How to COPE with Apartments

By | June 21, 2010

COPE is generally associated with property underwriting rather than as a risk class-based underwriting acronym. However, the traditional use and definition of COPE can be broadened to highlight the top concerns of underwriters reviewing apartment complexes.

Classically, COPE means: Construction, Occupancy, Protection and Exposure. Historically these terms apply to property underwriting only; but COPE’s use is expanded by this article to divide the underwriting criteria applied to apartment complexes into four easy-to-remember parts.


Almost intuitively, the first piece of information any underwriter (standard or non-standard) asks about is the property’s construction class. The more damageable the construction type (i.e. frame) the less desirable the risk from the underwriting perspective and the greater the importance placed on other relevant aspects of the facility’s risk characteristics (i.e. fire protection and loss control measures).

Beyond the basic construction type, underwriters require information about other construction aspects including: 1) the age of the buildings; 2) the date of improvements; and 3) the general condition of the property.

Standard carriers seem to have an upper limit on the age of an acceptable apartment complex. The maximum age tends to run between 20 and 25 years for a newly-submitted complex. Existing apartment risks within a standard carrier’s renewal book don’t necessarily face this limitation provided the carrier is satisfied with the general maintenance and upkeep of the facility and an acceptable loss history.

Non-standard carriers surely have an outside age limitation as well, but not one as stringently enforced as that of the standard carriers. While age is certainly a consideration for non-standard market underwriters, this was not listed as one of the top five considerations by these underwriters. The general overall condition of the risk is more important than the age.

Information regarding the last updates of the heating, plumbing, roofing and wiring is important to all apartment underwriters, but it appears to be more important to standard market underwriters. At least one standard carrier lists as a requirement that the apartment’s roof system cannot be more than 20 years old to qualify for its preferred program.

The question of updates leads to a discussion of aluminum wiring. Apartment complexes more than 30 years old may contain aluminum wiring; and although such wiring fully complied with the building code in effect at the time of construction, it does not meet the habitational building codes of today. The few standard carriers that are willing to write apartments generally say “no” to an apartment risk containing aluminum wiring. Conversely, some non-standard carriers pridefully state that they will write apartment risks containing aluminum wiring.

One non-standard broker reported that knowing who is responsible for the maintenance and upkeep of the facility is within its top five underwriting concerns. The carriers want to know if a staff member or a subcontractor is responsible for maintenance and repair. The answer leads to questions of responsiveness, liability and the presence of proper contractual risk transfer provisions. Standard carriers did not list this as a primary underwriting concern, most likely because these carriers have a much higher standard regarding the management of the complex discussed in the protection section following.


Obviously underwriters expect an apartment complex to be occupied largely for residential purposes, but standard carriers often require a certain percentage of occupancy. To be eligible for coverage, one standard market’s guidelines state that the complex must maintain at least an 80 percent occupancy rate on average. The percentage of occupancy was not listed by the non-standard carriers as a “top five” concern.

Who pays the rent is also a top underwriter concern. The presence of subsidized housing is a common concern for both standard and non-standard carriers; the difference is how much subsidized rent is allowed. Standard carriers disqualify a risk from preferred programs if there is any subsidized housing; non-standard carriers simply ask what percentage of residences is occupied as subsidized housing. Subsidized units beyond a certain percentage may disqualify the risk for some non-standard insurers while others have special programs for highly subsidized complexes.


Underwriters are concerned more with the protection aspect of an apartment than any of the other three parts of COPE. Standard and non-standard carriers consider six protection-related criteria when reviewing an apartment risk. Three relate to classic property underwriting information, two are general protection concerns and one is specific to apartment risks.

Public protection class, the presence of smoke detectors and information regarding the sprinkler system are the three “classic” protection concerns. Standard carriers seem to place more emphasis on these protection factors in the underwriting process than do non-standard carriers. One standard carrier’s apartment underwriting guidelines state that the complex must be located in a public protection class (PPC) 6 or better; while another standard carrier’s guidelines extended coverage to apartment properties located in any PPC other than 9 (1-8 is allowed). The non-standard carriers did not report this limitation as one of their top issues.

Smoke detectors and sprinkler systems were also listed as a standard market underwriting concern. One carrier required that a working smoke detector be located in each unit. Standard carriers also specified that a full sprinkler system exist in any apartment building with more than six floors. These requirements may be a non-issue since many jurisdictions also require this in their building code for newer buildings. Non-standard carriers did not list these as top underwriting concerns.

Non-standard carriers listed two protection-related underwriting concerns in their list of top issues: 1) safety procedures; and 2) tenant pre-screening and background checks.

Concern over the presence of written safety procedures is somewhat self-explanatory. Does the apartment complex have, know and practice a contingency safety plan? This is especially important for those complexes located in high wind areas, coastal areas, earthquake zones and other areas subject to natural or even manmade hazards.

Tenant pre-screening and background checks appeared as one of the top underwriting criteria of a non-standard carrier, but the standard carriers did not indicate this was an eligibility requirement. However, from a protection standpoint, performing such reviews will certainly be useful in protecting a complex from charges of negligence, provided negative reports are acted upon as allowed by law.

Absentee ownership or management is a major concern for standard carriers. Some require the complex to be managed and supervised by a full-time resident manager, an on-premises owner or a full-time property management company. Such requirement guarantees (to some extent) that there is always someone on premises to manage small problems before they grow big and mitigate big problems to preserve the well-being of the tenants and the property.


All prior underwriting concerns have focused exclusively on the apartment complex. Exposure underwriting is two-pronged; the one side revolves around exposures located on or offered by the complex and the second exposure underwriting characteristic is created by the surrounding community.

Risk-based exposures such as swimming pools, tennis courts, club houses, gyms and other such amenities create concern for underwriters on both sides – standard and non-standard. The increased opportunity for injury and complex liability is self-evident. In underwriting these exposures to loss, underwriters will ask for specifics such as the presence of a diving board or slide if there is a pool; the condition and upkeep of tennis courts and club houses; and the supervision employed for any of these facilities.

External exposures are also considered. What are the characteristics of the neighborhood in which the complex is located? Are there nightclubs and bars in the area that may lead to groups of residents or even non-residents gathering in the apartment complex’s parking lot or other facilities? Are there other operations in close proximity that could cause problems for the complex (even a school)? Lastly, what is the crime rate in the area? The external exposure component can encompass high wind, high risk flood areas and other hazardous locations.

Fourteen main apartment complex underwriting criteria are divisible into four broad classifications: construction, occupancy, protection and exposure (COPE). Use this method to gather underwriting data regardless of the intended market – standard or non-standard.

About Christopher J. Boggs

Chris Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS, is a veteran insurance educator. He is Executive Director, Big I Virtual University of the Independent Insurance Agents and Brokers of America. He can be reached at More from Christopher J. Boggs

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Insurance Journal West June 21, 2010
June 21, 2010
Insurance Journal West Magazine

Umbrellas – Personal & Commercial; Construction; Apartment Buildings