Jeff Cotto of The Baldwin Group will join Stephen and Jake Marcus for an in-depth look at the stabilizing condominium insurance market, to-do items for managers to encourage boards such as updating policy limits and increasing deductibles and thoughts for “selling” your condominium to insurance carriers. Often overlooked coverages such as cyber crime will be examined as well as reserve studies and short and long-term Inspection and Maintenance Plans.
WEBVTT
1
00:00:00.000 –> 00:00:01.680
Stephen Marcus: Let me hand it over to the gentleman.
2
00:00:02.520 –> 00:00:03.850
Jake Marcus: Okay. Yeah.
3
00:00:03.850 –> 00:00:11.090
Stephen Marcus: But we may chime in just with exclamation points, but we know you have a lot to get through.
4
00:00:11.330 –> 00:00:18.050
Jake Marcus: Yep, yep. Action-packed seminar. So let’s wait for people to filter in to our…
5
00:00:18.570 –> 00:00:24.100
Jake Marcus: Marcus Auer, this will be number… 25.
6
00:00:24.380 –> 00:00:26.990
Jake Marcus: We’re expecting a, a good, a good…
7
00:00:27.240 –> 00:00:36.290
Jake Marcus: a good program today, so thank you everyone for attending today. I know there’s other ways to be spending a Thursday as a…
8
00:00:36.340 –> 00:00:52.059
Jake Marcus: if you’re in New England, it starts to warm up a little bit, but still pretty cold. It’s like 25 this morning. If you’re in Augusta National, you’re watching the Masters, that would be a fun, fun thing to do, rather than pay attention to us.
9
00:00:52.060 –> 00:01:09.019
Jake Marcus: But we are excited to have this session today. It’s an important topic, one that we have done with Jeff Cotto before, kind of as a snapshot or landscape of the market in insurance, condo risk management, and provides kind of a…
10
00:01:09.020 –> 00:01:12.789
Jake Marcus: A background from property managers specifically.
11
00:01:12.790 –> 00:01:19.660
Jake Marcus: but also is important for board members, and unit owners as well. And…
12
00:01:20.040 –> 00:01:24.389
Jake Marcus: with that, I think we… we usually do a kind of,
13
00:01:24.810 –> 00:01:28.639
Jake Marcus: a poll, so I’m gonna submit a poll as to…
14
00:01:28.820 –> 00:01:38.229
Jake Marcus: who our guests are today, who we have on the show, and we can… yeah, we can just jump right in. Jeff, thanks for joining.
15
00:01:38.230 –> 00:01:41.049
Jeff Cotto: Thanks, Jake, thank you for having me. Steven, thanks for having me as well.
16
00:01:41.980 –> 00:01:54.170
Jake Marcus: And, and so I’m Jake Marcus of Alcock & Marcus, a full-service law firm servicing all New England states, Massachusetts, New Hampshire, Vermont, Maine.
17
00:01:54.660 –> 00:02:11.230
Jake Marcus: Rhode Island, Connecticut, I don’t practice in all those states. I practice in Massachusetts and Florida, so we also have a Florida office. Steven Marcus, he is of council for Alcock and Marcus, and you want to tell us a little bit about yourself, Steven?
18
00:02:13.200 –> 00:02:14.239
Jake Marcus: Busy on your phone.
19
00:02:14.590 –> 00:02:32.399
Stephen Marcus: Yeah, I’m too busy on my phone. Yeah, I’m with, Jake Marcus as my boss, and, I just do whatever he, he tells me to do, and, I’ve been doing condominium law for 47 years.
20
00:02:32.890 –> 00:02:37.899
Stephen Marcus: which makes Jake much younger than me.
21
00:02:38.020 –> 00:02:42.260
Stephen Marcus: But, that’s about all I have to say.
22
00:02:42.780 –> 00:03:01.659
Stephen Marcus: Excellent. From the webinar, if you want to get into that, so we shifted things a little bit here. I think the focus in 2026 and beyond, and probably should have been in 2025 and 2024,
23
00:03:02.490 –> 00:03:10.039
Stephen Marcus: 2000, for that matter, where we start with risk management, and then insurance.
24
00:03:10.240 –> 00:03:14.519
Stephen Marcus: I think it’s gone the other way around for… for decades.
25
00:03:14.600 –> 00:03:18.350
Stephen Marcus: And I thank Post Surfside.
26
00:03:18.410 –> 00:03:29.670
Stephen Marcus: And the tightening of the insurance market, and all that, that risk management measures, have become a vital.
27
00:03:29.700 –> 00:03:40.480
Stephen Marcus: Way that boards and managers have to act in terms of making their properties attractive.
28
00:03:40.540 –> 00:03:42.960
Stephen Marcus: to insurance carriers.
29
00:03:43.200 –> 00:04:01.999
Stephen Marcus: And, whether that be with reserve and condition studies, AWEER water sensors, Chubb Insurance, my own personal insurance with Chubb Masterpiece.
30
00:04:02.020 –> 00:04:04.509
Stephen Marcus: Just sent me a free ting.
31
00:04:04.540 –> 00:04:19.020
Stephen Marcus: Which apparently, checks for, electric surges, so for, to cut down on electrical fires. It gives out, warnings.
32
00:04:19.019 –> 00:04:25.119
Stephen Marcus: And I assume they did that because,
33
00:04:25.120 –> 00:04:41.950
Stephen Marcus: they’ve experienced losses, not because they wanted to send me an early Christmas present. But I think there are lots of things that associations have to be focused on. Jeff’s gonna go into a lot of them, including…
34
00:04:42.050 –> 00:04:44.330
Stephen Marcus: that…
35
00:04:44.580 –> 00:04:54.229
Stephen Marcus: Put it near the top of your list, if not at the top, doing a independent insurance replacement or reconstruction cost appraisal.
36
00:04:54.550 –> 00:05:08.499
Stephen Marcus: And… because the stated limits in the policy, in my opinion, don’t mean anything, and are not a guarantee by the agent or the insurer, unless there is a special relationship.
37
00:05:08.710 –> 00:05:20.470
Stephen Marcus: so the limits of policies, we think, in many cases, might be substantially below what a total loss
38
00:05:20.500 –> 00:05:27.390
Stephen Marcus: what, the limits would actually be. And then what that is,
39
00:05:27.390 –> 00:05:46.619
Stephen Marcus: the ordinance of law, which is for damage to things that don’t exist at the condominium, such as an automatic fire suppression system, etc, didn’t get destroyed in the… in the fire, so aren’t covered by typical insurance, but there’s coverages A, B, and C, demolition, debris removal.
40
00:05:46.700 –> 00:06:03.559
Stephen Marcus: And code upgrades, for, and the code upgrades, obviously, are for things that were never there, but there is insurance you can, can buy. But that is a, a preface to, Jeff. He has,
41
00:06:03.710 –> 00:06:12.920
Stephen Marcus: a very ambitious, PowerPoint and lots of materials to go over, so I’ll, turn it over to him.
42
00:06:13.220 –> 00:06:26.440
Jeff Cotto: Great, thank you, Steven, and thank you, everybody. Nice to meet you. And, again, Jeff Cotto, I’m a partner with Evolving Group in the Mid-Atlantic region. We insure condominiums not only here in New England, but in all 50 states, as well, and have offices across the country.
43
00:06:29.620 –> 00:06:34.250
Jake Marcus: And let me, let me just start the, slideshow.
44
00:06:34.250 –> 00:06:35.089
Jeff Cotto: Thanks, Jake.
45
00:06:36.270 –> 00:06:59.899
Jake Marcus: So, yeah, that’s, this was our 25th episode. We’ll be focusing on condominium risk management and insurance for property managers, but also, if you’re a board member, insurance agent, this is also a useful session. We… I saw that it looks like we have a good mix of managers, board members, and insurance agents, so you’re in the right spot. And let me just do a quick intro to Jeff. He is…
46
00:06:59.900 –> 00:07:07.900
Jake Marcus: of the Baldwin Group Vice President, and he has been, oh yeah, please, so…
47
00:07:08.140 –> 00:07:16.010
Jake Marcus: It sounds like your… your mic might be a little low when speaking, so, I’m not sure.
48
00:07:17.980 –> 00:07:23.500
Jake Marcus: And then, yeah, if you wanna, if you wanna submit, for the attendees, if you wanna submit any…
49
00:07:23.740 –> 00:07:35.110
Jake Marcus: questions, Q&As, or comments, feel free to chime in on the chat or Q&A. So yeah, Jeff has been specializing
50
00:07:35.550 –> 00:07:37.660
Jake Marcus: You wanna test your… test your mic?
51
00:07:37.920 –> 00:07:40.240
Jeff Cotto: Yeah, is that a little bit better? I’ll just get a little closer to it.
52
00:07:40.240 –> 00:08:02.040
Jake Marcus: That works. That sounds better, absolutely. Thank you. And so, yeah, Jeff has been doing… specializing in insurance and risk management solutions for condo associations for nearly 20 years, played a key role on the CAI New England Insurance Task Force, and chaired that.
53
00:08:02.170 –> 00:08:25.249
Jake Marcus: And also enjoys boating, fishing, and spending time outdoors. So, an outdoorsman, and excited to hear more about what Jeff has to say about the current challenges in the insurance market, liability and umbrella, the importance of a well-run association, and the opportunities right now in kind of a stabilizing market.
54
00:08:25.250 –> 00:08:48.050
Jake Marcus: We’ll discuss some of the litigation trends, risk transfer, proactive measures that you can take as a board member or as association, or property manager, focuses on insurance submissions, claims strategies, how to deal with maintenance and capital improvements, and then discussing the different types of
55
00:08:48.050 –> 00:08:55.719
Jake Marcus: insurance. We do… we have had a lot of Marcus hours on insurance. It is such an important topic in our field, so…
56
00:08:55.720 –> 00:09:03.070
Jake Marcus: we’ll let Jeff kind of get into some of the important things to look for in 2026. So, thank you, Jeff.
57
00:09:03.320 –> 00:09:06.189
Jeff Cotto: Thanks, Jake. And, if we can go to the first slide, that’d be great.
58
00:09:07.260 –> 00:09:31.939
Jeff Cotto: So, you know, I think the theme of 2026 so far is, you know, I call it the now what year, right? And I say now what because when you look at the catastrophic impact that your surplus line insurance market had, or the inability the last several years to, you know, potentially secure affordable insurance compared to what you were paying, there was a lot of non-renewals of coastal property in the market.
59
00:09:32.110 –> 00:09:34.350
Jeff Cotto: You know, there were condo associations with, you know.
60
00:09:34.350 –> 00:09:38.479
Stephen Marcus: Jeff, can you get closer to the microphone? Yep.
61
00:09:38.480 –> 00:09:39.070
Jeff Cotto: Yeah.
62
00:09:39.220 –> 00:09:40.319
Jeff Cotto: Better, Steven?
63
00:09:41.160 –> 00:09:42.440
Stephen Marcus: Yes.
64
00:09:42.440 –> 00:09:43.380
Jeff Cotto: Okay.
