CREJ

Page 10

— Property Management Quarterly — January 2018

www.crej.com

Insurance

hether you passed on a

third helping of turkey

and stuffing, dessert or

adult-beverage; whether

you reduce the number

of times you exercised in Novem-

ber and December; or whether you

choose to help the less fortunate

and those in need – the end of the

year always ushers in new resolu-

tions. No doubt, certain priorities

and resolutions are more important

than others. Often, our priorities or

resolutions are set for us. For exam-

ple, they could be based on an occu-

pation or career plans and deter-

mined by a manager or supervisor.

If you are responsible for overseeing

the day-to-day operations of a prop-

erty, I would recommend you con-

sider resolving to better understand

the insurance policy that covers

your building, and do it soon.

Insurance decisions can have sig-

nificant financial implications and

impact hundreds of people, which

is why you need to be knowledge-

able regarding property insurance

– coverages, exclusions and limits

on the buildings you own or man-

age. While you may rely on a broker

to ensure the building is properly

insured, you will want to thorough-

ly understand what is and what is

not covered.

You are in the minority if you

completely understand or are famil-

iar with your insurance policy. Even

if you feel comfortable with the

knowledge you have related to your

coverage, exclusions and limits,

you would be wise to schedule a

meeting with your broker early this

year to review the policy. Far better

to ask questions

about the policy

now than to learn

after a loss about

coverage gaps, lim-

itations or exclu-

sions that repre-

sentatives of your

insurance compa-

ny may assert are

applicable.

Your expertise

may be in over-

seeing properties,

maintaining the

grounds, keeping spaces leased, col-

lecting payments, addressing needs

of the tenants and more. Yet with

a sudden or accidental event at the

property – a fire, a break in a water

line or hail damage with water

entering from the roof – everything

could change in one moment. If

your expertise is not insurance cov-

erage or adjusting property claims,

you turn to others for their knowl-

edge, most likely representatives of

your insurance company.

However, gathering information

and asking questions of those who

are not affiliated with an insur-

ance company can lead to a better

understanding of policy terms and

conditions – or if there are changes

you could implement to better pro-

tect a property or resolve a claim.

You may learn your current under-

standing, based on the informa-

tion you’ve been provided, is not

entirely accurate or that there are

other options available that work

better for you and your situation.

Your broker may be an excellent

resource, but public adjusters or

other insurance consultants also

are available to provide input to

include how property claims should

be handled.

Few people contemplate having

to understand a policy if a building

is completely destroyed or how to

properly handle a property claim.

Do not assume your insurance

policy provides the required cover-

age for all damage you may sustain

in a loss. Learn about any specific

damages that are not covered and

why – requests for coverage infor-

mation and clarification should be

in writing. Does the policy include

a 2 percent deductible or greater for

hail or wind damage? If so, be sure

you know the amount the owner is

responsible to pay before receiving

any funds from the insurance com-

pany.

You should know what the

insured’s duties are after a loss and

how the insurance company will

assist in recovering. It is important

to know if your insurance company

will work with your selected con-

tractor to reach an agreement on a

reasonable and defendable scope of

repairs, how the insurance compa-

ny determines depreciation and the

amount being withheld, and how

the coverage limits and deductibles

are set. Further, you should know if

the property is insured to value and

when a co-insurance penalty might

apply, and if you are able to request

coverage not found within your

policy for an additional premium.

You should ask if your insurance

company will issue an advance

payment to assist with immediate

temporary and emergency needs, or

issue payment to relocate tenants

or residents to minimize a business

income loss, and be sure to ask how

the extra-expense coverage is uti-

lized.

Another important piece to

consider is if your building has

adequate coverage for increased

costs of construction to adhere to

applicable building codes. Changes

are being made constantly to build-

ing codes in an effort to make

structures safer and more energy

efficient. Older buildings may not

have a fire-sprinkler system or

Americans with Disabilities Act

accommodations. If the building is

damaged, costs to install fire sprin-

klers and meet ADA requirements

may be enforced. Since the sprin-

klers and accommodations did not

previously exist, the costs would fall

under a separate coverage for code

upgrades. If the limit is not suffi-

cient to address all code costs, the

owner will be most likely incur out-

of-pocket costs.

Keep accurate records regarding

on-going maintenance at the prop-

erty. Assess risks at the property

annually – risks that might impact

coverage of the property and risks

that might impact tenants and the

public. Maintain copies of all writ-

ten communications with your

insurance company regarding cov-

erage and information you have

requested. Assessing and better

understanding your property insur-

ance coverage in 2018 is a worth-

while resolution.

▲

Commit to better understand your coverage

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