{"id":2831,"date":"2022-05-16T22:33:25","date_gmt":"2022-05-16T22:33:25","guid":{"rendered":"http:\/\/estrategist.com\/website\/members\/?p=2831"},"modified":"2022-05-16T22:33:25","modified_gmt":"2022-05-16T22:33:25","slug":"condo-apartment-owners","status":"publish","type":"post","link":"https:\/\/estrategist.com\/members\/condo-apartment-owners\/","title":{"rendered":"Condo & Apartment Owners"},"content":{"rendered":"

This Competitive Environmental Intelligence (CEI) will arm you with the resources to successfully educate Condo & Apartment owners on the value pollution insurance can add in protecting their investment.\u00a0 Since environmental losses tend to be a severity versus frequency issue, as part of \u201cBest Practices\u201d, Condo & Apartment owners must have a financial assurance instrument in place to address environmental liabilities or face potentially serious devaluation of their investment.<\/span><\/p>\n

A simple example involves a fire loss:\u00a0 As a general rule, Condo & Apartment owners purchase fire insurance to finance a potential loss and \/ or to meet a requirement of the financial institution holding the mortgage on the subject property.\u00a0 A fire occurs and the fire department puts out the fire.\u00a0 Now in the aftermath the water and chemicals used by the fire department along with the burned building and its contents mix and create a pollution liability.\u00a0 The fire department by law is immune from prosecution.\u00a0 However, under Federal law the property owner is ultimately responsible for the environmental condition of their property, regardless of who caused the pollution liability.\u00a0\u00a0<\/span><\/p>\n

Here\u2019s the problem, most fire polices offer a token expense to address clean up after a fire that can fall significantly short of the environmental liability created by the fire.<\/span><\/p>\n

So, any business with a fire policy, that experiences a fire, has an excellent chance of being impacted by environmental liabilities.\u00a0 What is your financial assurance strategy for environmental liabilities created by a fire?\u00a0\u00a0<\/span><\/p>\n

What is a Pollutant?\u00a0<\/strong><\/p>\n

Any material, substance, liquid, product\u2026 which is introduced into an environment for other than its intended use \/ purpose.\u00a0 In other words, something that ends up where it does not belong.\u00a0 Fresh water, cheese, and milk have all been classified as pollutants by Insurance Carriers under various circumstances.\u00a0<\/span><\/p>\n

Commercial real estate owners should be aware that pollutants (such as mold) are excluded from coverage on most GL policies. And GL policies that do provide pollution coverage typically do so on a limited sudden and accidental basis, with inadequate limits and\/or strict discovery and reporting requirements for there to be coverage.\u00a0 In the event of a pollution loss at one of your properties, does your insurance provide adequate coverage?\u00a0<\/span><\/p>\n

Environmental Exposures Impacting Condo & Apartment Owners<\/strong><\/p>\n

May include, but are not limited to<\/b>;\u00a0 Historical contamination from agriculture, mining, lagoons, landfills, manufacturing, Brownfields;\u00a0 Pollution cleanup and liabilities that result after a fire is put out;\u00a0 Herbicides and Pesticides (Glyphosate) used for landscaping;\u00a0 Pollution from neighboring properties migrating onto yours;\u00a0 Storm water runoff;\u00a0 Natural resource damages; Vapor Intrusion;\u00a0 Easements (i.e. oil, fuel, natural gas\u2026) that cross the property which may leak or spill hazardous materials;\u00a0 Contamination from fertilizers or pesticides used for landscaping;\u00a0 Leaks from elevator hydraulic fluid storage tanks;\u00a0 Impacting sensitive areas such as wetlands or endangered species;\u00a0 Corroded wastewater and storm water sewers;\u00a0 Excavation through and spreading of unknown preexisting contaminated soil;\u00a0 Impacting groundwater from drilling and excavation work (i.e. cross contamination of aquifers, etc.);\u00a0 Old and\/or unknown leaking underground storage tanks;\u00a0 Impacting underground utilities during construction;\u00a0 Collapse and\/or or explosion during and after construction;\u00a0 No auditing of waste handling and disposal companies \/ facilities;\u00a0 Tenants using or storing environmentally sensitive materials, chemicals, waste\u2026.;\u00a0 Spill of oils\/fuels\/chemicals brought onsite;\u00a0 Vandalism;\u00a0 Sick building syndrome;\u00a0 Mold \/ Legionella;\u00a0 Asbestos;\u00a0 Lead;\u00a0 Past\/present use of septic systems;\u00a0 Above ground or underground storage tanks;\u00a0 Adverse reactions and interactions of chemical compounds that accidentally commingle during a fire;\u00a0 Wastewaters generated from human septage;\u00a0 Janitorial cleaning compounds;\u00a0 No emergency and spill control plans;\u00a0 nuisance odors; Storage & use of pool \/ spa chemicals, meth labs; and more…<\/span><\/p>\n

