A correct headline would read, “Only $18 Million in coverage for liability claims”. The $30 Million in property coverage is not available for liability claims. I wonder if there is wording excluding coverage for claims brought by or on behalf of association members. Reminds me of what happened after the explosion in West, Texas. The plaintiff lawyers immediately gathered. They assumed that there were large amounts of GL coverage. When they realized that there was only $1 Million, they were seen no more. I predict that the carriers will tender policy limits so they don’t incur defense costs.
This condo like all of the others in Florida are underinsured for building replacement cost due to the inept and probably unethical appraisers. Every condo purchases replacement cost appraisals routinely. These appraisals for high rise, reinforced concrete, condo towers almost always show a current day replacement cost of less that $150 per square foot. This is complete nonsense. The condo then uses this information to create their property insurance application resulting in a woefully low replacement value and policy limit. Then tragedy occurs and the policy holders are financially ruined because each unit owner’s share of the so-called replacement cost payout is too low to rebuild and much less than their mortgage or equity. The appraisers know they are undervaluing the replacement cost but they don’t want to come with a proper value because it will increase the limit the insured has to purchase thereby increasing the association’s cost (property premiums). That appraiser will get a reputation for being “high” and never get another job (through the existing garbage referral system that exists).
Thinking the insurance agent that thought that building had enough coverage at $30mil to rebuild is going to be sued big time. Talk about grossly underinsured, but more than likely he let the the Association dictate coverage based on cost. When you have people that do that, any agent worth doing business with would walk away from the deal. Good luck mr. insurance agent.
Good point Jack. Did a rough estimate on square footage of units and at $30mm, the insured value is only about $150-$160 per sqft foot and this doesn’t include common areas, hallways, elevators, etc. Seems woefully underinsured. I heard the property may be worth $30mm-$50mm, which I assume the owners are entitled to their pro-rata share? But I would think any monies there are a long way off.
Each owner should also have an HO-6 policy, and all of those will probably just pay limits, too, including for assessment limits. That’s 200ish individual policies, so that could add up to a significant amount in total. Curious which company had the biggest market share of those policies in the building – how much will this cost Citizens?
Mark, would agree that the original estimate on insurance probably did not include the H06 availability but I can say with almost 100% certainty that 1) many owners didn’t see a need for H06 coverage (“what, I’m basically in a concrete box, why would I need coverage) and 2) those long term owners probably had an old policy that’s with $50k in Coverage A.
I can’t imagine the rental units not having some kind of coverage, especially the furnished ones. Plus, the people who had mortgages would have had to have something. Even at $50k each, it adds up to real money, especially if somehow the legal system ties a preztel and accesses the personal liability limits. It’s just a curiousity, really. Always interested to see which companies end up with a completely unexpected aggregate loss. In a 12 month period a few years ago, Allstate paid multi-millions in losses due to explosions in Texas. I’m sure that wasn’t exactly modeled for, specifically.
July 8, 2021 at 9:35 pm
mark says:
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additionally, will those individual condo unit owner policies also pay out liability coverages for the ones that were rented? If the unit owners are the association, can you make that jump and go after each unit owner’s liability coverage? That could also rope in PUP policies, etc. Auto liability for the cars that caught on fire post collapse? I know that last part is a stretch, but this whole situation is going to create those stretches.
And don’t forget that many of the deceased had life insurance policies. Probably millions in coverage there. To say there is only $48 million of insurance coverage is misleading. Someone else made the proper comment that there is only $18 million of liability coverage, but there are many other policies that will pay on this one. But, of course, all those dollars will have minimal impact on relieving the grief of the families.
Maybe or maybe not. Had some young people in the building that wouldn’t buy life insurance, very old residents that no longer had a need, and some foreign owners that may or may not carry it. Not really related to the fact that the building was probably under-insured. If you’re the owner that just paid over $2mm for the penthouse you’ll never recoup that money until the land is sold.
July 10, 2021 at 8:35 am
mark says:
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Throw in possibly travel insurance, along those lines, for people who were in an AirBNB. Which, brings up another question – will they (or any other short term rental platform/realtor) be roped in for listing rentals in an “unsafe” building? Yeah, you sign a waiver. But, we all know those don’t mean a thing in situations like this.
July 12, 2021 at 10:26 am
Another SWFL Agent says:
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Florida Statute 718.111(11)(a) requires insurance to value appraisals every 36 months for condos. Not sure why the agent would be on the hook for the determination of values. If the appraisal provided to the agent says $30m why would there be any expectation that the agent would need to question something provided by an appraisal expert?