65
00:09:43.380 –> 00:09:44.050
Stephen Marcus: Much better.
66
00:09:44.050 –> 00:10:08.980
Jeff Cotto: Sorry about that. Yeah, so as I was saying, it’s the now what market, as, you know, we really had a lot of, you know, non-renewals of condo associations, we had significant price increases, you know, we had the inability to get terms in a favorable timeframe. A lot of that has gone away, I would say, since the last quarter of last year. If you’re a, you know, frame condominium in a coastal area, you are most likely, or
67
00:10:08.980 –> 00:10:17.330
Jeff Cotto: have been seeing a reduction in your property rates this year. We’ve been delivering consistent reduction in property insurance rates anywhere from…
68
00:10:17.330 –> 00:10:31.319
Jeff Cotto: 10-25% this year, for coastally exposed property. That’s gonna be in your E&S and surplus market, so if you think Lloyd’s of London as a surplus carrier, that’s where we’re seeing the most reduction and the most reset in the market.
69
00:10:31.680 –> 00:10:56.270
Jeff Cotto: Where we’re seeing stabilization is with your admitted markets, so if you’re using a GNY, a Traveler’s, a Philadelphia, those markets continue to be more stable. They are usually, you know, less expensive than the ENS or surplus carriers to begin with, so they’re more stable in their rate reductions, or, you know, a slight increase. And so, you know, that being said, it’s been nice earlier in the year
70
00:10:56.350 –> 00:11:04.689
Jeff Cotto: to alleviate board’s mind when we’re talking about their renewal pricing. And so, you know, when you’re solving the pricing coverage, you know, if you’re having
71
00:11:04.690 –> 00:11:19.010
Jeff Cotto: repetitive water damage claims, or you’ve had a massive fire, you know, that story may not be for you, and there may be some concern on how your insurance rate’s going to look. But if you have been loss-free, you’ve been working on improving your risk profile.
72
00:11:19.010 –> 00:11:30.709
Jeff Cotto: And you had a significant increase the last couple years, there is a strong chance you get pricing stabilization, and you get your indications on what your property insurance premiums are going to be a lot earlier.
73
00:11:31.990 –> 00:11:48.120
Jeff Cotto: So that being said, the now what is, how does that trend continue? You know, how does an association, position itself to be able to continue to take advantage of the best terms being offered at renewal, outside of just going to market and shopping the insurance?
74
00:11:50.880 –> 00:12:03.209
Jeff Cotto: liability and umbrella are areas that we are still seeing some price increase and some challenges. You know, there was a time where you could buy a $25 million umbrella for $3,000 to $4,000, you know, with
75
00:12:03.210 –> 00:12:19.999
Jeff Cotto: the high-impact claims that we’re seeing with some of the litigation and judgments you’re seeing in the industry, you know, nuclear verdicts for liability and umbrella. The carriers just aren’t either willing to put up $25 or $50 million, potentially, anymore. The price to do so is up.
76
00:12:20.000 –> 00:12:43.749
Jeff Cotto: And it, you know, if you have a lot of short-term rentals within your association, multiple pools, a beachfront, restaurants, anything that really adds an amenity or an apartment or a vacation feel to your association, you may struggle a little bit more than other markets to secure high-limit umbrellas. And liability, same thing, slip and falls, litigated financing.
77
00:12:43.750 –> 00:12:53.350
Jeff Cotto: things of that nature with larger judgments. You know, there’s some exclusions being put into liability for assault and battery, firearms, certain things.
78
00:12:53.350 –> 00:13:04.980
Jeff Cotto: We are seeing some of that be stripped away this year, too, so some of the general liability renewals, even though there might be price increases, you may get some of those limits back if you had lost them in the past, if you’ve been lost free.
79
00:13:05.590 –> 00:13:12.299
Stephen Marcus: Jeff, a quick question on two questions. Well, one, a comment and a question.
80
00:13:12.500 –> 00:13:21.320
Stephen Marcus: On… umbrella, for over D&O, general liability, non-owned and hired auto.
81
00:13:21.430 –> 00:13:29.109
Stephen Marcus: what range of limits are you suggesting?
82
00:13:29.210 –> 00:13:41.630
Stephen Marcus: We’re saying, 1980, 1979 levels still, and Fannie Mae only requires a million dollars for condominiums.
83
00:13:41.800 –> 00:13:44.470
Stephen Marcus: For general liability.
84
00:13:44.590 –> 00:13:50.890
Stephen Marcus: Which we think is… Extremely… too low.
85
00:13:50.980 –> 00:13:55.150
Stephen Marcus: And… and the second part of the question…
86
00:13:55.190 –> 00:13:59.639
Stephen Marcus: And I’m guessing that you’re gonna be saying.
87
00:13:59.660 –> 00:14:04.000
Stephen Marcus: 25 million, 50 million. We’ve seen 100 million.
88
00:14:04.020 –> 00:14:20.840
Stephen Marcus: and, but we’ve got, and one of the answers, I suppose, is that the amount of umbrella insurance you should buy, is how much can you afford?
89
00:14:21.460 –> 00:14:29.879
Stephen Marcus: And it doesn’t matter what size your condominium is, or what the values of each unit owner is, a premises liability case.
90
00:14:29.920 –> 00:14:41.389
Stephen Marcus: can have significant, demand settlements and, and, and judgments. The, the question is.
91
00:14:41.420 –> 00:14:56.700
Stephen Marcus: With capacity issues, and we know we’re, we’re seeing layered property values these days, with layered umbrella levels.
92
00:14:56.830 –> 00:15:04.230
Stephen Marcus: where more than one carrier participates? Are you finding more luck in terms of getting
93
00:15:04.660 –> 00:15:09.029
Stephen Marcus: These higher limits, whether they be 25 million or $100 million?
94
00:15:09.030 –> 00:15:23.289
Jeff Cotto: Yeah, we’re still able to secure the higher umbrella limit, Steven, right? But I agree with you, it’s, you know, it’s one, how much can you afford, and then two, yes, we’re starting to see, you know, some of the programs add multiple carriers into the mix, and so, you know, you have one carrier taking five.
95
00:15:23.290 –> 00:15:46.920
Jeff Cotto: the next layer, and the next layer, and so on, to build to those $50 million limits. And so, you know, again, you know, it depends on what your risk, your exposure, and your claims have been. We’re still able to get the higher limits. It does take some risk sharing to do it, and again, the cost can be more expensive, but again, you know, you should be getting quotes all the way from $5 to $50 million at a minimum from your agent at renewal, if they can find them.
96
00:15:46.920 –> 00:15:51.339
Jeff Cotto: And then making a, you know, educated decision on, you know, should we purchase the higher limits or not?
97
00:15:54.240 –> 00:15:54.720
Jeff Cotto: Thank you.
98
00:15:54.720 –> 00:15:55.470
Stephen Marcus: Go ahead.
99
00:15:55.470 –> 00:16:14.100
Jeff Cotto: Yep, and then I think, really, at the end of the day, you know, the message on the associations that are getting, you know, the key benefits of what we were talking about, from price reduction, you know, still finding good liability in umbrella terms, are the associations, we’ll talk about this more, but that are well-run, that are documenting, that are, you know.
100
00:16:14.100 –> 00:16:18.359
Jeff Cotto: you know, claims narrative when there’s a claim. So they’re telling a good story.
101
00:16:18.360 –> 00:16:31.980
Jeff Cotto: they’re, you know, managing their risk well, and they’re gonna be the ones benefiting. The condos that continue to struggle are working with condos or managers where, you know, you say, well, what’s been done to the roofs? Well, they’re 25 years old.
102
00:16:31.980 –> 00:16:41.380
Jeff Cotto: You know, is there a plan to replace them in the next couple years? They’re working on it. Have you done anything to the electrical or the plumbing in the last 5 years? No, they haven’t.
103
00:16:41.380 –> 00:17:05.539
Jeff Cotto: You know, what does the claims history look like? I’m not quite sure. That narrative does not do well with an underwriter anymore. It doesn’t do well with your agent, you know, going out to market and finding you an alternative. And if that is your, you know, continued messaging, we’ll talk about it a little bit later, it may not be a year that you’re looking to shop your insurance. If you continue to have no improvements, you know, you’re still having the same repetitive water loss claims.
104
00:17:05.550 –> 00:17:11.820
Jeff Cotto: It’s going to be more challenging in the market for you, and there’s got to be a better plan and strategy, and I think that’s what today’s about.
105
00:17:16.280 –> 00:17:24.150
Stephen Marcus: While we’re mentioning it, since it’s so hot, And exciting.
106
00:17:24.310 –> 00:17:28.410
Stephen Marcus: maybe just to me. But Fannie Mae and Freddie Mac.
107
00:17:28.790 –> 00:17:32.080
Stephen Marcus: Just did an overhaul of their condominium.
108
00:17:32.310 –> 00:17:50.790
Stephen Marcus: Lending, guidelines for the Fannie Mae Selling Guide, and the Freddie Mac Selling Guide, by announcement 202603 for Fannie Mae, and 2026C, for Freddie Mac.
109
00:17:51.100 –> 00:17:55.410
Stephen Marcus: And one change to address the problem
110
00:17:55.480 –> 00:18:05.209
Stephen Marcus: was carriers were, pulling away from insuring roofs, or roofs, as they say out west.
111
00:18:05.210 –> 00:18:16.039
Stephen Marcus: at replacement cost, but Fannie Mae requires associations to ensure for 100% replacement coverage.
112
00:18:16.300 –> 00:18:21.939
Stephen Marcus: And to answer a question from Adrian Rosso, that is not a new requirement.
113
00:18:22.460 –> 00:18:28.549
Stephen Marcus: The Fannie and Freddie have forever required the 100% replacement coverage.
114
00:18:28.740 –> 00:18:33.270
Stephen Marcus: The problem was, if you couldn’t, if you had 10-year-old Ruth.
115
00:18:33.670 –> 00:18:41.370
Stephen Marcus: And they had a useful life of 20 years, let’s say they were worth $200,000 to replace.
116
00:18:41.420 –> 00:18:58.410
Stephen Marcus: carriers were or are only willing to insure them an actual cash value. One of the big announcements by Fannie and Freddie is they now will accept 100% replacement coverage
117
00:18:58.490 –> 00:19:04.179
Stephen Marcus: But we’ll make an exception for roofs, and we’ll accept them at actual cash value.
118
00:19:04.240 –> 00:19:20.789
Stephen Marcus: And then the second part of the question, is somebody’s, asking, the ca- our carrier will not provide a statement saying that, we have 100% replacement coverage.
119
00:19:20.790 –> 00:19:37.380
Stephen Marcus: I don’t blame the carrier. I don’t think associations should be signing anything saying that it’s a 100% replacement cost. I don’t think managers should, I don’t think carriers should, but I do think the answer, in my opinion.
120
00:19:37.450 –> 00:19:49.230
Stephen Marcus: is, and I’ll keep stressing it, is… Go out and get… a independent insurance
121
00:19:49.530 –> 00:19:54.289
Stephen Marcus: And replacement, or reconstruction cost appraisal.