Environmental Claim Scenarios<\/strong><\/p>\n

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  1. During remodeling of an apartment once used for a meth lab, contractors discovered mold within the unit\u2019s walls and ceilings. After further investigation, mold was also found in other areas of the property.\u00a0 Cost to dispose of the chemicals used to make meth, remediate the mold, lost rental revenues, and temporary housing for residential tenants while the mold was being remediated cost the property owner over $1,500,000.\u00a0<\/span><\/li>\n
  2. A fire erupted at an apartment building.\u00a0 The burning building and its contents sent dangerous fumes throughout the surrounding community.\u00a0 Fire suppressing liquids \/ foam used to extinguish the fire were now contaminated and went into the surrounding soils.\u00a0 Hundreds of community members filed suit citing health problems from inhalation of toxic fumes and property damage from hazardous firewater runoff.\u00a0 The state environmental regulatory agency determined that the site and surrounding properties must be cleaned up, resulting in expensive remediation costs.\u00a0 The total costs for citizen suits and remediation topped $550,000.<\/span><\/li>\n
  3. Residents of an apartment building became ill from legionella.\u00a0 The cause of the legionella was the improper sealing of the ducts during the installation of a new HVAC unit which allowed condensation to build up.\u00a0 Suits have been filed against the property owner and contractor.<\/span><\/li>\n
  4. Mold contamination caused by water intrusion in apartment building cost $10,079,000 to remediate. The seven story building houses apartments and retail space. The building owners have filed suit against the general contractor and sub-contractors.\u00a0 The contractor has filed suit against the subcontractor who installed the EIFS and interior dry wall.\u00a0<\/span><\/li>\n
  5. New construction commenced on a previously undeveloped parcel of land.\u00a0 During excavation and dewatering activities, contaminated ground water was discovered.\u00a0 The developer was required by State regulatory authorities to collect, test and treat groundwater pumped out during the excavation process.\u00a0 Contaminated soils we also discovered at the site.\u00a0 Construction delays and additional expenses totaling over $1,000,000 were incurred by the developer.\u00a0 It was determined the contamination had migrated from a nearby by manufacturing facility that had been shut for years due to bankruptcy of the manufacturer.\u00a0\u00a0\u00a0<\/span><\/li>\n
  6. A commercial real estate owner was subject to defense costs exceeding $25,000, in addition to property damage and bodily injury claims exceeding $400,000 from a neighboring residential community. During sewage installation, a subcontractor improperly tied in piping. This caused raw sewage to migrate into the underlying groundwater and contaminate residential wells.<\/span><\/li>\n
  7. A landscape contractor working for a condominium association applied fertilizer to the lawn.\u00a0 Later in the day rain caused the fertilizer to wash off into a neighbor\u2019s pond.\u00a0 Cost to remediate the pond was $55,000.\u00a0\u00a0<\/span><\/li>\n
  8. While cleaning out an apartment unit in preparation for a new tenant, the cleaning company discovered a meth lab in the unit. Since meth labs create toxic material, emergency cleanup contractors were called to handle the situation. Total cost of the cleanup for the property owner was over $75,000.\u00a0\u00a0<\/span><\/li>\n
  9. A commercial janitorial contractor accidentally mixed non-compatible chemicals for cleaning.\u00a0 The fumes from the chemicals forced the evacuation of all of the building residents while clean up took place.\u00a0 Third party bodily injury, property damage and business interruption claims were filed against the property owner and janitorial contractor, which exceeded $750,000.<\/span><\/li>\n
  10. A tenant was very proud of her collection of tropical plants and orchids.\u00a0 Unfortunately, the high temperatures and humidity levels kept the plants healthy got carriedaway and resulted in significant mold growth behind the unit\u2019s wallpaper.\u00a0 The mold eventually contaminated the entire buildings HVAC duct work with mycotoxins.<\/span><\/li>\n
  11. A condominium association had several residents in two specific buildings complaining of health problems.\u00a0 The condominium association hired an environmental engineering firm to conduct air sampling tests.\u00a0 Testing revealed the residents were being exposed to contamination from vapor intrusion caused by a neighboring property.\u00a0 Cost to install a vapor barrier to protect condominium owners from the toxic fumes exceeded of $200,000.\u00a0 Suit has been filed against the property owner responsible for the vapor intrusion for bodily injury, property damage, remediation costs and more.\u00a0\u00a0\u00a0<\/span><\/li>\n
  12. A tenant stirred up some excitement when the unit was raided by agents from the DEA.\u00a0 Chemicals from the production of methamphetamines had saturated all porous surfaces in the unit.\u00a0 All counters, cabinets and wallboard had to be removed and disposed of as hazardous waste.\u00a0 Indoor air quality sampling was also required to be performed in each of the adjacent units to guarantee safety to remaining tenants.\u00a0\u00a0<\/span><\/li>\n
  13. Residents were ordered to stop using their showers after Legionella was detected in samples taken from plumbing system.\u00a0 An elderly resident was hospitalized when she breathed in Legionella tainted water droplets while showering.\u00a0 It could take weeks to pinpoint the source of Legionella and to remediate the buildings entire water system.<\/span><\/li>\n<\/ol>\n

