A Healthy Building Will Limit the Rising Cost of Insurance

As part of our ongoing Problem Solved series, Habitat spoke with Jonathan Steward, vice president at OSA Insurance Brokerage.

Carriers hitting the exits. Insurance carriers have exited the New York market because of claim frequency. For example, the fatal Bronx fire in January and the condo collapse in Florida last year — these things play a role in carriers’ appetites. So some buildings are no longer insurable with the carrier they’re currently using.

Time to shop around. The option at this point is to go out to other markets —  I would say there are about 10 out there — to see which carriers would want to take a look at your property and provide the coverage to you. That's basically the only option.

There are certain things the carriers will look at. The biggest thing is violations on buildings from Housing Preservation and Development or the Department of Buildings. The carrier will make sure any violations are limited. Aside from that, you need to have a proper risk-transfer process in place. When a shareholder or unit-owner hires a contractor to perform work in their unit, the co-op or condo board needs to oversee this process and make sure the contractor has the right indemnification and hold-harmless agreements. You also need to make sure that the contractor names the building as an additional insured so you are protected from large claims.

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Preventive medicine. Boards want to make sure in the spring that they’ve fixed cracks in sidewalks or anything that could cause a possible trip and fall. In the winter, make sure there's some sort of snow maintenance log kept in place, making sure that the sidewalks are salted and shoveled. Those are just two examples of preventive maintenance.

Get a head start. Prior to our insured’s policy renewal, we’ll advise them to get a head start on addressing any violations. We also ask boards or their management companies to make sure they contact us about the hiring of any contractors in the building. We’re able to make sure they're using the proper wording in their contracts and obtaining the proper amount of coverage for the building and the residents. I get calls every day from insureds saying, "We're working on this project. Is this insurance acceptable? Am I using the proper contracts?" I have to review these policies. 

Coverage shrinking. Contractors’ insurance policies are starting to limit coverage. A contractor's certificate of insurance for a fifth-story facade repair might, for example, name you as an additional insured — but the policy has a four-story height limitation. Therefore, that policy is not going to help because there is going to be no coverage for the contractor.

Price tag growing. The cost of your insurance package — your property coverage and general liability coverage — is going up by about 10% to 15%. Umbrella policies, which extend over these, are sustaining the biggest increases — 50%, maybe even 70%. And most co-ops and condos have umbrella policies.

Words of wisdom. My advice to boards is to make sure that you have proper maintenance done to your property. Unlike prior years, when carriers used to look at just loss history to make sure you haven't had any claims, they’re becoming more and more focused on violations and risk transfer. Nowadays those two things are coming up all the time. You want to have a head start in terms of being able to find an affordable carrier that's giving you proper coverage in this limited, hard insurance market.