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Page 28 — Multifamily Properties Quarterly — February 2017
As an insurance broker who
specializes in apartment
building, complex and com-
munity association insur-
ance, often I am asked to
provide new owners and buyers, as
well as established building own-
ers, with a basic understanding of
the key coverages associated with
an apartment building/complex
insurance policy. It’s scary to review
insurance policies at times to dis-
cover that these property owners
might not be covered for what they
thought they were. Some of these
insurance policies can be hundreds
of pages long and, believe me, we
can spend hours within just a cou-
ple of pages on these policies.
The apartment insurance policy
is made up of two key components:
the real property portion and the
premises general liability portion.
The portion that dictates the major-
ity of the premium is the real prop-
erty portion of the policy.
Within this section you will find
your building coverage, which
includes protection and coverage
against perils such as fire, water,
wind, hail, theft, vandalism, etc. The
most expensive portion of the pol-
icy is coming from your building-
coverage limit. Building-coverage
limits can come in many valuation
types, and the two most popular
types are replacement cost or actual
cash value.
Replacement cost is what it would
cost to replace and rebuild the
structure to like kind and quality in
today’s market compared to actual
cash value, which
would be what
the building and
materials are worth
today after depre-
ciation. While there
are some situations
that make sense to
insure a building at
actual cash value,
it’s usually recom-
mended to go with
replacement cost, if
you can.
Replacement
cost should not be
confused with market value, which
takes into consideration land value
and other variables. Especially in
today’s hot market, it is not unusual
for apartment building replacement
cost to be less, or maybe even a lot
less, than market value. Your insur-
ance agent or broker can work with
you to come up with the correct
replacement cost number.
Digging deeper into the prop-
erty portion of the policy, you will
find some key coverages to con-
sider and review – items like wind
and hail deductibles, ordinance
or law endorsements, loss of rent,
equipment breakdown/boiler and
machinery, and water and sewer
backup coverage. All of these are
key to reducing your exposures as a
property owner.
A new norm on apartment build-
ing insurance policies is increased
wind/hail deductibles. Within your
property insurance policy will
be the property deductible and,
often, you will have a separate and
increased wind/hail deductible.
These increased deductibles are a
result of the wind and hail claims
insurance carriers have suffered
over the last five to 10 years.
According to 9News, a report
by the National Insurance Crime
Bureau places Denver as second in
the nation for hail-related insur-
ance claims. In 2015, Coloradans
filed over 180,000 hail loss claims.
Only Texas had more.
Often the wind/hail deductibles
are percentage-type deductibles.
This is not a percentage of the
claim, but rather a percentage of
the building-replacement cost limit
that is listed on your insurance
policy. For example, say you have
$1 million in building-coverage
limits assuming a 2 percent wind/
hail deductible. If the roof is dam-
aged by wind or hail, the deductible
would be $20,000 or 2 percent of the
building-coverage limit. There are
separate insurance policies that can
buy down a percentage wind/hail
deductible to a lower deductible.
Loss of rent, boiler and machin-
ery, and water/sewer backup cover-
ages are fairly self-explanatory but
important. Another important item
to examine is ordinance or law cov-
erage. This provides coverage for
the increased cost of construction
to rebuild to current code. This is
especially important for older prop-
erties.
There are three parts to this
particular coverage. Coverage A
provides coverage for loss to the
undamaged portion of a building. If
the building was damaged by fire,
local jurisdiction can require that
the remaining portion of the build-
ing be torn down. This coverage
pays to rebuild the undamaged por-
tion of the building when it must
be demolished to comply with code
requirements. Coverage B provides
coverage for the cost of demoli-
tion. This will pay for the cost to
demolish and clear the site of the
undamaged portions of the covered
building, where the law requires its
demolition. And Coverage C provide
coverage for the actual increased
cost of construction to rebuild to
current code. While the increased
costs associated with rebuilding to
current codes might bring a rude
awakening, they need not result in
an unpleasant surprise. Properly
planned and placed ordinance or
law coverage will help make sure
that full financial recovery takes
place.
The other component of the
insurance policy is your premises
and general liability portion. This is
the least expensive portion of the
policy and protects and defends
you, the building owner, against
suits for bodily injury and property
damage claims as a result of the
building owner’s negligence.