122
00:19:55.410 –> 00:20:04.500
Stephen Marcus: submit that to Jeff, who could then submit it to the carrier to state that this is our proof
123
00:20:04.650 –> 00:20:08.890
Stephen Marcus: That were insured at 100% replacement coverage.
124
00:20:09.000 –> 00:20:27.159
Stephen Marcus: Fannie Mae and Freddie Mac also just changed their regulations, so they had taken away guaranteed replacement costs, and maybe it’s tough to find these days, but they had removed it for some reason. But they’ve added it back as being one basis for showing 100% replacement coverage.
125
00:20:27.660 –> 00:20:40.850
Stephen Marcus: An odd one, even though they have it in here, is they’ll take extended replacement costs, which typically is the carrier will pay up to 125% of the limits, as proof.
126
00:20:40.920 –> 00:20:48.860
Stephen Marcus: But the best one, there are a couple of others, something from the carrier, but that’s difficult to get, but the one that…
127
00:20:48.970 –> 00:20:58.079
Stephen Marcus: would seem to work, and that I strongly suggest every association do, and every manager have their associations do, is have an independent
128
00:20:58.290 –> 00:21:04.669
Stephen Marcus: replacement or reconstruction cost appraisal. Perhaps Jeff can give…
129
00:21:04.770 –> 00:21:20.799
Stephen Marcus: names that we could give you next week when we send you the recording and the answers to the Q&A, if he has specific appraisers in mind. But that… that’s the answer to the question about,
130
00:21:20.800 –> 00:21:31.949
Stephen Marcus: the carrier won’t provide the statement, what do we do? I think the answer is the independent, replacement or reconstruction cost appraisal. Jeff, thoughts?
131
00:21:31.950 –> 00:21:52.850
Jeff Cotto: Yeah, a couple quick thoughts, you know, so, you know, as far as the, you know, actual cash valuations on the roof, and so, you know, with improving terms and conditions, you know, if you had a limitation to, you know, your roofs had to be 10 years old, or you were getting ACV from the carrier, the actual cash value, you may be able to negotiate, you know, a 15- or a 20-year, you know.
132
00:21:53.290 –> 00:22:02.440
Jeff Cotto: you know, condition on your policy this year versus that 10-year. So, you know, again, it’s looking at your terms and conditions, and there are some ability to fix that.
133
00:22:02.600 –> 00:22:08.730
Jeff Cotto: Supporting documentation, it goes a long way in that. You know, if you have smolder roofs, but you’ve had roof inspections done.
134
00:22:08.730 –> 00:22:23.270
Jeff Cotto: and you can provide those reports showing that there’s been repairs and maintenance done. Those can go a long way to helping, negotiate with underwriters. As far as, you know, we were talking about the, you know, the valuation, Steven, I look at it another way as well.
135
00:22:23.270 –> 00:22:47.819
Jeff Cotto: Oftentimes, when we’re underwriting an account, or going through the underwriting process, you know, we’ll ask for the square footages, and, you know, let’s say we have a 100-building complex, or a 50-building, you know, 50-building complex. It takes a long time to find the accurate square footage if it’s not in the master deed, or if it’s not tracked by the association. The cost of construction is through the roof and continues to be, so, you know, it’s very difficult to come up with an accurate
136
00:22:47.820 –> 00:23:04.829
Jeff Cotto: usually for $5,000 or under, you know, depending on the size of the association, you get a document that measures the square footage and accurately tells you all of that information about your building and what the true cost to rebuild it is. It’s a great tool for not only negotiating your insurance.
137
00:23:04.830 –> 00:23:20.839
Jeff Cotto: but for defending yourself as a board, that you actually went out and purchased the proper amount of insurance. So I would say, you know, replacement cost valuations are something you should have done and put as a priority on your list if you haven’t done one in the last 3 to 5 years.
138
00:23:23.250 –> 00:23:46.259
Jeff Cotto: Improved terms and deductibles, you know, I’m still a fan of higher deductibles to a point. I think that, you know, the cost of construction now, you know, where we used to see a water damage in a kitchen cost $10,000, you know, that kitchen repair might cost $30,000, $40,000 now. You know, once you start getting a frequency of water damage or freeze-ups, it can get
139
00:23:46.260 –> 00:23:58.979
Jeff Cotto: you know, quickly add up on your loss history. So, still a big fan of, you know, that $50,000 AOP deductible as a good starting point for associations. That way the smaller claims are not hitting your loss
140
00:23:58.980 –> 00:24:03.070
Jeff Cotto: History, and they’re still manageable for the unit owner under their policy.
141
00:24:04.490 –> 00:24:19.320
Jeff Cotto: And again, fixing the loss drivers, right? So, if your 5-year loss history has 7, 8, 9, 10, 12 water damage claims, and they are all very similar, you know, burst pipe, you know.
142
00:24:19.360 –> 00:24:25.410
Jeff Cotto: leaky water heater, leaking hose from the dishwasher. If that continues to be an issue.
143
00:24:25.410 –> 00:24:40.329
Jeff Cotto: Then some of the things that your owners can do later on in the presentation, those issues should really be addressed. What’s causing these repeated losses in water damage claims? And one, should we increase or add a per unit deductible to try to slow them down?
144
00:24:40.330 –> 00:24:46.300
Jeff Cotto: Or two, can we get owners to kind of unify and do certain things to prevent these claims before they’re happening?
145
00:24:48.330 –> 00:24:49.490
Jeff Cotto: Next slide, Jake.
146
00:24:54.470 –> 00:25:19.400
Jeff Cotto: So again, you know, the liability and umbrella challenges that we talked about are, you know, rising claim severity. You know, very punitive society. I think Steven and Jake can speak to, you know, some of the amounts of judgments that you’re seeing, you know, when you have a significant bodily injury or property damage claim, for associations. But, you know, a million dollars on the general liability isn’t what it used to be, and, you know, settlements of 10, 25, 30 million dollars against
147
00:25:19.400 –> 00:25:33.319
Jeff Cotto: associations, you know, make it much more difficult for these umbrella carriers to still, you know, pay $3,000 in premium to get $25 million. Just doesn’t make sense. And so, you know, one of the challenges we talked about was umbrellas.
148
00:25:33.320 –> 00:25:56.290
Jeff Cotto: Litigation, you actually can finance your claim, so people that maybe wouldn’t have sued get a call from a group, saying, we heard you had a claim, you know, where you were injured, and, you know, we’d like to offer you defense and counsel, and, you know, by the way, we will fund, we think you have a strong case, and we’re gonna fund it. So that’s a scary thing, that cases that would not make it to…
149
00:25:56.290 –> 00:26:08.270
Jeff Cotto: trial or to settlement now have a team of professional attorneys who are very good at what they do, financing, some of the litigation and bringing it, you know, much tougher to fend for the carriers.
150
00:26:10.110 –> 00:26:26.070
Jeff Cotto: Contracts with vendors, that’s something that’s super important, too. So, you know, when you’re working with your landscape contractor, when you’re doing a, you know, building enveloping project, when you’re having major work done on the association, or contractors are coming onto your property to work.
151
00:26:26.070 –> 00:26:31.340
Jeff Cotto: One of the things that can get overlooked is a lot of people will get the certificate of insurance.
152
00:26:31.360 –> 00:26:35.399
Jeff Cotto: But that doesn’t take it far enough, because that’s just a stamp
153
00:26:35.660 –> 00:26:43.460
Jeff Cotto: in time that they actually have insurance. What you really want to look at is an indemnification contract
154
00:26:43.570 –> 00:26:49.219
Jeff Cotto: That has language in there that indemnifies you, by signature.
155
00:26:49.220 –> 00:27:13.109
Jeff Cotto: And that you’re named as an additional insured on the contractor’s policy. So, you really want to have, if you haven’t looked at one, have an attorney take a look at your contract you’re using with subcontractors and vendors, make sure that that insurance and indemnity language is in there, and that not only you get the certificate of insurance, but the association is named on there, and that contract is executed. It’s going to provide much better risk transfer.
156
00:27:13.120 –> 00:27:18.510
Jeff Cotto: Protect the association than just getting a certificate, which may or may not be valid at the time of lawsuit.
157
00:27:18.510 –> 00:27:27.070
Stephen Marcus: One final point, that, again, is…
158
00:27:27.380 –> 00:27:32.479
Stephen Marcus: Not being picked up, because…
159
00:27:33.260 –> 00:27:42.780
Stephen Marcus: Board members and managers aren’t supposed to be experts at… at insurance, but next time you have the chance to look at it.
160
00:27:42.860 –> 00:27:55.660
Stephen Marcus: look at the evidence of liability. I’m talking to the audience, not to Jeff. He knows exactly what it says. And in bold, right near the top.
161
00:27:56.200 –> 00:28:06.519
Stephen Marcus: It basically says, You may not. This certificate of insurance basically confers no rights on you.
162
00:28:06.660 –> 00:28:14.670
Stephen Marcus: You may not, and then it goes on to say, you may… may not be added as an additional insured.
163
00:28:15.290 –> 00:28:20.129
Stephen Marcus: Except by an endorsement to the policy by the carrier.
164
00:28:20.580 –> 00:28:23.979
Stephen Marcus: Sometimes the carrier’s policies
165
00:28:24.090 –> 00:28:33.679
Stephen Marcus: We’ll say that if there’s a contract that provides for indemnification, that that could be listed on the certificate of insurance.
166
00:28:33.790 –> 00:28:53.199
Stephen Marcus: But, to be named as an additional insured, the best way that I know of, unless Jeff tells me differently, is an actual endorsement by the carrier, not a certificate of insurance that the local agent sends out, and then ASM throws in the trash.
167
00:28:54.020 –> 00:29:18.950
Jeff Cotto: Exactly, yeah, Steven, the best way is, you know, either getting a copy of their initial insured endorsement, or like you said, having the specific endorsement naming the association on their policy, so actually having that, you know, endorsement read with the association’s name on it. So, definitely something to talk to with your property manager or to look at this year. You know, snow plowing was huge up in the Northeast this year, and in a lot of areas of the country.
168
00:29:18.950 –> 00:29:41.659
Jeff Cotto: you know, more snowplow work than a lot of the landscapers or people that do snow management have been used to. So you want to look at your contracts that you have with your snowplow, people, you know, and again, you know, proactive maintenance comes into, you know, there was a lot of damage, you know, from plowing this year, where pavement and gravel, sidewalks, things of that nature, you know, got torn up and have hazards like potholes or…
169
00:29:41.660 –> 00:30:05.049
Jeff Cotto: you know, areas that could cause trip and falls, tree limbs that were damaged in storms that came down, you know, that were overhanging, you know, buildings, those should be looked at this year to see if there needs to be trimming. And so, again, when you’re doing all of this work, which a lot of associations do, I would highly recommend documenting a lot of these things, right? So if you can tell a really good story.
170
00:30:05.050 –> 00:30:12.780
Jeff Cotto: About what you’re doing from a proactive maintenance plan, what your risk transfer looks like with your vendors and contractors.
