Best's Underwriting & Loss Control Resources provides insight into the lines of coverage for apartments, cooperatives and condominiums.
June 2023 will mark the two-year anniversary of the collapse of a condominium tower in Surfside, Florida, that killed 98 people. The aftermath of what was deemed the third-deadliest structural engineering failure in United States history included a $997 million settlement that impacted insurers, and legislative reforms that include tougher codes on inspecting, repairing and reserving for costs on condominium towers throughout Florida.
Experts and engineers told news outlets they believed prolonged structural damage and delayed repairs played a role in the deadly event. Indeed, the sudden collapse of the 40-year-old structure provided an example of why underwriters should consider the age, construction and condition of these types of buildings when considering whether to insure them.
While a sudden building collapse isn't all that common, there are structural risks that should not go unchecked, according to a recent Best's Underwriting & Loss Control Resources report, Apartments, Cooperatives and Condominiums. "Property sites can be vulnerable to damage caused by hazards other than fires," the report said. "Assess the strength, age, and condition of the roof. Roofs may be vulnerable to damage from heavy winds, or from the weight of snow and ice accumulations. A roof that collapses-even partially-could disrupt or sever pipes carrying water to sprinkler systems, which could lead to breaks in electrical conduits, or give rise to electrical shorting, arcing and possible fire ignition."
Fire risk also includes small on-site kitchens, where food-preparation equipment could be an ignition source, the report said. If smoking is not permitted, "No Smoking" signs should be prominently posted, especially where fuel and combustible chemicals, such as fertilizers and pesticides, are stored.
Occupancy is also a concern. "If there are more people living in an apartment or owned space than it has been constructed to accommodate, this will increase the property exposure," the report said. "What procedures does the insured have in place for enforcing occupancy limits?"
Owners may face claims of personal injury, property damage or excessive noise from on-site operations such as repairs and landscaping, according to the report.
"Directors and officers for these properties also could be sued by residents to redress real or imagined wrongful acts that may have resulted in the mismanagement of facilities," according to the report, which helps readers assess the insurance needs of those who own various types of multiunit properties, primarily residential.
Best's Underwriting Reports has identified eight lines of coverage for apartments, cooperatives and condominiums: Automobile Liability; General Liability: Premises and Operations; Directors and Officers Liability; Workers' Compensation; Crime; Property; Business Interruption; and Inland Marine.
Best's Hazard Index ranks the risk of exposure for the lines of business as Low (1-3), Medium (4-6), High (7-9) and Very High (10).
Best's Hazard Index
Lines of Coverage
Losses due to property damage can be widespread and quite expensive. Faulty wiring, overheated or malfunctioning machinery and equipment (regardless of whether property owners or tenants own it) and possibly smoking will be the most common ignition sources
General Liability: Premises and Operations
Apartment, cooperative and condominium property owners and managers are potentially liable for any claims that could occur on the properties that they own or manage.
Directors and Officers Liability
Condominium and cooperatives shareholders could file legal claims against their directors and officers for alleged errors or omissions, negligence, illegal discrimination or breach of duties allegedly committed in the course of their individual or collective duties in connection with the owner or management company's normal activities.
Slips, trips, falls and repetitive motion injuries will be the primary source of injury for office personnel. Companies that have groundskeeping, building maintenance and repair staff to service their managed properties will experience injuries such as cuts, burns, shocks, accidental dismemberment, lifting injuries, and skin or respiratory problems from exposure to cleaning or landscaping chemicals and/or pesticides. Certain employees may also be injured by occupants who are being evicted.
• What are the age, construction and condition of the insured's building(s)?
• Are building materials fire-resistant?
• What is the layout of the premises?
• Is the manager's on-site apartment situated so that they have an unobstructed view of the entire premises?
• What are the backgrounds and qualifications of directors and officers?
• Does the insured have one or more directors and/or officers who oversee on-site operations?
• Is the insured in compliance with all worker safety regulations applicable to its area of operation?
• How many workers does the insured employ, and what are their training, experience and duties?