Common general liability claims
would be trip-and-fall or slip-and-
fall type claims. The insurance
company agrees to pay those sums
that you, as the building owner,
Dustin Thome
Executive vice
president, The
Buckner Co.,
Denver
Management
Your multifamily dwelling is up
against increasing competi-
tion. With more options avail-
able, renters want the best
possible experience for their
dollar. This includes the facilities
and features as well as the overall
esthetics, both inside and out.
As the growing season quickly
approaches, the esthetics of your
landscape might be challenged this
year. We compiled a list of pests
and insects to keep an eye out for
on your property. These pests and
insects can be destructive if left
untreated, contributing to a devalu-
ing of your property’s esthetics.
• Emerald ash borer. We predicted
that Emerald ash borer would be
found outside of Boulder by June
2016. That prediction came true
with the discovery in Longmont on
June 6, 2016. Though not proven, it is
suspected that the infestation came
from some transported wood, which
contained the borer. This infestation
in Longmont is still within the quar-
antine area in Boulder, which dem-
onstrates how the insect will move
and become established.
The responsible method of deal-
ing with ash wood is to take it to an
approved disposal site where the
material will be buried. We know
that as more trees are removed and
more infested ash wood is moved,
these detections will become more
common.
• Scale insects. We saw a dramatic
increase in the numbers and vari-
eties of scale insects in 2016. Oys-
ter shell scale has not been overly
aggressive for 20 years, yet is becom-
ing more prevalent
in the northern
part of the state.
Usually a pest of
aspen, oyster shell
is back to infesting
ash trees and lilac
shrubs as well.
Willow scale con-
tinues to be found
in the southern part
of our service area
on aspen trees. This
is a very prolific
insect and devastat-
ing to aspens.
European fruit
lecanium scale
has been around for many years
and usually doesn’t cause damage.
However, in 2016, we saw lecanium
becoming aggressive on oak and
maple trees. We expect this insect to
spread rapidly in 2017. European elm
scale has been an issue on Ameri-
can elm for over a half a century in
northeastern Colorado. Elm scale
has been a consistent problem for
longer than any other landscape
pest in Colorado. This year should be
no different.
• Japanese beetle. Japanese beetle
is a strong flier – spreading on its
own by up to 2 miles per year. Most
of the Denver metro area is active
with Japanese beetle. Prolific popu-
lations exist in Boulder, Longmont
and Greeley – the beetle is just get-
ting started in Fort Collins. Feeding
from the adults on a wide variety of
plants is very noticeable.
We are seeing more larvae (grub)
feeding on turf grass roots. For 2017,
we are expecting more lawn damage
from the beetle larvae.
• Aphids on pines. We’ve been bat-
tling these pests for the past several
years throughout the Front Range.
This insect persists on Austrian pine
for much of the year and can be
found in the winter months. With a
relatively mild winter thus far, we’re
expecting the aphid infestations to
increase in the early spring.
• Ips engraver beetles on spruce.
Weather patterns over the past six
months favor a resurgence of Ips
engraver beetle infestations in blue
spruce. This insect causes the death
of its host. Once the beetles attack,
there is no way to save the tree.
• Lawn mites.When we think of
mites, we equate them with warmer
weather. Lawn mites are cool-
season pests that do their damage
during the winter and early spring
months before the lawns green up
for the season. A very warm, dry fall
certainly gives the mites an early
start. The predicted normal precipi-
tation combined with warmer-than-
expected temperatures will create
drought conditions early in 2017
– favoring early spring mite infesta-
tions.
• Dutch elm disease and mountain
pine beetle. Yes, Dutch elm disease
is still around and there is a risk to
American elms as well. But the dis-
ease incidence has been very low
for the past 13 years, and we don’t
expect to see a resurgence this year.
Mountain pine beetle is a recurring
insect. Pine beetle populations are
on the decline. We expect to see
only spotty activity from this insect
in the next several years. s
Steven Geist
Senior consulting
arborist and
plant pathologist,
Swingle Lawn, Tree
& Landscape Care,
Denver
Swingle Lawn, Tree & Landscape Care
As more trees are removed and more infested ash wood is moved, the detections of
Emerald ash borer will become more common around Colorado this year.