    Overlooked Benefits of Environmental Liability Insurance\u00a0<\/strong><\/p>\n

    Unlike most liability exposures impacting mixed-use property owners, pollution losses are not a frequency risk, but rather a severity risk. Because all multi-use properties have notable environmental exposures, consideration needs to be given to the economies of scale afforded with environmental liability insurance as part of your risk transfer strategy, versus self-insurance.<\/span><\/p>\n

    Furthermore, most only consider the remediation costs associated with a pollution event. However, often times the clean-up costs are far less than other costs that can arise from the loss. Three of the most overlooked benefits of investing in Environmental Liability Insurance include;\u00a0<\/span><\/p>\n

      \n
    1. Defense Costs:<\/b>\u00a0 Environmental liabilities are relatively new and very litigious.\u00a0 Even if you do nothing wrong you can still get named in a suit and have to expense defense costs i.e. legal fees, environmental investigations\u00a0<\/span><\/li>\n
    2. Claim Management:<\/b>\u00a0 All policies come with specialists to assist you in handling a claim.\u00a0 Who is in charge of communications, public relations, emergency response, government compliance, financial management, third party claims for bodily injury, property damage, natural resource damages\u2026.?<\/span><\/li>\n
    3. Third Party Liability<\/b>:\u00a0 The majority of the time the cost to clean up the environmental problem\/s is far less than the associated claims that come in from third parties for bodily injury, property damage and business interruption.\u00a0 You need to look at your client\u2019s and neighbors that can be impacted if you or a sub-contractor\/vendor create an environmental loss.<\/span><\/li>\n<\/ol>\n

      Environmental Liability Insurance Coverages<\/span><\/h3>\n

      Premise Pollution Liability (PPL)<\/b><\/p>\n

      PPL is for real estate owners susceptible to economic loss caused by pollution that actually or allegedly originated from their properties. PPL is applicable for commercial insureds who own, rent, lease, operate, or have any other insurable interest in real property and\/or the operations.\u00a0<\/span><\/p>\n

      Coverage can be written in a variety of ways to address new conditions that may occur and\/or unknown preexisting environmental conditions.\u00a0 Coverage can include third party bodily injury and property damage, along with business interruption, on and off site clean-up, legal defense, Non-Owned Disposal Site Liability, Transportation Pollution Liability, and more. PPL can be offered on multiyear terms, which typically provides annual savings over the term of the policy. Most PPL policies cover above ground storage tanks up to a certain size.\u00a0 You can also cover multiple locations on a single PPL policy.<\/span><\/p>\n

      Contractors Pollution Liability (CPL)<\/b><\/p>\n

      Real estate owners & developers have potential indirect environmental exposures from the service vendors & contractors they hire to perform work on their behalf.\u00a0 CPL insurance protects real estate owners \/ developers should their vendors cause or exacerbate an environmental condition.\u00a0<\/span><\/p>\n

      Property Transfer Coverage<\/b><\/p>\n

      When buying or selling property there can be unknown preexisting environmental conditions. Since environmental due diligence cannot guarantee uncovering all potential pollution conditions, insurance companies have created property transfer insurance. This coverage protects the new owner or any party with an insurable interest, against unknown environmental conditions that may be discovered during the policy period.<\/span><\/p>\n

      This coverage not only helps to keep the property at its maximum value, it will assist the purchaser in being able to secure the necessary financing to complete their transaction.\u00a0 Real estate owners and developers who use this product as part of their risk transfer strategy can often negotiate with the seller to share the cost and negotiate a better mortgage rate than if they did not have property transfer coverage.\u00a0\u00a0<\/span><\/p>\n

