Green Certification: How to Protect Your Eco-Friendly Hotel
By Jackie Collins Senior Director Real Estate & Hospitality Division, Arthur J. Gallagher | May 12, 2019
A luxury hotel offering five-star service might not be enough for some guests when it comes to selecting the perfect overnight spot. Research has shown that guests often consider the environment when selecting a hotel, and for years now hotel owners, developers and designers have been taking steps to offer guests an enjoyable, eco-friendly experience. Many hotels achieve this by earning a green certification.
However, maintaining those green standards can be challenging. Requirements could include using specific biodegradable materials that can only be purchased from verified vendors or conserving energy at a certain level. Hotels invest significant time, money and resources into being eco-friendly, but might not always stop to consider if those investments are covered by their insurance.
When it comes to hotels adopting eco-friendly practices, the sky is the limit. Or more accurately, the roof, where hotels are putting everything from vegetation to organic gardens to beehives, all in the name of being a more socially conscious business. But what happens if a hotel's vegetative rooftop – one that is carefully curated and specifically designed to have environmental benefits – is destroyed by extreme weather?
It would be a devastating loss for a hotel. And if the hotel did not consult its insurance broker before planting the vegetation and securing the proper coverage, the hotel could be responsible for the full cost of reinstalling the vegetative rooftop, which can cost upwards of hundreds of thousands of dollars.
An example of the importance of consulting an insurance broker recently occurred with a Gallagher hotel client. The hotel was installing new carpeting and the adhesive used to secure the carpeting to the floor was called into question by the insurance underwriter, whose role it is to decide what the insurance company will insure based on risk assessment. There were also questions about the carpet itself. Was it hypoallergenic or did it meet certain green certifications?
It might seem strange that an insurance company would need to know this level of detail in a hotel room, but it all ladders up to the insurance company understanding the type of coverage the hotel should include in its policy. In this case, does the hotel want to get pollution coverage for its floor coverings and adhesive? Skipping it might seem like an easy way to save money. After all, how much harm could glue and carpet cause?
To determine the answer, consider this: If the carpet lets off fumes that release volatile organic compounds (VOCs) into the air, those fumes contribute to indoor air pollution. And those VOCs are considered an increased risk that an insurance company would need to know about. What if guests become sick from the fumes as the carpets air out? Or what if the flooring adhesive was known to contain toxic chemicals, and somehow a pet in the hotel ingested exposed glue? It's important to note that general liability policies will usually have a pollution exclusion, which is a provision that excludes coverage for losses caused by pollution. Pollution could mean any type of irritant or contaminant, including fumes, chemicals and waste.
Without specific coverage for its floor coverings and adhesive, suddenly, the decision to use that adhesive or install that carpet could become a costly, out-of-pocket expense for the hotel. Depending on the type of flooring and glue, the insurance coverage itself could vary. If the insurance company knows that the adhesive is toxic and the carpet could release VOCs, it's possible the hotel's premiums could increase or coverage may not be offered. That same premise works in reverse. Similar to how toxic products could have a negative impact on a hotel's insurance premium, using eco-friendly products can have positive outcomes.
For example, if an insurance company is aware that a hotel's cleaning products are all green, there is an increased level of comfort with the hotel. These decisions could help the hotel earn savings on its premium and lead to improved coverage on its general liability policy or pollution policy.
Other basic steps include investing in LED lighting, starting a linen reuse program (cuts down on soap, water and energy when linens and towels don't have to be washed as often) and implementing a hotel-wide recycling effort. Although it's not necessary to keep an insurance broker informed of every single green effort a hotel undertakes, when it comes to larger investments, such as the aforementioned green cleaning products, it's important to connect with an insurance broker.
Why? Because it all goes back to the level of comfort the insurance company has with the hotel. If a hotel makes a significant investment to overhaul its cleaning products and solely use cleansers that are non-toxic and biodegradable, the insurance company underwriter will recognize the safety measures the hotel is taking and this will be taken into consideration when reviewing the overall the account. Although there is no guarantee that a hotel will save money on its insurance policies because of one or two green actions, it is important to convey to the insurance broker the overall positive impact of all the hotel's green efforts.
Keeping an insurance broker in mind when hotels are undergoing repairs and upgrades is also important. What hotels might not realize is just how helpful that insurance broker can be, starting from the moment the repairs or upgrades are being considered. It is especially important if a hotel is considering using eco-friendly materials or plans to follow specific guidelines to earn a green certification. Before a single dollar is spent, it is worth contacting an insurance broker to determine exactly what the hotel's current insurance covers – and what it does not cover.
Perhaps the hotel is planning to install a new rainwater collection system. The system may not be automatically included for property coverage. Maybe the hotel is following specific guidelines to earn a green certification. Are special materials required? If so, that will need to be factored into the builders risk insurance. Will new building codes need to be addressed, and if so, does the hotel have building ordinance coverage for those new codes? With so many aspects to be aware of, an insurance broker is essential to making sure a hotel is covered and protected.
Once the hotel has earned its green certification, the hotel owner will be grateful the insurance company is aware of every aspect that was required to earn that certification. Why? Many times the additional expense to meet green certification may not be realized in properly valuing the hotel. If there is a loss, those guidelines and materials will need to be replaced to become re-certified. If even one of those items is not properly recovered, the hotel is at risk of not be able to re-earn the green certification.
But what if damages to the hotel occur during the repairs or construction, while the hotel is trying to earn a green certification? For example, if there is a fire and debris needs to be removed from the property ? Not only are there environmental laws that determine how debris can be disposed, but the hotel may be required to send the debris to a specific recycling facility if it's trying to earn a green certification. In addition, the hotel will be responsible for having the indoor air quality tested and restored back to specified clean levels. An insurance broker will know exactly what type of coverage to have in place to ensure that the hotel can continue to pursue its green certification despite any setbacks.
Or perhaps a hotel isn't ready to invest in eco-friendly upgrades quiet yet, but knows it will want to make those changes someday. Even if a hotel is simply considering future eco-friendly upgrades, hotel owners should keep their insurance brokers in mind. For instance, a hotel might decide that in the case of certain damages it will want to make repairs using eco-friendly building materials versus traditional materials. An insurance broker can include that requirement in the hotel's coverage, looking towards the future.
Many hotels may also decide to build or rebuild a property and pursue LEED (Leadership in Energy and Environmental Design) certification, one of the most widely used and well-respected green building certification programs used worldwide. While a hotel earning LEED certification in and of itself might not automatically translate to improved insurance coverage, everything that encompasses being LEED certified could have a positive impact on the hotels insurance coverage. An insurance broker who understands the rigorous standards and what it takes to earn LEED certification can use that knowledge to help obtain the type of coverage that is right for that hotel.
This article only touches on a handful of green efforts hotels can take to be more eco-friendly. A basic online search of eco-friendly hotel trends reveals endless ways hotels can make their properties more sustainable, conserve more energy, and reduce more water and waste. Regardless of what type of actions a hotel takes, without the proper insurance in place, even the best intentions might never be realized. In many cases, hotels looking for ways to protect the earth, first need to consider how to protect themselves. An insurance broker can help a hotel do just that.
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