You won’t know how important it is to have good building insurance until you need it. “Having poor insurance coverage is like walking a financial tightrope with no safety net,” says the New York real estate attorney. Steven Wagner, Partner at Adam Leitman Bailey, PC, representing co-op and condominium boards and owners.
Any structural damage or injury to anyone in the building can create serious hardship for your condo or co-op. With insurance premiums running into the tens of thousands of dollars a year, you need to make sure your building gets what it pays for.
“If you’re not getting a satisfactory insurance premium, if the company is denying your claims, or if your premiums are going up as a result of claims, it’s worth considering whether you have the right broker or insurer for your building. says Wagner.
Unfortunately, co-op and condo boards often have very little time and few options when it comes to renewing building insurance coverage. You should devote as much time as possible to reviewing a quote and possibly reducing costs. It’s also important to understand how insurance works and how to get the best coverage at the best price.
1) Group coverage can save you money, but only if it’s distributed fairly
Insurance coverage is not like title insurance where rates are regulated based on the price of a property.
“Companies have some leeway in what they will cover,” Wagner says. Some property managers purchase insurance policies to cover all of their properties under one contract. “You need to know if you are part of a group or not and how premiums and coverage are allocated.”
Group insurance may result in lower premiums, but the distribution among group members can be changed so that you may be paying more or less than your fair share. Ask your property manager how the premiums are broken down and ask for scales reflecting the premiums paid by each insured property.
A new trustee can often obtain a better rate for a building when he takes over its operation.
“It’s because they use their relationships with insurers to lower premiums as one of their selling tools – they come in and save building money on insurance. This gives you an idea of the flexibility of the premium,” says Wagner.
2) Use multiple brokers but limit the carriers they can contact
Insurance companies often only deal with one broker for a building, so for a truly competitive bidding process, the trick is to use multiple brokers but limit the number of insurance companies that they can contact. “It is customary for a broker to notify the entire industry that he is the exclusive broker for the building. This can limit the competitiveness of the bidding process,” says Wagner.
By selecting more than one broker and asking each to declare which company they will approach, you will get the most competitive offer. Brokers will maximize their relationships with carriers to your advantage.
Keep in mind that looking for new coverage every year is counterproductive.
“Insurance companies feel more comfortable insuring a condo or co-op they have a long-standing relationship with, and there is also a risk that claims will fall through the cracks of two policies. different insurance policies each time you change companies,” says Wagner.
3) Securing the right to choose a lawyer
If a lawsuit is brought or threatened against your building, your insurance company may have an obligation to defend the building against the claims. The initial decision will be made based on the allegations contained in the complaint. If it is unclear whether the claim will be covered, the insurance company will hire an attorney to defend the co-op, but will reserve the right to refuse to pay, if it is ultimately determined that the claim is not covered.
When an insurance company does this, you have the right to require your own lawyer to handle the case so that there is no risk that the insurance company’s lawyer can steer in a way that causes the insurer to deny coverage.
“Keep in mind that the insurance company might not agree to pay your lawyer’s hourly rate, so your building might have to make up the difference,” Wagner says.
4) Know the amount of the deductible and what is included
You need to know the amount of your building’s deductible, that is, the amount the building would have to pay before an insurance company intervenes. Sometimes the deductible will include legal fees and the cost of defending a case, and sometimes it won’t be earned. t.
“It may require you to write a check when a solicitor is appointed and sometimes there is a small co-payment, around 1%. It’s not a major expense, but you should find out in advance if you will be required to pay for it,” says Wagner.
5) Importance of prompt notification of claims
Most policies require you to notify your insurance company of claims within a reasonable time. Wagner says “the safest thing to do is to inform the insurance company as soon as possible, even if all the board has received is a threatening letter.”
If you don’t notify the insurance company and it turns out the council received notice earlier, it could lead to them refusing to pay. The risk is even greater if the building has recently changed insurance companies, as it may come down to a dispute over which company is responsible for the cover.
Wagner says some managing agents don’t submit claims because they think it will increase premiums, but that’s wrong. “Insurance is bought for a reason,” he says.
You pay premiums for protection and the policy should be used to avoid or mitigate expenses and losses that co-op or condo owners might otherwise incur.
“You shouldn’t be shy about filing complaints, even if you don’t think they won’t turn into lawsuits. If the claim does not result in a lawsuit, in most cases it will not affect premiums,” he says. “However, if you know the claim is less than your deductible, it certainly won’t be worth submitting a claim.”
Real estate lawyer in New York Steven Wagner, a partner at Adam Leitman Bailey PC, has over 30 years of experience representing co-ops and condos, as well as individual owners and shareholders. You can submit a question for this topic by email or if you would like to arrange a free 15 minute phone consultation with Steve, email or call (212) 584-1973.