171
00:30:12.780 –> 00:30:20.120
Stephen Marcus: Jeff, I hate to do this, but either I talk too loud, or you talk too soft.
172
00:30:20.120 –> 00:30:22.280
Jeff Cotto: Sorry, I’ve been having problems with my Zoom, and we tried to.
173
00:30:22.280 –> 00:30:31.870
Stephen Marcus: But the last comment is nothing unusual. I think it applies to everybody in the world. Your volume is 30% of Stephen’s volume.
174
00:30:31.870 –> 00:30:32.380
Jeff Cotto: Okay.
175
00:30:32.380 –> 00:30:35.070
Stephen Marcus: That’s because… that’s because I talked too loud.
176
00:30:35.220 –> 00:30:44.169
Jeff Cotto: Yeah, sorry, my… I’m having a computer issue that I can’t fix. We’ve been working on it, but it’s a Zoom issue that I haven’t been able to fix. It’s an external Zoom thing, so I apologize. I’ll try to talk louder.
177
00:30:44.170 –> 00:30:48.080
Jake Marcus: Maybe Steven can be more quiet and Jeff just yell the whole time.
178
00:30:48.080 –> 00:30:48.740
Jeff Cotto: Yeah.
179
00:30:48.740 –> 00:30:49.400
Jake Marcus: Heh.
180
00:30:52.570 –> 00:30:56.909
Jake Marcus: Alright, so, I know we got a couple of questions as well, sure.
181
00:30:57.240 –> 00:31:02.109
Jake Marcus: We got… it looks like, Steven, it looks like you addressed Val McLaughlin’s question.
182
00:31:02.460 –> 00:31:19.149
Jake Marcus: Do you find, we require our associations to obtain an updated RCA every 5 years, replacement cost assessment. Do you find, appraisal… do you find that this time period is adequate, or would you recommend less or more time for this?
183
00:31:19.430 –> 00:31:19.770
Jeff Cotto: So, with.
184
00:31:19.770 –> 00:31:20.790
Stephen Marcus: And…
185
00:31:20.790 –> 00:31:21.190
Jeff Cotto: Yeah, go ahead.
186
00:31:21.190 –> 00:31:27.200
Stephen Marcus: I, I, I added, I added my answer in the, In the webinar chat.
187
00:31:28.310 –> 00:31:43.449
Jeff Cotto: Yeah, I would say 3 years in this market, just due to the cost of construction, and then you can have a second opinion on it, but, you know, 5 years is better than no years, but definitely right in this market, I would say they’re good for about 3 years, and then you can secure a second opinion on them.
188
00:31:44.610 –> 00:31:57.480
Jake Marcus: Excellent. And then, we received a question as to, what does umbrella policy mean? And that’s basically, excess outside of the building. Would you… what would you guys add on to that?
189
00:31:59.230 –> 00:32:22.950
Jeff Cotto: Yeah, I would say that for your umbrella, you know, you can look at adding your general liability, you know, your directors and officers in some cases, depending on the umbrella carrier, your workers’ comp, you’re hired a non-auto, so it’s a liability policy for catastrophic losses. So if you exceed the limit of an underlying policy, so you have a $3 million claim on your liability policy, but you only have a million dollar limit.
190
00:32:23.020 –> 00:32:29.459
Jeff Cotto: That umbrella is the catastrophic insurance to protect you for the additional $2 million that you would need to cover that claim.
191
00:32:30.000 –> 00:32:32.469
Stephen Marcus: Now, it’s normally said about,
192
00:32:32.600 –> 00:32:45.200
Stephen Marcus: about lenders, but I’ll shift the quote that I heard about 40 years ago, so it’ll be new to the crowd, to carriers. An umbrella is something that a carrier gives you
193
00:32:45.350 –> 00:32:50.080
Stephen Marcus: When the sun is out, and takes away when it starts raining.
194
00:32:50.280 –> 00:33:00.030
Stephen Marcus: That’s not really the case. Carriers, take seriously their obligation to, back up their umbrella policies.
195
00:33:00.100 –> 00:33:20.010
Stephen Marcus: But there are good ones and there are bad ones. There are standalone ones that are better than the package policies, so you need folks like… like Jeff advising. And then just a quick comment, a gentleman asked whether Marshall Swift, CoreLogic provide good value guidance.
196
00:33:20.210 –> 00:33:24.460
Stephen Marcus: And I’ll get my answer, and then I’ll defer to Jeff.
197
00:33:24.970 –> 00:33:27.330
Stephen Marcus: I think it gives you a starting point.
198
00:33:27.720 –> 00:33:42.340
Stephen Marcus: I don’t think that Marshall SWEV, RSMains, CoreLogic, is a replacement for getting an independent insurance replacement cost appraisal. Jeff, thoughts?
199
00:33:42.340 –> 00:33:56.459
Jeff Cotto: Yeah, I agree, Steven. To keep it simple, yes, I agree. It also depends on who’s inputting the data and who’s doing them, right? So an agent, you know, that doesn’t know all the cost modifiers and things to apply is going to come up with a different valuation than an appraiser who’s licensed to do so.
200
00:33:56.460 –> 00:34:15.190
Stephen Marcus: And if you have all-in coverage, I was just told by an insurance expert out in California that he just ran into a condominium where one unit owner had put in $7 million
201
00:34:15.260 –> 00:34:32.060
Stephen Marcus: of improvements to their unit. If you have an all-in policy, and it’s supposed to be capturing what unit owners are doing, that could throw your limits off by $7 million pretty easily.
202
00:34:33.500 –> 00:34:34.190
Jeff Cotto: Correct.
203
00:34:34.530 –> 00:34:36.780
Stephen Marcus: I mean, not that 7 million is normal.
204
00:34:37.079 –> 00:34:37.819
Jeff Cotto: No, it is.
205
00:34:37.820 –> 00:34:49.020
Jake Marcus: And a question that has kind of been… I mean, there’s a question as to companies with great claims practices, can you provide us with names of companies that perform insurance replacement cost appraisals?
206
00:34:49.020 –> 00:34:58.090
Jake Marcus: Just as a general guidance, without giving names, and I’ll defer to, you guys if you want to give some names, but,
207
00:34:58.170 –> 00:34:59.530
Jake Marcus: the…
208
00:34:59.690 –> 00:35:12.139
Jake Marcus: the… it’s important to make sure that you go to someone who knows condominiums, rather than just trying to get general insurance, if your crazy Uncle Eric says he does insurance, and then you find out it’s life insurance.
209
00:35:12.140 –> 00:35:22.860
Jake Marcus: it’s probably not gonna be that suitable for your condominium, so it’s good to find an expert in the condominiums and HOAs, to kind of address the insurance market there.
210
00:35:23.980 –> 00:35:30.239
Stephen Marcus: Somebody made a comment, I want to check on it, and then Jeff has a million slides that I’m messing him up on.
211
00:35:30.670 –> 00:35:40.730
Stephen Marcus: That he has to get to, saying Fannie Mae and Freddie Mac will not accept, any replacement cost appraisal older than 3 years.
212
00:35:40.790 –> 00:35:51.609
Stephen Marcus: I’m gonna have to double-check on that. I don’t know the answer to that. I do know that Fannie Mae and Freddie Mac will not accept any reserve study that is older than 3 years.
213
00:35:52.170 –> 00:35:55.269
Stephen Marcus: Jeff, do you happen to know the answer?
214
00:35:55.270 –> 00:36:01.500
Jeff Cotto: Steven, I’d have to check it, too, right? You know, it’s… I’m not usually providing the reserve study to the lender directly, so, you know.
215
00:36:01.500 –> 00:36:04.560
Stephen Marcus: No, no, no, no, this is on the insurance.
216
00:36:04.560 –> 00:36:09.009
Jeff Cotto: I’m not usually giving the lender directly the replacement cost on my end, so I don’.
217
00:36:09.010 –> 00:36:23.890
Stephen Marcus: Okay, so we’ll check on that. It’s a great, it’s a great question. I know the answer as to reserve studies. I don’t know it as to independent insurance appraisals. Jeff, I’ll stay quiet. Go ahead.
218
00:36:23.890 –> 00:36:24.979
Jeff Cotto: Next slide, Jake.
219
00:36:27.860 –> 00:36:46.379
Jeff Cotto: Perfect. So that, you know, again, this is the story that we’re talking about building, and, you know, really, in working with your property manager, you know, when you’re going out to market with your incumbent agent, you know, who is providing the policy now, or you’re interviewing a new agent to potentially, you know, write your insurance, first of all, have them out to a board meeting.
220
00:36:46.380 –> 00:37:02.669
Jeff Cotto: or meet them in person or over a Zoom meeting, and spend some time working with them. And, you know, this is what you should really be working on if they’re going to represent you in the market, is your narrative, right? So, when I get together with condos, I’ll ask these questions.
221
00:37:02.750 –> 00:37:14.270
Jeff Cotto: Please provide me 5, if you can get them, and you should be able to, 10 years of loss history. Any agent that tells you they can’t provide your loss history, and they don’t get them to you within 48 hours.
222
00:37:14.270 –> 00:37:34.409
Jeff Cotto: is, including if my agency does this, it’s stalling and blocking, because they don’t want to release that data because they know you’re oftentimes going out to market. I would say you should be asking for your loss runs from your agent on a quarterly basis, just to have them on file and understand what your claims history looks like. So you want to get 5 to 10 years of loss history.
223
00:37:34.410 –> 00:37:43.949
Jeff Cotto: And if there’s any large claims or open claims, you want to be able to tell a narrative of what’s going on with those claims and what was done to prevent them.
224
00:37:44.350 –> 00:38:00.300
Jeff Cotto: The property map, or the site plan, allows the underwriter to get a good view of the property. You know, not everything shows up on Google Earth or Google Images, but it gives them a good idea of how the buildings are spaced out and what the property looks like, where the units go and what the building numbers are.
225
00:38:00.560 –> 00:38:11.269
Jeff Cotto: We’ve covered the replacement cost appraisal, and then a really good narrative. One of my associations has a 10-year log on their website of every single project
226
00:38:11.270 –> 00:38:27.380
Jeff Cotto: and cost that they have put into their association on the last 10 years. Whenever I market their account, and we send that website to the underwriters, we usually get a, wow, this makes my job easy. So, you want to document, you know, what have we done to roofs?
227
00:38:27.430 –> 00:38:34.119
Jeff Cotto: Have we done an enveloping project? If we did an enveloping project, give us the report from the enveloping company.
228
00:38:34.430 –> 00:38:52.089
Jeff Cotto: Provide the replacement cost appraisal. What have we done to prevent water damage claims? You know, what kind of notification do we give owners on what they need to carry for insurance? The better story that we can tell as an agent to an underwriter, and provide proof, as Steven says at the bottom.
229
00:38:52.550 –> 00:39:03.390
Jeff Cotto: you’re going to do better. If you’ve done recent work to the roofs, and you had an inspection, and even though the roofs are a little bit older, but they’re in great shape, send that documentation and those photos in.
