Why is it sometimes difficult to place the insurance for any given commercial property? We’ll explore some of the reasons, and what can be done about them. But it all comes down to one word in the insurance industry – RISK.
A Neighboring Building is Doing Work
- If work is going on near your building, it increases the risk that something can happen to your property from the ongoing work.
Your Building is Having Work Done On It
- And so it goes that if your building is having any work done, the insurance company wants to see the properly executed risk transfer and indemnification documents along with the Contractor’s and any other subcontractor’s Certificates of Insurance (or, better yet, full copies of their policies showing proper coverage). Transferring the liability for any potential loss to another party (the Contractor’s insurance) is a positive for your carrier and property as there is less risk involved.
Loss Recommendations (and the subsequent replacement of insurance for non-renewals due to non-compliance of their recommendations)
- Not addressing any loss recommendations issued by your carrier increases your risk of having a loss, thereby increasing their risk of the carrier having to pay out for a loss. All carriers want to have their advice and suggestions followed for a safer property abided by. This is Insurance 101.
Graffiti or Vandalism on Your Building or Your Neighboring Building
- Any signs of marring to your property or your neighbor’s property (whether it’s sprayed with a paint can or boarded up windows and doors) is an open invitation to other so-called “artists” to come and scribble more or break more glass. Look to have the graffiti removed immediately and any signs of vandalism repaired. Surveillance camera usage will also deter some of these future unwanted recurrences Those actions will speak loudly to the carrier that you maintain your property to a high standard, leaving their risk of insuring your property at a minimum.
Carriers Leaving the Habitational Market Altogether
- Unfortunately, there is nothing you can do about this one. The company has decided internally they are not going to offer insurance services for commercial properties any longer. Likely they have found that this type of market is too risky or costly for them, and they have changed their insurance products accordingly.
Location, Location, Location
- The geographical location of the property has been deemed as having too much risk for the insurance carrier’s liking. Think of NYC boroughs which each have their own unique set of problems or disadvantages, making them more susceptible to certain claims. Also, think of coastal locations for which insurance companies have their own “watered” down excuses for these properties not to be a desirable insurance investment.
Open Liability Claims with Large Reserves
- The insurance carriers worry when they see something like this on the property’s loss history. It is considered risky business for them because they think they may find themselves in the exact same position, and an open claim could have its reserve increased even higher.
Repair Work from an Open Claim Not Completed
- Again the risk factor is unfavorable if a loss occurred and the problem was not completely remediated to the insurance company’s satisfaction. If damage has not been repaired and another claim happens to the same area, how can the insurance company know what was prior damage and what is new damage?
Frequency of Claims
- A high-frequency count of reported claims factors into the risk equation as well. Thankfully, a slew of water damage claims from an overflowing tub in Unit G6 that causes water damage all the way down to all of the G line units is only considered one claim on an occurrence policy. If there are too many reported claims for various reasons, though, they may think twice about taking on the property to insure. Having a higher deductible can be a solution here for property claims. A big question is always, “What has been done to prevent future losses like those listed on the loss runs?”
Larger Buildings That Do Not Have Adequate Fire Safety
- This is a big risk factor. The last thing an insurance carrier wants to take on is a building that lacks in this area. Fire safety is always a major concern for them, both on the property side and on the liability side. It’s bad enough to have a loss of property, but it’s even worse to have a loss of life. Invest in your property with Illuminated Exit Signage and Emergency Lights in all the common areas, and self-closing doors in all the stairwells. Posted evacuation plans on each floor can always make a big difference. Consider that a large fire claim can also be a large water damage or property claim once the firefighters are there doing their job.
Labor Law Claims
- This is a huge risk for insurance companies. We’ve talked about it above in “Your Building is Having Work Done”. NYC boroughs are prone to having these due to the Labor Laws in New York, which were put into place for the benefit of workers. Any measure of transferring the liability risk to another party can be helpful, but the proper signed documents are key. Always check with your Corporate Attorney for guidance, and always have them check the Contractor’s insurance policy.
Open HPD & DOB Violations
- We’ve talked about this prior, but having a “list” of these is not appetizing to the insurance carrier, and represents a risk they may not want to consider. The property should take care of these quickly to meet or exceed the good standing level that the potential carrier would like to see. Besides, taking care of these smaller fixes can possibly prevent much larger claims. Look to the news of the collapsed parking garage in Manhattan in April of 2023. According to the news, they had many open violations for decades.
As always, we are here to help. Reach out to us with questions anytime.