      Environmental Risk Managers<\/b><\/p>\n

      Process to Effectively Sell Environmental Insurance<\/strong><\/p>\n

      Fact:<\/b>\u00a0 Every business is impacted by environmental exposures and environmental insurance is a financial assurance strategy that reduces or eliminates the negative impact of uncertain future environmental liabilities.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n

      Step #1:\u00a0 <\/b>Education <\/b>\u00a0<\/b><\/p>\n

      Education is the solution to pollution, not dilution.\u00a0 If an insurance professional is not environmentally educated they are not going to discuss environmental exposures and insurance.\u00a0 Likewise, a business that is not environmentally educated does not understand the value pollution liability insurance adds to their business model, so why invest their monies?\u00a0 With the ERMI environmental educational resources, businesses are able to focus on the most relevant risks in addressing future outcomes.\u00a0 An environmentally educated businesses can make informed decisions on the structure of their financial assurance strategy and if investing in pollution insurance will add value to their business model.\u00a0 <\/span>www.ermi.us<\/span><\/a> or <\/span>www.estrategist.com<\/span><\/a> for educational resources.\u00a0<\/span><\/p>\n

      Step #2:\u00a0 <\/b>Environmental Risk Tolerance\u00a0<\/b><\/p>\n

      Environmental Risk Tolerance is the amount of environmental risk a business can fiscally tolerate.\u00a0 What are acceptable and unacceptable environmental liabilities such as defense, environmental investigations, clean up, third party bodily injury, third party property damage, third party business income, reputational risk, first party business income\u2026?\u00a0 Since every business is impacted by environmental exposures, as part of \u201cBest Practices\u201d, they must have a financial assurance strategy.<\/span><\/p>\n

      Step #3:\u00a0 <\/b>Risk Appetite<\/b>\u00a0<\/span><\/p>\n

      Risk Appetite is how much a business wants to internally self-insure based upon their risk return goals and objectives.\u00a0 Understand, environmental liabilities tend to be a severity versus frequency issue.\u00a0 A businesses risk appetite is set by their board or upper management and helps to guide their resource allocation.<\/span><\/p>\n

      Step #4:\u00a0 <\/b>Merge Competitive Environmental Intelligence from Steps 1, 2 & 3\u00a0<\/b><\/p>\n

      To answer the following question:\u00a0 \u201cAs part of the business\u2019s environmental financial assurance strategy, does it make fiscal sense for the business to transfer their environmental exposures for fractions of a cent on the dollar via an environmental insurance product, or wait until an uncertain environmental liability occurs and spend 100 cents on the dollar out of their own pocket for legal defense, investigations, clean up, third party bodily injury, third party property damage, third party business income, reputational risk\u2026?\u201d<\/span><\/p>\n

      Step #5:\u00a0 <\/b>Fill out an Environmental Risk Managers Environmental Insurance Application<\/b><\/p>\n

      If you answered \u201cYes\u201d to transferring the business\u2019s environmental exposures, fill out an Environmental Risk Managers environmental insurance application and send the submission to your Environmental Risk Managers team member.\u00a0 <\/span>www.ermi.us<\/span><\/a> for applications or call (269) 792-1070. \u00a0 <\/span>\u00a0\u00a0<\/span><\/p>\n

      Step #6:\u00a0 <\/b>Educate \u2013 Review, Compare & Get Deals Closed<\/b><\/p>\n

      Once Environmental Risk Managers marketing effort has been completed, educating the insured on the benefits, coverages, and differences between the various proposals is the final step in identifying the insured\u2019s best investment option. Often times, a conference call with the agent, insured, and your ERMI team member, assists to further educate the insured and ultimately get deals closed!\u00a0 <\/span>It\u2019s not about market access, it\u2019s about customer service and writing business effectively, and ERMI has pioneered the process.\u00a0\u00a0<\/span><\/p>\n

      Environmental Financial Assurance Risk Transfer Simulator<\/b><\/p>\n

      Condo & Apartment Owners<\/span><\/p>\n

      The base PPL policy isn\u2019t a direct unit rating.\u00a0 Underwriters still look at it on a per location basis.\u00a0 So, if it\u2019s all 1 facility with 250 units or less, premiums will likely be between $4,500 – $5,500 for the base PPL.\u00a0\u00a0<\/span><\/p>\n

      Ballpark estimates for mold coverage option:<\/b><\/p>\n