230
00:39:03.390 –> 00:39:23.360
Jeff Cotto: They’re going to help you get to the top of the underwriting pile, versus an association that doesn’t want to put the work in to do it, or a property manager that just says, I don’t know, and sends you a copy of the policy and asks for a bid. So, really make sure that you’re digging into these slides here when you’re putting your submission together.
231
00:39:25.350 –> 00:39:26.570
Jeff Cotto: Next slide, Jake.
232
00:39:28.180 –> 00:39:46.089
Jeff Cotto: And again, here’s the, you know, the claim story. You know, we had a multi-million dollar fire at an account that we’re looking at, worked with the property manager to understand, you know, how did it happen, what caused the fire, you know, what was the report from the fire department, the fire marshal, and the investigation team?
233
00:39:46.440 –> 00:39:51.259
Jeff Cotto: What is going to be notified to the owners to try to prevent that claim in the future?
234
00:39:51.360 –> 00:40:01.219
Jeff Cotto: And then, you know, we’re gonna document that, and so when we send this account out to market, we’re gonna have a clear picture of what happened, why, what we’ve done to prevent it.
235
00:40:01.220 –> 00:40:14.159
Jeff Cotto: And that should help answer any questions that we have. If we just say to the underwriter, we don’t know, it was a large fire, they’re not sure, it’s not going to hold very much weight. And so that’s just a clear example of what we talked about on the previous slide.
236
00:40:16.490 –> 00:40:17.660
Jeff Cotto: Next, Jake.
237
00:40:19.480 –> 00:40:37.980
Jeff Cotto: Maintenance and capital improvements, and so, you know, again, this really comes down to planning and budgeting. So, you know, I think a lot of the fear the last couple years for associations understanding the cost of everything is really, really high. A lot of maintenance has been deferred, or people are concerned with the cost of it.
238
00:40:37.980 –> 00:40:42.799
Jeff Cotto: You know, reserve studies, the, you know, replacement cost.
239
00:40:42.800 –> 00:41:07.580
Jeff Cotto: study, and then, you know, looking at what in that reserve study, you know, may need attention. You know, is it the roof? Is it the enveloping? You know, are hot water heaters and boilers at failure? You know, really kind of understanding what needs to be done, and then working to finance and really show and demonstrate care that moving forward these issues are going to be addressed is going to help you. And so, even if the money isn’t there right now.
240
00:41:07.760 –> 00:41:26.430
Jeff Cotto: But we’ve got a capital campaign going, we’re working on, you know, reserving, you know, our reserve fund balance to get up. We’ve had, you know, a couple companies out to give us a quote on an enveloping project, and we have a 3-5 year plan. Any of that kind of narrative to an underwriter of what’s going to happen in the future also helps very well.
241
00:41:26.430 –> 00:41:36.230
Jeff Cotto: And again, documentation, documentation, documentation below. Summaries, invoices, and reports. Let’s prove it, not just tell them that it’s happening.
242
00:41:38.590 –> 00:42:00.499
Jake Marcus: And that also goes… I just want to add on that the proactive measures, as far as when a claim comes to be, and you’re looking into litigation defense, it makes it easier for us. I do some litigation defense when a claim will come in, and we trigger insurance, and…
243
00:42:00.520 –> 00:42:16.099
Jake Marcus: the insurer is going to defend the claim, usually under a reservation of rights, and what will happen is it makes it easier for us if things are proactively planned, reserved studies, documentation, getting the right policy in place, doing everything to kind of
244
00:42:16.210 –> 00:42:29.650
Jake Marcus: proactively approach it will make it easier in the defense. And also, timely reporting of the claims is an important factor that we see more and more with that type of, that type of area as well.
245
00:42:29.870 –> 00:42:30.840
Jeff Cotto: Absolutely.
246
00:42:33.400 –> 00:42:56.289
Jeff Cotto: And I think, you know, here again is the, you know, a lot of the times what will happen… look, there’s a limited number of insurers, especially in, you know, coastal-prone areas or, you know, high wildfire areas. There are a limited number of insurance carriers willing to write in high-hazard areas, and if you every year go to market and ask your property manager to get 3 agents every year to submit a bid.
247
00:42:56.340 –> 00:43:07.659
Jeff Cotto: And you’re going out with a dirty, you know, dirty track record, meaning your claims frequency is high, and none of the, you know, narrative is being told to what’s being done to fix these issues.
248
00:43:07.660 –> 00:43:31.549
Jeff Cotto: we can’t afford it isn’t going to help, because if you’re telling them we can’t afford it, we don’t have adequate reserves, that’s even more scary for an insurer. So, I think, you know, if you’ve had a tough year with claims, you’ve had a carrier that’s willing to give you coverage, and, you know, their increase is reasonable, you know, for that year, and you’re working to, you know, clean up some of these issues.
249
00:43:31.550 –> 00:43:43.259
Jeff Cotto: Make sure you fix those issues first, and then get a go-to-market strategy, because what happens is, once it’s seen by an underwriter, it’s documented. It’s in the file, so we’ll send out…
250
00:43:43.260 –> 00:44:06.699
Jeff Cotto: Hey, we’re waiting on the loss runs, but we’d like you to look at this condo, and they say, thank you, but we’ve seen this the last 5 years. They have a pretty high claims history, we have the loss runs from last year, and it doesn’t really look like they’ve done anything different unless you can tell us otherwise. We’re gonna pass. And so, you really don’t want to go out years with very large open claims that are unsettled, or things unless you absolutely have to.
251
00:44:06.700 –> 00:44:16.370
Jeff Cotto: So fix those risks as best you can, come up with that narrative, talk to your agent, but going to market may not be the best strategy. It may hurt you more than you think in the long run.
252
00:44:20.800 –> 00:44:37.670
Jeff Cotto: So, here is the, you know, quick, you know, thing here. So, market value versus replacement cost. So, you know, market valuation, oftentimes we hear people say, well, this is what my condo’s worth, that’s what you could sell it for, not what would actually cost to build from an insurance standpoint.
253
00:44:37.950 –> 00:44:52.590
Jeff Cotto: Underinsurance can cause a major claim issue. One of the things that you lost in the E&S and surplus market on a lot of policies was your blanket agreed amount valuations. Those would suspend the coinsurance, meaning you were insuring to value.
254
00:44:52.590 –> 00:45:08.779
Jeff Cotto: And that was abused for a very long time in the industry, so you’ve seen more focus on making sure that you’re close to your valuation as you can be. So, not having enough insurance, or not understanding what it is, and then maybe not having agreed amount or replacement cost.
255
00:45:08.780 –> 00:45:15.610
Jeff Cotto: Could cause a very large coinsurance penalty where you’re not getting close to what you need to do the work to put yourself back together.
256
00:45:16.310 –> 00:45:19.439
Jeff Cotto: overinsurance, you know, I think that…
257
00:45:19.440 –> 00:45:44.330
Jeff Cotto: when you look at… I don’t often get too many clients where I think they’re over-insured, causing a budget strain. I don’t think that, you know, we see people, you know, buying absurd limits over what they should have, or, you know, buying absurd umbrella limits that are costing them a lot of money, so I don’t have a lot of thought on over-insurance. You know, I think it’s… in a tough market, people often tend to cut things because it costs
258
00:45:44.330 –> 00:45:55.000
Jeff Cotto: So, I don’t see too many over-insured associations. And then again, the appraisals and the reserve studies we’ve talked about, they just provide credibility and documentation and guidance.
259
00:45:58.700 –> 00:46:23.629
Jeff Cotto: Claims reporting, Jake mentioned this, some of your policies, such as your director’s and officers policy, are duty to report, meaning once you are aware of claim, you need to bring it to your insurance carrier’s attention as soon as possible. Where we run into issues or challenges with condos, oftentimes in areas where we have, you know, snowbirds or people that are not in their units over the winter, is, you know, there’s a water damage
260
00:46:23.630 –> 00:46:27.910
Jeff Cotto: claim The unit sits flooded, the owner comes back.
261
00:46:27.930 –> 00:46:32.910
Jeff Cotto: They notify their HO6 carrier, they get a check, and they start doing work.
262
00:46:32.910 –> 00:46:52.029
Jeff Cotto: But nobody told the master policy, and now the HO6 adjuster says, well, this should have been reported to the master first, because they’re going to be on the hook for the majority of it. And, you know, 4 months later, you’ve got a moldy, wet, you know, unit that nobody had a chance to look at. So, you really should have a claims documentation procedure that all the owners are aware of.
263
00:46:52.030 –> 00:47:06.369
Jeff Cotto: You should be talking to your property manager about, you know, are the claims coming to the board, are they coming to the manager, and then how do they get reported to the agent, and who else should be notified? So, you want to, you know, know who’s going to be the contact to report the claim.
264
00:47:06.430 –> 00:47:13.530
Jeff Cotto: Owners want to know that they need to report to their H06 carrier, and you’re also going to report to the Master Insurance Policy as well.
265
00:47:17.420 –> 00:47:42.309
Jeff Cotto: The great thing about technology, as Steven mentioned, you know, my car this morning started itself automatically and got ready to go to work, just by a touch of the button, you know, while I was getting ready to get in the shower. So, there’s some great technology out there, you know, heat and watering devices. Somebody asked if, you know, people have mandated these, but, you know, some of the carriers will even provide you a free water sensor to put under, you know, water-prone areas, like your dishwasher.
266
00:47:42.310 –> 00:48:06.799
Jeff Cotto: boiler. So, you know, there’s some great technology out there. Obviously, your smartphones can control your heating. So, you know, keeping the heat up in the unit, you know, if water comes into contact or the temperature drops rapidly, technology can let somebody know so that you can get into the unit and fix it, you know, before a unit floods and just sits with water. So, definitely take a look into some of the technologies. The great thing about them.
267
00:48:06.800 –> 00:48:11.570
Jeff Cotto: As, you know, they become more advanced, and more people adopt them, they become cheaper.
268
00:48:11.820 –> 00:48:22.079
Jeff Cotto: Preventative things are always good. You know, steel hoses on your washing machine or your dishwasher is gonna hold up a lot better than a rubber hose, so that’s something you can do.
269
00:48:22.120 –> 00:48:38.950
Jeff Cotto: A lockout tag-out program, or a lockout program, or where everybody just kind of goes in and, you know, you do a water heater replacement program, you know, we see a lot of times that people won’t go and look at their water heater until it’s too late, when it floods their basement. So setting a program, a lot of associations will
270
00:48:38.950 –> 00:48:53.110
Jeff Cotto: have each unit inspected, and they’ll look at the age on the tank that it says it needs to be replaced, and they’ll work on replacing those water heaters before they get to the point of critical failure. That’s an easy thing to do, and can be a massive prevention of claims.
271
00:48:55.310 –> 00:49:03.659
Jake Marcus: And I just… I submitted a, a poll, because I was pretty topical to the discussion of technology. I wanted to figure out
272
00:49:03.660 –> 00:49:19.840
Jake Marcus: geographic region for most of our attendees today, because sometimes where you live, even if you’re coastal, even if you’re in Massachusetts and you’re coastal versus non-coastal, can make a big difference in what type of insurance and how you want to protect yourself from that.