The building replacement costs shown on appraisals are fiction. Appraisers are scared they will get a reputation for being “high” which increase the buyers premium costs. Appraisers that give buyers and agents bad news don’t get a nice referral for that next job
Be that as it may, an incorrect or undervalued appraisal can’t be pinned on the agent for “failing to recommend adequate insurance to value limits.” The agent is no doubt going to be drug into the suit(s) by the Associations lawyers as a hail Mary, but good luck to the Association for trying to put the screws to the agent for accepting the Association’s provided appraisal.
I’d be far more concerned about not having adequate documentation for recommending higher limits of liability.
What could happen if the assoc, did not state the building had structural issues on the application of insurance and they knew this, what’s the covered cause and exclusions on the policy?
Interesting question. Similar to failure to disclose health issues on a life insurance app or failure to disclose potential employment litigation on an employment practices app. Probably no coverage.
Concealment of or material misrepresentation of critical info. But if the agent knew, and didn’t advise the carrier, hello E&O. But probably not covered there either, intentional act.
If that question was even on the app. I regularly write property coverage that doesn’t ask that question. Obviously not at those limits, but in theory, with some of my companies, I COULD write that limit without that question being on an application. I have a few companies that have gone “applicationless”, no signatures required at all.
The application does not necessarily have to contain a specific question. When the applicant has knowledge of the conditions that have been described, the engineer reports detailing required repairs and the constant in-fighting about costs between the board and association members (assessments), it will be easy for the carrier to show a willful intent to deceive the insurance company to secure coverage. And what about denial by the reinsurance carriers? No company is going retain the full $30 Million exposure. No easy answers here.
But was it willful intent? Non-insurance people don’t know what they don’t know. And, did the applicant know all that? A lot of that information was also online, according to the most recent letters from the HOA. How can you willfully deceive by withholding information that isn’t hidden to begin with? That’s what I call an insurance company blaming the insured and/or agent for not asking the questions to obtain information the want to know, and blaming those for their own lackadaisical underwriting. It’s up to the insurance company to do the underwriting. Field underwriting by agents is a thing of history – My message to insurance companies is if you want me to underwrite, service, AND sell, you need to pay me to do all of those jobs. And that does not include telling me to charge my insured an agency fee. Otherwise, my job centers on discovering what is to be insured, and offering a product to cover it.
There’s a 100% chance that the carrier (or broker) charged an inspection fee and likely did so every year with the provision that the continuance of the policy was subject to that inspection and compliance with recommendations.
It would seem that if the carrier inspected and didn’t cancel for the presumption would be that they were aware and didn’t care. If they took the fee and didn’t inspect – well, that’s on them.
This condo like all of the others in Florida are underinsured for building replacement cost due to the inept and probably unethical appraisers. Every condo purchases replacement cost appraisals routinely. These appraisals for high rise, reinforced concrete, condo towers almost always show a current day replacement cost of less that $150 per square foot. This is complete nonsense. The condo then uses this information to create their property insurance application resulting in a woefully low replacement value and policy limit. Then tragedy occurs and the policy holders are financially ruined because each unit owner’s share of the so-called replacement cost payout is too low to rebuild and much less than their mortgage or equity. The appraisers know they are undervaluing the replacement cost but they don’t want to come with a proper value because it will increase the limit the insured has to purchase thereby increasing the association’s cost (property premiums). That appraiser will get a reputation for being “high” and never get another job (through the existing garbage referral system that exists).
All of us know that the ITV issue is going to be a nightmare and $30 Mil is not going to touch the total loss here. We are and have been our worse enemies and this article’s headline is proof. It gives the impression that $48 Mil is available but it isn’t and even it was, its laughable based on the size of the structure and the total loss of life. Who knows how much is enough from the liability side, but at the best case side we as professionals need to do a better job to be sure the ITV is at least close to cover a total loss. We are all at fault here because we don’t want to push the client to go elsewhere and lose the business, insurance company personnel take our word for values and the its a bad cycle all around. We need to do a better job educating our clients to what proper ITV means and try to get close. These numbers are hard and fast based on construction, occupancy, protection and exposures, measurable items. The loss of life and cost of their lives is not and that is where the big question mark of how much liability insurance is enough. We cannot measure that the same way we can measure physical assets. Lessons to be learned here.
