Problem Solved: Keeping an Insurance Carrier From Walking Away

As part of our ongoing Problem Solved series, Habitat spoke with Jason Schiciano, co-president of the Levitt-Fuirst insurance brokerage.

A bump in the road. We had a condominium building in Westchester County that was looking for a new insurance carrier, and we thought we had come up with an unbeatable option for them, including a very attractive package insurance policy quote, which includes both property and liability insurance and represents 80% or more of the total premium. We’d gotten the go-ahead from the board to place the insurance. Then we hit a big bump in the road.

Unacceptable conditions. It’s typical for a new package insurance carrier to inspect a property after they bind the insurance coverage. A qualified inspector will look over every nook and cranny of the building, from the basement up to the roof and everything in between and make sure that there are no obvious sources of potential insurance claims. In this case, what they found was unacceptable, in their opinion.

They noticed some deterioration in the underground parking garage. There was some evidence of water infiltration potentially causing some corrosion to the structural steel and the concrete structural posts, which in essence are holding the building up. This is exactly the condition that led to the collapse of the Surfside, Fla., condominium. Since then, insurance carriers have been on heightened awareness of anything that might lead to a similar outcome.

In fact, the board of this condo was already aware that some repairs were needed. They had solicited an engineer’s report that said, yes, there are some issues that need to be addressed here, it's nothing urgent. The structural integrity of the building is sound, but if these things are not addressed, they could be eventually problematic. Even so, the insurance carrier was not going to get into this.

(Like what you're reading? To get Habitat newsletters sent to your inbox for free, click here.)

Let’s talk. A new carrier has 60 days from the time the insurance is bound to decide whether or not the conditions of a property are acceptable. And if not, they can issue written notice that they're not going to proceed. We decided we had to have a conversation with the carrier. There are a lot of insurance brokers who do business with carriers at arm’s length. It's all through email. Nobody really knows anybody. But we have good relationships with all the major carriers, and we got on a Zoom call with a number of the underwriting and inspection decision-makers at the carrier.

So I said, “Why don't you give us the opportunity to go to the board and find out what their intentions are in terms of making repairs sufficient to alleviate any future structural compromise issues? If they can do it within the 60-day period, and if you’re comfortable that the matter's going to be resolved, then you can insure this building for the rest of the term. Everybody wins. You get a new client, we get a new client, and the building's going to be repaired properly. Meanwhile, if things don't go that way, anywhere in the first 60 days, you can always pull the plug and get out of the deal.”

They agreed to do it. So we went back to the board and the managing agent and told them the carrier needs to see a signed contract within the first 30 days. They need to verify that the scope of  the work to be done is going to be satisfactory, and they want the insurance information on the contractor to make sure the contractor is reputable and properly insured. They  also wanted us to give them progress reports at 30, 45 and 58 days. The board and the property manager responded that they were willing to sign a contract within 30 days. 

Deferred maintenance is not an option. Boards need to know, especially in this day and age, that you can't defer maintenance, especially on major capital projects. If you don't do them, they're going to lead to major insurance claims or possibly much, much, much worse. The other lesson from this story is the importance of good relationships between the broker and the insurance carrier, and between the broker and the managing agent and the board. When something goes wrong, the broker needs to be able to get involved with the principals and decision-makers and upper management of the carrier in order to get things done.