273
00:49:20.010 –> 00:49:39.890
Jeff Cotto: Yep. Yeah, and simple things as having a salt bucket, you know, next to your steps for, you know, in a winter time, or, you know, having a camera on, you know, a Ring doorbell, you know, that kind of monitors the front of your unit. So there’s a lot of great technology, and then kind of sharing that technology as well as part of your narrative. You know, deductibles, again, you know, for associations that were being forced
274
00:49:39.890 –> 00:50:04.770
Jeff Cotto: to have very high deductibles because they couldn’t secure anything lower. The Fannie decision and Freddie decision’s a win at the $50,000 level. You know, I’m a big fan of at least a $50,000 master policy deductible. You really want to think of your master policy as a catastrophic insurance policy, not a maintenance policy. So, you know, having the responsibility of an owner understanding, look, if I
275
00:50:04.770 –> 00:50:25.640
Jeff Cotto: don’t winterize my unit, or, you know, I don’t turn the water off in the bathtub after 3 martinis, and I flood, you know, 5 other units down below me, I’m gonna have some skin in the game. Can be a good thing for everybody, and so, you know, work with your agent to explore. You can get quotes on, you know, 10 up to, you know, $50,000, $100,000 deductibles.
276
00:50:25.640 –> 00:50:45.619
Jeff Cotto: I look at them as a risk management, tool more than a cost saver. So, we’re not seeing… if the loss history isn’t horrendous, we’re not seeing $250,000, $300,000, $400,000 deductibles in a lot of cases anymore. A lot of people are sticking with the $50,000, and some of the per-unit deductibles, you know, from $5,000 to $50,000 as well.
277
00:50:45.870 –> 00:50:53.190
Stephen Marcus: And Fannie Mae, Freddie Mac, just came out with the announcement on March 18th.
278
00:50:53.310 –> 00:51:00.110
Stephen Marcus: That the per-unit deductibles cannot be more than… $50,000.
279
00:51:00.260 –> 00:51:06.180
Stephen Marcus: But they got rid of, for per unit deductibles, the 5% maximum.
280
00:51:06.180 –> 00:51:06.710
Jeff Cotto: Yep.
281
00:51:07.900 –> 00:51:10.279
Stephen Marcus: Yep. So that’s… that’s a whim.
282
00:51:10.280 –> 00:51:34.619
Jeff Cotto: That’s a win, exactly. And so, you know, and we were able to overset that. Steven, in most cases, we could go to the carrier and say, look, you need to cap the per unit at under 5%, and we got a lot of endorsements changed so that they would do that. And then again, you know, this is a good thing for, you know, Steven and Jake, but, you know, documentation on who’s responsible for what, and again, that becomes a frequent source of dispute, so…
283
00:51:34.620 –> 00:51:42.510
Jeff Cotto: I think you really want your documentation to be clear as to what is the unit owner’s responsibility, what is the master policy to, you know.
284
00:51:42.510 –> 00:52:03.830
Jeff Cotto: responsibility, and then making sure, you know, if you hand out bylaws, you know, doing them electronically, and having somebody click on it so that you can see they’ve downloaded it, or, you know, they’ve accepted that policy, you know, it’s very easy to say, well, I never got a copy of the master deed in the bylaws when I moved in, but if you have a timestamp and a signature on it, it’s a lot more, you know, plausible that way.
285
00:52:08.730 –> 00:52:33.490
Jeff Cotto: Cyber risk is one of those things that we get a lot, that people say, well, you know, we have a management company, you know, there’s not a lot of money stored on-site, you know, what’s gonna really happen to us from a, you know, from a standpoint? And, you know, I think when you look at cyber, it, you know, really, the board members or the owners that are logging in, if you have an association website, or if you have a board emailing back and forth.
286
00:52:33.490 –> 00:52:44.740
Jeff Cotto: you know, on budgets and financial documents. It’s very easy to click on a link that you think is from a trustee, or your management company or a lender you work with.
287
00:52:44.740 –> 00:52:57.649
Jeff Cotto: and now have, you know, a ransomware demand. You can have software that gets installed into your computer so that they’re able to access banking information or account information for unit owners.
288
00:52:57.650 –> 00:53:00.330
Jeff Cotto: personal identifiable information.
289
00:53:00.330 –> 00:53:20.160
Jeff Cotto: The answer comes down to cyber, is nobody can stop it. The federal government can’t stop it with any of their systems. You’ve seen the hack of the CIA, FBI, you see large officials have their emails hacked, so there’s really no preventing cyber risk, and the question really becomes, is it the management company’s responsibility
290
00:53:20.160 –> 00:53:23.959
Jeff Cotto: Or is it the board’s responsibility? And the answer is it’s both.
291
00:53:24.090 –> 00:53:38.619
Jeff Cotto: the association owns the data. If it’s a breach through the management company’s software, then they may have some accountability. But a cyber policy for an association, depending on, you know, how many owners you have.
292
00:53:38.620 –> 00:54:03.389
Jeff Cotto: is relatively affordable, and it is a very broad policy, and they’re continuously updated to cover new cyber risks that claims occur from. So, again, I would say you do share responsibility with your management company. You should be looking at, you know, are we using multi-factor authentication when logging into, you know, financial documents, in some of our management systems?
293
00:54:06.310 –> 00:54:09.160
Jeff Cotto: Any questions there, Steven? I know this is a hot button for you.
294
00:54:13.340 –> 00:54:19.170
Stephen Marcus: Nope, I’m gonna let you, you still have some slides to get through, so I’ll hold comments.
295
00:54:19.170 –> 00:54:26.889
Jake Marcus: Cyber risk is a huge area, though. It’s definitely something that is a gap in condominiums, and not… we see it’s not…
296
00:54:27.020 –> 00:54:32.320
Jake Marcus: Not, not packaged enough, or not, not, not bought in enough in the, condominiums.
297
00:54:32.520 –> 00:54:33.080
Jeff Cotto: Yep.
298
00:54:33.080 –> 00:54:57.280
Jeff Cotto: This one always… crime and fidelity, people, like, laugh and joke that, you know, we’re heading off to Thailand with the association balance because it’s cold, or it’s too hot here, and we’re going to Iceland for the winter. But, you know, if you have money, and it’s, you know, a lot of people look at lending regulations on how much fidelity coverage they buy. I like Stephen’s line is, well, how much money do you have? It can all be stolen. So, definitely look at your crime and fidelity limits, you know.
299
00:54:57.280 –> 00:55:18.210
Jeff Cotto: especially with increases needed in reserve fund balance. This is not an overly expensive coverage, especially, you know, if you’re carrying $250,000, $500,000, a million dollars. In the scheme of your overall insurance, your crime and fidelity, is not an expensive coverage, most… for the most part, and can protect you, God forbid, something happens, along with cyber as well.
300
00:55:19.130 –> 00:55:20.570
Jeff Cotto: Next slide, Jake.
301
00:55:20.790 –> 00:55:26.510
Jake Marcus: We’re seeing more and more of that, too. There was an alleged embezzlement case in South Florida just this week.
302
00:55:26.510 –> 00:55:42.119
Jeff Cotto: Yep, a guy that I grew up, doing Junior Rifle Club with, over, and it’s not an association, but small business owner, he had a million dollars embezzled from his, bookkeeper, and when he had to go get cancer treatments, he found out that he was basically bankrupt. It was, it was horrendous. Wow.
303
00:55:42.280 –> 00:55:57.760
Jeff Cotto: D&O exposure. Again, there’s a lot of, you know, decisions being made related to, and I hear a lot for associations, you know, around budgeting, reserve funding, transparency, you know, claims disbursement from insurance.
304
00:55:57.760 –> 00:56:21.469
Jeff Cotto: you know, right now, people are under a lot of financial strain. You see a lot of changes in, you know, regulations that we’ve talked about, things coming out, so you need to be really, you know, careful as a board that you’re documenting things, and that you’re putting, you know, proper procedures in place when you’re making decisions, but your D&O policy becomes very, you know, important as far as defense and potential settlement.
305
00:56:21.470 –> 00:56:43.850
Jeff Cotto: You really want to work with an umbrella carrier in the D&O space, if you can, that will cover over your directors and officers policy. You know, a lot of people will buy a $1 million directors and officers policy, and that’s it. You can buy those policies up $1 to $5 million, and then you can get your, as Steven said, $25 and $50 million umbrella to sit over the top of them.
306
00:56:43.920 –> 00:56:55.690
Jeff Cotto: do not buy your D&O policy with inside of your master policy for liability and property. There’s programs like McGowan, Kevin Davis, Ian Graham.
307
00:56:55.690 –> 00:57:15.350
Jeff Cotto: JGS, there are specialty directors and officers programs in the marketplace with a standalone policy that will be sat over by an umbrella. So, you know, make sure you’re getting a high-limit D&O policy, and make sure that on the D&O claim, if you think you have a D&O claim or allegation.
308
00:57:15.350 –> 00:57:20.460
Jeff Cotto: Report that right away, because you do have a duty, to report in those policies.
309
00:57:21.900 –> 00:57:23.280
Jeff Cotto: Next slide.
310
00:57:24.310 –> 00:57:29.369
Jeff Cotto: I think we talked about this one, so we’ll skip this chick, reserve studies, we’ve spent some time there.
311
00:57:29.910 –> 00:57:51.619
Jeff Cotto: Ordinance and law, you know, this is another one Steven and I talk about a lot when we’re having conversations, you know, it’s… people don’t think about the fact that once your building catches on fire, that you need to, one, demolish that building, you then need to take the debris and removal away, and then you also need to see if there’s any code enhancements and improvements.
312
00:57:51.690 –> 00:58:07.679
Jeff Cotto: With the extreme increases in cost of construction, you know, a lot of the policies that have ordinance and law coverage as a throw-in, you know, $50,000 limit, or, you know, combined limit of $100,000, it’s not going to be adequate
313
00:58:07.680 –> 00:58:31.519
Jeff Cotto: One of the best things about a reserve study is they will often put the demolition and removal cost and some of this into your reserve study. So, you know, if a building doesn’t have a sprinkler, they’ll let you know what the sprinkler system will cost, and then they’ll also give you an estimate on the cost per square foot of demolition. So, again, that, you know, replacement cost survey does a lot, but, you know, really look at and ask your agent.
314
00:58:31.570 –> 00:58:43.219
Jeff Cotto: Are higher limits of ordinance and law available, and should we be considering them? And then get some quotes, because you may be surprised what the difference between $500,000 in ordinance and law is versus a million.
315
00:58:47.440 –> 00:59:07.320
Jeff Cotto: Contract and risk transfer, we hit on that, that you really want to, you know, get the indemnification language, you want to be an additional insured, you want to see that on that certificate, and you really want to make sure that you’re… you know, I have people say, well, I kind of feel bad for the contractor, he doesn’t want to carry a million dollar umbrella because it’s going to cost him $800.
316
00:59:07.320 –> 00:59:11.050
Jeff Cotto: Well, if he wants to work on your property, and it’s a good contract.