A correct headline would read, “Only $18 Million in coverage for liability claims”. The $30 Million in property coverage is not available for liability claims. I wonder if there is wording excluding coverage for claims brought by or on behalf of association members. Reminds me of what happened after the explosion in West, Texas. The plaintiff lawyers immediately gathered. They assumed that there were large amounts of GL coverage. When they realized that there was only $1 Million, they were seen no more. I predict that the carriers will tender policy limits so they don’t incur defense costs.
This condo like all of the others in Florida are underinsured for building replacement cost due to the inept and probably unethical appraisers. Every condo purchases replacement cost appraisals routinely. These appraisals for high rise, reinforced concrete, condo towers almost always show a current day replacement cost of less that $150 per square foot. This is complete nonsense. The condo then uses this information to create their property insurance application resulting in a woefully low replacement value and policy limit. Then tragedy occurs and the policy holders are financially ruined because each unit owner’s share of the so-called replacement cost payout is too low to rebuild and much less than their mortgage or equity. The appraisers know they are undervaluing the replacement cost but they don’t want to come with a proper value because it will increase the limit the insured has to purchase thereby increasing the association’s cost (property premiums). That appraiser will get a reputation for being “high” and never get another job (through the existing garbage referral system that exists).
Thinking the insurance agent that thought that building had enough coverage at $30mil to rebuild is going to be sued big time. Talk about grossly underinsured, but more than likely he let the the Association dictate coverage based on cost. When you have people that do that, any agent worth doing business with would walk away from the deal. Good luck mr. insurance agent.
Jack: Good points, but with what was plainly visible, I doubt the carrier did an inspection. Maybe it was written on an actual cash value basis.
Good point Jack. Did a rough estimate on square footage of units and at $30mm, the insured value is only about $150-$160 per sqft foot and this doesn’t include common areas, hallways, elevators, etc. Seems woefully underinsured. I heard the property may be worth $30mm-$50mm, which I assume the owners are entitled to their pro-rata share? But I would think any monies there are a long way off.
Each owner should also have an HO-6 policy, and all of those will probably just pay limits, too, including for assessment limits. That’s 200ish individual policies, so that could add up to a significant amount in total. Curious which company had the biggest market share of those policies in the building – how much will this cost Citizens?
Mark, would agree that the original estimate on insurance probably did not include the H06 availability but I can say with almost 100% certainty that 1) many owners didn’t see a need for H06 coverage (“what, I’m basically in a concrete box, why would I need coverage) and 2) those long term owners probably had an old policy that’s with $50k in Coverage A.
I can’t imagine the rental units not having some kind of coverage, especially the furnished ones. Plus, the people who had mortgages would have had to have something. Even at $50k each, it adds up to real money, especially if somehow the legal system ties a preztel and accesses the personal liability limits. It’s just a curiousity, really. Always interested to see which companies end up with a completely unexpected aggregate loss. In a 12 month period a few years ago, Allstate paid multi-millions in losses due to explosions in Texas. I’m sure that wasn’t exactly modeled for, specifically.
additionally, will those individual condo unit owner policies also pay out liability coverages for the ones that were rented? If the unit owners are the association, can you make that jump and go after each unit owner’s liability coverage? That could also rope in PUP policies, etc. Auto liability for the cars that caught on fire post collapse? I know that last part is a stretch, but this whole situation is going to create those stretches.
And don’t forget that many of the deceased had life insurance policies. Probably millions in coverage there. To say there is only $48 million of insurance coverage is misleading. Someone else made the proper comment that there is only $18 million of liability coverage, but there are many other policies that will pay on this one. But, of course, all those dollars will have minimal impact on relieving the grief of the families.
Maybe or maybe not. Had some young people in the building that wouldn’t buy life insurance, very old residents that no longer had a need, and some foreign owners that may or may not carry it. Not really related to the fact that the building was probably under-insured. If you’re the owner that just paid over $2mm for the penthouse you’ll never recoup that money until the land is sold.
Throw in possibly travel insurance, along those lines, for people who were in an AirBNB. Which, brings up another question – will they (or any other short term rental platform/realtor) be roped in for listing rentals in an “unsafe” building? Yeah, you sign a waiver. But, we all know those don’t mean a thing in situations like this.
Florida Statute 718.111(11)(a) requires insurance to value appraisals every 36 months for condos. Not sure why the agent would be on the hook for the determination of values. If the appraisal provided to the agent says $30m why would there be any expectation that the agent would need to question something provided by an appraisal expert?
