to help ensure that a window's energy performance is maintained over time. Specifiers can reduce risk by requiring certified products with available certifications. While certifications are available for non-typical products–such as for dynamic IGUs, dynamic window performance and window attachment performance–and reduce potential barriers, certification is typically used to help ensure quality for business-as-usual specification.

So how do we de-risk high-performance fenestration and façade materials in the eyes of the design team and owner? Private insurance companies would likely consider façades with new products or systems higher risk than business-as-usual if there isn't a sufficient track record, even though the potential is higher performance relative to energy efficiency and climate resilience.

While it is possible for manufacturers to purchase additional insurance to support more encompassing and/or longer warranties, that may not be enough.

The Role of Government

The U.S. government's role has been to de-risk building technologies to support adoption. Work includes the General Services Administration's (GSA) Green Proving Ground (GPG) program and the DOE's research, development and deployment work for fenestration technologies. The GPG program uses government buildings to demonstrate the performance of new technologies with the goal of helping them bridge what they call "the valley of death," where revenue and/or investment is low during the pre-commercial and early commercialization phases. The evaluations focus mainly on proving the main performance value proposition and don't tend to run the length of time needed to demonstrate long-term serviceability.

Government-Backed High-Performance Façade Insurance?

To de-risk the long-term performance question, could federal or state governments provide insurance programs for owners who want to invest in high-performance building envelopes? This could help them manage the perceived financial risk and guarantee long-term performance.

There is already a precedent for government-backed insurance: Florida already has a state-owned insurance company that has become the insurer of last resort, insuring many residents for flood and wind damage risk as many private insurers flee the state because of heightening risk from weather disasters.

To qualify, a government-funded façade insurance program could also set requirements that drive other changes in today's business-as-usual façade design and construction, such as:

This is just one concept that the Façade Tectonics Institute is exploring as we investigate the barriers to adopting high-performance façades and engage members and other stakeholders on solutions to overcome them.

Reducing the perceived risk in changing from business-as-usual design and construction to adopting high-performance façades is vital to achieving the country's decarbonization goals and creating resilient buildings supporting occupant health and well-being. Please join the dialogue!

Your email address will not be published. Required fields are marked *

Comment *

Name *

Email *

Website

Δ

This site uses Akismet to reduce spam. Learn how your comment data is processed.