317
00:59:11.050 –> 00:59:30.090
Jeff Cotto: he needs to have an umbrella policy in place. And so, you know, you really want at least a million dollars an umbrella for your, you know, contractors or more. You want million or $2 million general liability limits. You want to see workers’ comp insurance in place. In states that don’t require a sole proprietor to have workers’ comp.
318
00:59:30.220 –> 00:59:45.879
Jeff Cotto: I would say that it’s worth the cost for them to purchase workers’ compensation, so, you know, you really want to make sure that you’re in your contract when you’re working with your attorney or your property manager, that you set the vendor limits high enough, and that you enforce them with all of the contractors and document it.
319
00:59:48.260 –> 00:59:54.670
Stephen Marcus: When we go into, indemnification, my little pet peeve is,
320
00:59:55.870 –> 01:00:00.779
Stephen Marcus: One, not for our purposes, because we’re busy enough.
321
01:00:01.400 –> 01:00:04.770
Stephen Marcus: But I think all contracts should be looked at.
322
01:00:05.020 –> 01:00:13.890
Stephen Marcus: From pest control to the trash people to everybody else, just because it’s typeset does not mean that it favors you. It doesn’t.
323
01:00:13.930 –> 01:00:28.530
Stephen Marcus: But on indemnification, my pet peeve is I always want the contract to say defense and indemnification. Indemnification, technically, only pays you
324
01:00:28.590 –> 01:00:32.129
Stephen Marcus: After… A settlement or a judgment?
325
01:00:32.210 –> 01:00:50.640
Stephen Marcus: Whereas defense pays the legal fees, as you go along. So, I see too many contracts that just say indemnification and don’t have broad language to incur reasonable attorney fees.
326
01:00:50.740 –> 01:00:54.440
Stephen Marcus: Though we all know there’s no such thing as reasonable attorney fees.
327
01:00:54.920 –> 01:00:55.460
Jeff Cotto: Right.
328
01:00:56.130 –> 01:00:56.480
Jake Marcus: Good point.
329
01:00:56.480 –> 01:00:59.040
Stephen Marcus: Except for what I charge.
330
01:00:59.830 –> 01:01:01.790
Stephen Marcus: Yeah.
331
01:01:01.790 –> 01:01:26.759
Jeff Cotto: And again, you know, so again, really, I think the closing takeaway today is, you know, look, there is a strong chance this year, if you have had a favorable loss history over the last several years, and you have seen a large impact on your pricing, that that can be right-sized. You know, the planning for that should start 90, 120 days out. You know, if you are going to go to market with another agent, as Jake said, have them come in, you know, interview them, you know, what’s their experience.
332
01:01:26.910 –> 01:01:50.540
Jeff Cotto: you know, what does their claim system look like? Do you have on-staff claims people that help through the process? You know, what do they do as far as education, you know, for condos? So, really make sure you’re working with a firm that understands condominiums and not Uncle Eddie, as Jake mentioned. And then, really, the focus to continue the trend of being more favorably, you know, looked at as a risk is what we’ve talked about today.
333
01:01:50.540 –> 01:01:55.500
Jeff Cotto: Maintenance and documentation of that maintenance and planning moving forward.
334
01:01:55.500 –> 01:02:04.669
Jeff Cotto: You know, the government in your documents, you know, how owners report claims, what you’ve put in there about their responsibility for certain things is so important.
335
01:02:04.670 –> 01:02:27.610
Jeff Cotto: documentation, documentation, documentation, and then again, planning that renewal 120 days, you know, 90, 120 days out, you know, meeting with your agent, and then really putting together that narrative so that you have the best plan in place, to leverage the most insurance, you know, most favorable insurance renewal is going to go a long way. I was working on one this week where
336
01:02:27.610 –> 01:02:51.370
Jeff Cotto: for 4 weeks, I have not been able to get the square footages of any of their buildings. They actually can’t even tell me what units go in some of their buildings, and it, you know, it becomes very challenging, because at that point, you know, doing this for 20 years, I just start to say, well, I have other files that, you know, are providing this documentation, and, you know, after 2 or 3 weeks of looking it up in the, you know, assessor’s office and doing things on my own.
337
01:02:51.370 –> 01:03:04.949
Jeff Cotto: You know, unless it gets provided to me, I’m probably going to move on to another risk. And so, you know, you want to work with your agent and provide the documentation they’re asking for, because for the most part, it’s being used to leverage a much more favorable renewal on your part.
338
01:03:05.410 –> 01:03:10.399
Stephen Marcus: Who do you usually find who is daring enough to.
339
01:03:11.120 –> 01:03:15.340
Stephen Marcus: Trust the measurements they do to give you square footage.
340
01:03:16.210 –> 01:03:41.020
Jeff Cotto: You know, so, I mean, Steven, we’ll find them a lot of the time in the town assessor’s cards, and we can pull them if all the units are there, you know, and then, you know, I always say to people, look, you know, I’m using the, you know, we’re using the square footage either from your master deed or from the, you know, town assessor’s cards, but, you know, we don’t have 100% verification on it, and so, you know, that’s usually where we get it. I try not to just use the ones that are given to me from another agent’s, you know.
341
01:03:41.020 –> 01:03:45.800
Jeff Cotto: applications, etc. I will try to double-check them, and oftentimes they’re not right.
342
01:03:45.800 –> 01:03:50.980
Stephen Marcus: How about the, floor plans that my laws filed with the…
343
01:03:51.120 –> 01:03:55.119
Stephen Marcus: Massachusetts, the master deed, but declarations in other states.
344
01:03:55.120 –> 01:03:55.700
Jeff Cotto: Yep.
345
01:03:55.700 –> 01:04:02.880
Stephen Marcus: the Master D’s, one of the exhibits will give the square footage of each unit.
346
01:04:02.880 –> 01:04:03.510
Jeff Cotto: Right.
347
01:04:03.510 –> 01:04:11.969
Stephen Marcus: But that, of course, is… if you just use that, you’re gonna be messing up, because you’re gonna be missing all the common areas.
348
01:04:11.970 –> 01:04:12.540
Jeff Cotto: Exactly.
349
01:04:12.540 –> 01:04:15.130
Stephen Marcus: Or a full basement.
350
01:04:15.130 –> 01:04:40.089
Jeff Cotto: Yeah, exactly. And really what it comes down to is, you know, when we look at the cost per square foot, the easiest way to determine it, you know, for a quick view is, you know, what’s the total square footage of the association divided by the insurance limit coverage, and that gives you a rough idea, right? And, you know, if you start seeing, well, our, you know, cost per square foot on that simple calculation is somewhere, you know, $190 to $200, you know, you’re very well underinsured in a lot of areas of the country.
351
01:04:40.090 –> 01:04:59.470
Jeff Cotto: So you definitely are going to need to do some work. And that’s why that, you know, replacement cost appraisal, it takes the guesswork out of it, right? And that’s what you want, is something that’s defensible and, you know, shows you, you know, how to plan to make these increases, and maybe why you need to, versus an agent guessing or the board saying, we don’t agree with that, that’s too high.
352
01:04:59.470 –> 01:05:07.189
Stephen Marcus: And even based just on the Cape, where you were initially based until you became
353
01:05:07.370 –> 01:05:21.689
Stephen Marcus: world, world headquarters down, in the Cape, and part of the Baldwin Group, years ago, like, 20 years ago.
354
01:05:21.830 –> 01:05:27.300
Stephen Marcus: We could build something… In the suburbs of Boston.
355
01:05:27.470 –> 01:05:31.220
Stephen Marcus: For… at the time, it was 200 a square foot.
356
01:05:31.710 –> 01:05:36.910
Stephen Marcus: the CAPE automatically was 300. I assume those numbers are now…
357
01:05:37.410 –> 01:05:42.070
Stephen Marcus: 350 and 500, or whatever, but even…
358
01:05:42.070 –> 01:05:47.159
Jeff Cotto: 6,500, 600, 700 on Nantucket, you know, and again, it just keeps rising, and I think.
359
01:05:47.160 –> 01:06:03.269
Stephen Marcus: Montana, we have some in Big Sky and Yellowstone, that we deal with that are… a couple of years ago were at $800, and again, the cost of building materials, possible tariffs.
360
01:06:03.290 –> 01:06:11.609
Stephen Marcus: The cost of fuel, the, what’s going on in Iran.
361
01:06:11.680 –> 01:06:20.980
Stephen Marcus: It takes ships and planes and whatever to carry these materials.
362
01:06:21.010 –> 01:06:36.229
Stephen Marcus: And maybe Southwest is gonna charge you an extra $3 for an extra checked, checked bag. but, the suppliers of
363
01:06:36.290 –> 01:06:52.619
Stephen Marcus: building materials, probably gonna cost you, charge you substantially more, because the cost of, of, of, of gas and oil have increased, dramatically. Maybe they’ll settle down, so it’s a moving target.
364
01:06:53.970 –> 01:07:07.989
Jeff Cotto: Absolutely, and you know, I think for time’s sake, Steven, you know, I noticed there’s some questions in the chat that maybe didn’t get hit, so you and Jake are usually very good about sending out the follow-up questions, and I’ll get those back to everybody with, you know, some thoughts within the next couple.
365
01:07:11.070 –> 01:07:20.149
Stephen Marcus: Yeah, we’ll send out a recording. We’ll do… with Jeff, Jake, and myself, we’ll do answers to the
366
01:07:20.150 –> 01:07:37.009
Stephen Marcus: Q&A, maybe one that, just came in from, a very good, agent down in, Cincinnati that does some standalone projects for McGowan.
367
01:07:37.010 –> 01:07:41.090
Stephen Marcus: Saying we didn’t touch coinsurance, do you wanna…
368
01:07:41.230 –> 01:07:52.400
Stephen Marcus: touch on that a bit, and as a preface to it, I’ll say, I don’t see any more in the Fannie Mae guidelines the words agreed amount endorsement.
369
01:07:52.400 –> 01:08:12.569
Jeff Cotto: Yeah, no, I agree. So, you know, the way we see a lot of condo associations from a coinsurance standpoint, so, you know, current coinsurance is the insurance company’s way of forcing you to insure to value, and if you don’t insure to value, and you have a coinsurance provision in your policy, then you can be penalized for not having enough insurance.
370
01:08:12.570 –> 01:08:13.310
Jeff Cotto: So…
371
01:08:14.060 –> 01:08:15.740
Stephen Marcus: Okay, but, but…
372
01:08:15.740 –> 01:08:16.260
Jeff Cotto: Yep.
373
01:08:16.510 –> 01:08:24.930
Stephen Marcus: The big caveat is… If you had an agreed amount endorsement, or waiver of coinsurance.
374
01:08:24.930 –> 01:08:25.680
Jeff Cotto: Yeah, that’s where I.
375
01:08:25.689 –> 01:08:43.739
Stephen Marcus: And your building was insured for $30 million, and there was a total loss of $50 million, and put aside any ordinance or LAR upgrades. Unless you have a guaranteed replacement cost policy, which I assume are tougher and tougher to get.