The building replacement costs shown on appraisals are fiction. Appraisers are scared they will get a reputation for being “high” which increase the buyers premium costs. Appraisers that give buyers and agents bad news don’t get a nice referral for that next job
Be that as it may, an incorrect or undervalued appraisal can’t be pinned on the agent for “failing to recommend adequate insurance to value limits.” The agent is no doubt going to be drug into the suit(s) by the Associations lawyers as a hail Mary, but good luck to the Association for trying to put the screws to the agent for accepting the Association’s provided appraisal.
I’d be far more concerned about not having adequate documentation for recommending higher limits of liability.
What could happen if the assoc, did not state the building had structural issues on the application of insurance and they knew this, what’s the covered cause and exclusions on the policy?
Interesting question. Similar to failure to disclose health issues on a life insurance app or failure to disclose potential employment litigation on an employment practices app. Probably no coverage.
Concealment of or material misrepresentation of critical info. But if the agent knew, and didn’t advise the carrier, hello E&O. But probably not covered there either, intentional act.
If that question was even on the app. I regularly write property coverage that doesn’t ask that question. Obviously not at those limits, but in theory, with some of my companies, I COULD write that limit without that question being on an application. I have a few companies that have gone “applicationless”, no signatures required at all.
The application does not necessarily have to contain a specific question. When the applicant has knowledge of the conditions that have been described, the engineer reports detailing required repairs and the constant in-fighting about costs between the board and association members (assessments), it will be easy for the carrier to show a willful intent to deceive the insurance company to secure coverage. And what about denial by the reinsurance carriers? No company is going retain the full $30 Million exposure. No easy answers here.
But was it willful intent? Non-insurance people don’t know what they don’t know. And, did the applicant know all that? A lot of that information was also online, according to the most recent letters from the HOA. How can you willfully deceive by withholding information that isn’t hidden to begin with? That’s what I call an insurance company blaming the insured and/or agent for not asking the questions to obtain information the want to know, and blaming those for their own lackadaisical underwriting. It’s up to the insurance company to do the underwriting. Field underwriting by agents is a thing of history – My message to insurance companies is if you want me to underwrite, service, AND sell, you need to pay me to do all of those jobs. And that does not include telling me to charge my insured an agency fee. Otherwise, my job centers on discovering what is to be insured, and offering a product to cover it.
There’s a 100% chance that the carrier (or broker) charged an inspection fee and likely did so every year with the provision that the continuance of the policy was subject to that inspection and compliance with recommendations.
It would seem that if the carrier inspected and didn’t cancel for the presumption would be that they were aware and didn’t care. If they took the fee and didn’t inspect – well, that’s on them.
This condo like all of the others in Florida are underinsured for building replacement cost due to the inept and probably unethical appraisers. Every condo purchases replacement cost appraisals routinely. These appraisals for high rise, reinforced concrete, condo towers almost always show a current day replacement cost of less that $150 per square foot. This is complete nonsense. The condo then uses this information to create their property insurance application resulting in a woefully low replacement value and policy limit. Then tragedy occurs and the policy holders are financially ruined because each unit owner’s share of the so-called replacement cost payout is too low to rebuild and much less than their mortgage or equity. The appraisers know they are undervaluing the replacement cost but they don’t want to come with a proper value because it will increase the limit the insured has to purchase thereby increasing the association’s cost (property premiums). That appraiser will get a reputation for being “high” and never get another job (through the existing garbage referral system that exists).
All of us know that the ITV issue is going to be a nightmare and $30 Mil is not going to touch the total loss here. We are and have been our worse enemies and this article’s headline is proof. It gives the impression that $48 Mil is available but it isn’t and even it was, its laughable based on the size of the structure and the total loss of life. Who knows how much is enough from the liability side, but at the best case side we as professionals need to do a better job to be sure the ITV is at least close to cover a total loss. We are all at fault here because we don’t want to push the client to go elsewhere and lose the business, insurance company personnel take our word for values and the its a bad cycle all around. We need to do a better job educating our clients to what proper ITV means and try to get close. These numbers are hard and fast based on construction, occupancy, protection and exposures, measurable items. The loss of life and cost of their lives is not and that is where the big question mark of how much liability insurance is enough. We cannot measure that the same way we can measure physical assets. Lessons to be learned here.