376
01:08:43.739 –> 01:09:02.049
Stephen Marcus: If you have a $30 million loss, or a $30 million limit, and $50 million of coverage, even with agreed amount endorsement, the insurer, correct me if I’m wrong, is not going to pay you a dime more than $30 million. Correct. And who wants to be…
377
01:09:02.089 –> 01:09:05.839
Stephen Marcus: The board member, or manager.
378
01:09:05.909 –> 01:09:19.619
Stephen Marcus: Or insurance agent or attorney who addresses a group of unit owners to tell them, well, we have some bad news, you’re each gonna have to pay your share of a $20 million shortfall.
379
01:09:19.620 –> 01:09:20.430
Jeff Cotto: Correct, exactly.
380
01:09:20.439 –> 01:09:20.779
Stephen Marcus: So…
381
01:09:20.779 –> 01:09:41.159
Jeff Cotto: a lot of the agreed amount, you know, a lot of those agreed amount endorsements in the excess market have gone away, and so blanket, you know, agreed amount is no longer available, meaning each building needs to be specifically insured to value, and the limit of that building. So, you know, let’s say you had a $50 million property, you know, spread across 10 buildings in the past.
382
01:09:41.159 –> 01:09:49.179
Jeff Cotto: you know, you could have one building incur whatever loss, you know, with up to $50 million, and the claim would be paid. You know, with the stated per value per building.
383
01:09:49.179 –> 01:09:54.419
Jeff Cotto: you know, each building may only have $5 million of insurance. If you have a $7 million claim.
384
01:09:54.419 –> 01:10:18.459
Jeff Cotto: you’re $2 million short, right? And so, again, you really need to look at valuation, and you need to understand not to get people confused. You can be penalized for not having enough insurance. You can have to assess for not having enough insurance. You can get sued for not having enough insurance. And so, you know, you really need to understand how those policy, you know, provisions work for your specific policy to try to not get people too confused regarding coinsurance.
385
01:10:20.320 –> 01:10:34.390
Stephen Marcus: one, one other, comment, that, that came up, and I realize we, we’ve, we’ve gone over, but, everybody will get a copy of the,
386
01:10:34.390 –> 01:10:41.190
Stephen Marcus: the recording. A couple of things to think about is…
387
01:10:41.250 –> 01:10:59.200
Stephen Marcus: We do deductible resolutions, allocating the deductible to the, to the unit owner, especially, with deductibles up to $50,000 per unit. We believe it should be covered by Coverage A.
388
01:10:59.200 –> 01:11:18.540
Stephen Marcus: To the HO6 policy by increasing it by $50,000, if it’s a $50,000 deductible. but also re, thinking of amending your insurance, sections, the provisions of your condominium documents. Most of them are awful.
389
01:11:18.540 –> 01:11:22.639
Stephen Marcus: But somebody points out, that there are…
390
01:11:22.650 –> 01:11:30.039
Stephen Marcus: Too many that still have an 80% coinsurance provision, which is just…
391
01:11:30.130 –> 01:11:38.920
Stephen Marcus: horrible if you actually do it. it should be at 100%. But we also do…
392
01:11:39.150 –> 01:11:47.089
Stephen Marcus: And it’s a little daring, but it’s been successful over the decades. An in-unit maintenance resolution, where things such as
393
01:11:47.300 –> 01:12:04.519
Stephen Marcus: Replacing hot water heaters before the end of their, warranty period, to the sensors, to notifying the association, if there’s evidence of water on a windowsill indicating some infiltration.
394
01:12:04.720 –> 01:12:14.160
Stephen Marcus: the AWARE, water, water alerts, the… Dang.
395
01:12:15.380 –> 01:12:22.890
Stephen Marcus: Excuse me. Electric, electrical fire, hazards.
396
01:12:22.890 –> 01:12:36.479
Stephen Marcus: are all things that we have put into in-unit maintenance resolutions, and with great success. There’s nothing worse… I started in 197… while I was in law school as a condominium manager.
397
01:12:36.650 –> 01:12:47.719
Stephen Marcus: And there’s nothing worse than having a 20-story high-rise and have a hot water heater go. Nobody’s fault, it just bursts.
398
01:12:47.860 –> 01:12:54.230
Stephen Marcus: And ending up with $25,000 of damage to…
399
01:12:54.710 –> 01:13:07.300
Stephen Marcus: each of the 19 floors below. One, you’re dealing with the idea that, oh, we only manage the common areas. No, you don’t. You now have 19 unit owners screaming at you every day.
400
01:13:07.300 –> 01:13:20.099
Stephen Marcus: two, they’re gonna be fighting the amounts that the claims are, settled for. if history holds true, a lot of people won’t have an H06 policy.
401
01:13:20.100 –> 01:13:32.890
Stephen Marcus: these end-unit maintenance resolutions can at least cut down on the chances of a loss. They can’t prevent them, but it can cut down on the chances.
402
01:13:38.650 –> 01:13:39.490
Jeff Cotto: Yep, all very good.
403
01:13:39.490 –> 01:13:42.199
Stephen Marcus: Have we… have we… have we run out of things to say?
404
01:13:42.580 –> 01:13:50.910
Jeff Cotto: No, I think you and I could probably go on and on and on, so I want to be, you know, cautious of people’s time, and you know, Jake, you let us know, but again, we’ll follow up with everybody in the.
405
01:13:50.910 –> 01:13:51.230
Stephen Marcus: Yeah.
406
01:13:51.230 –> 01:13:53.179
Jeff Cotto: You know, section that didn’t get an answer.
407
01:13:53.600 –> 01:14:02.490
Jeff Cotto: If you have a specific question, you know, related to legal or myself, you know, our emails are on the, on the, you know, the bio right here, and you’ll get that, I believe, mailed to you after, too.
408
01:14:02.490 –> 01:14:09.800
Stephen Marcus: Yeah. Yeah, next week you’ll receive a copy of the recording, answers to the…
409
01:14:09.840 –> 01:14:28.370
Stephen Marcus: Q&A, they’ll be in summary fashion, because some of them are around the lengthy and somewhat, complicated, but not only were there some great questions by the audience, there were also some great comments, so we, we truly appreciate that.
410
01:14:28.370 –> 01:14:30.740
Stephen Marcus: One of the comments was.
411
01:14:30.760 –> 01:14:50.600
Stephen Marcus: a $4,000 grind… grinder pump, maybe last year, is now $9,000. Just an example of some, how some costs are escalating rather rapidly, so it’s tough to keep up with the appropriate limits. Jake, do you have any,
412
01:14:51.130 –> 01:14:55.000
Stephen Marcus: Closing words or… or… or thoughts?
413
01:14:55.530 –> 01:15:14.260
Jake Marcus: No, I think, yeah, we’ll address all the questions in Postscript, and appreciate everyone coming, attending. We appreciate Jeff. Thank you so much for joining us. The expertise is invaluable, and, we really appreciate it. This was a great kind of
414
01:15:14.260 –> 01:15:30.709
Jake Marcus: crash course on the status of insurance, condo insurance specifically, in 2026. So, we’re excited to kind of continue this conversation and reach out to us if you have any questions, follow-up questions after the seminar.
415
01:15:30.710 –> 01:15:37.859
Jake Marcus: Review the recording, go over it with… whether you’re board, go through it with your board members, property manager, go through it with your…
416
01:15:37.860 –> 01:15:51.650
Jake Marcus: with your properties, and insurance agents, this is always an important topic that keeps growing and is very important. Everything starts and ends with it, and, let’s, stay in touch and keep the conversation going.
417
01:15:51.950 –> 01:15:52.860
Jeff Cotto: Thank you, everyone.
418
01:15:53.460 –> 01:16:04.990
Stephen Marcus: If there are comments on, whether today was helpful, what you didn’t like, other than,
419
01:16:05.250 –> 01:16:27.269
Stephen Marcus: Jeff has to get this monstrous Baldwin group to fix his Zoom thing so people can hear him, or he has to just, get really close to his computer screen. But if you have comments on what we could do better, or what we did awful, and…
420
01:16:27.270 –> 01:16:35.429
Stephen Marcus: other topics that you would like to see us address. we fall a little behind because of
421
01:16:35.430 –> 01:16:39.980
Stephen Marcus: Some unforeseen circumstances, at least in my family.
422
01:16:39.980 –> 01:16:55.150
Stephen Marcus: in terms of doing these as, monthly as, we had been, but, plan on, getting back to, to that, and,
423
01:16:55.250 –> 01:17:02.669
Stephen Marcus: I personally found what Jeff had to say, extremely…
424
01:17:02.800 –> 01:17:11.199
Stephen Marcus: Helpful and enlightening, and, really appreciate him taking the, time to be our guest today.
425
01:17:12.710 –> 01:17:13.080
Jeff Cotto: Yes.
426
01:17:13.080 –> 01:17:18.470
Jake Marcus: Absolutely, let us know on topics, we’re happy to… Get into the popular topics.
427
01:17:21.650 –> 01:17:22.500
Stephen Marcus: Thank you.
428
01:17:22.700 –> 01:17:23.330
Jeff Cotto: Thank you.
429
01:17:23.950 –> 01:17:24.810
Jake Marcus: Thank you.
430
01:17:29.280 –> 01:17:35.299
Stephen Marcus: Jake, are you cutting and pasting the chat and Q&A?
431
01:17:35.840 –> 01:17:37.060
Jake Marcus: Correct.
432
01:17:37.720 –> 01:17:39.770
Stephen Marcus: Yeah, I say that there’s both.
433
01:17:40.350 –> 01:17:41.750
Jake Marcus: I know, that’s what I’m doing.
434
01:17:41.750 –> 01:17:43.589
Stephen Marcus: Yeah, I do the same, yeah.
435
01:17:50.360 –> 01:17:52.999
Jake Marcus: Good job, Steven. You did great today.
436
01:17:55.010 –> 01:18:01.710
Stephen Marcus: You did as well, Jake, yeah. Jeff apparently… the pad.
437
01:18:03.420 –> 01:18:04.780
Jake Marcus: He was in a rush.
438
01:18:05.380 –> 01:18:06.220
Stephen Marcus: Yeah.
439
01:18:06.680 –> 01:18:08.480
Jake Marcus: Maybe he had to go see the Masters.
440
01:18:08.870 –> 01:18:11.160
Stephen Marcus: That could be.
441
01:18:13.730 –> 01:18:24.420
Stephen Marcus: We, the… still have people trickling out. Again, we want to thank everybody for for attending.
442
01:18:24.860 –> 01:18:32.490
Stephen Marcus: And, look forward to seeing you, hopefully, next month.
443
01:18:34.160 –> 01:18:35.080
Jake Marcus: Absolutely.
444
01:18:36.630 –> 01:18:40.009
Jake Marcus: Alright, thanks everyone. I’m gonna end the slideshow.
445
01:18:45.830 –> 01:18:49.920
Stephen Marcus: Okay, Have a great day, everybody.
446
01:18:50.090 –> 01:18:50.659
Jake Marcus: Have a great.