There are two huge issues that all New York condo insurers must grapple with. One is on the liability side; the other is on the property side.
“They’re the usual New York challenges,” said Robert G. Mackoul, vice president and chief underwriting officer at New Empire Group, Ltd. “On the liability side, we’re up against the New York Labor Law, and on the property side, there are a lot of water damage issues.”
The New York Labor Law states that a landlord has absolute liability in all cases. The letter of the law states that if anything happens on premises, whether that’s a contractor falling off a ladder, or a visitor slipping and falling in the lobby, the claim will fall on the landlord’s shoulders.
“Any insurance company writing any kind of liability in the New York area, whether that’s for condos, apartments, or anything else, has to face the Labor Law issue,” said MacKoul, who heads up New Empire Group’s CondoPak program. “Condo-savvy people, or just insurance-savvy people in general, will do everything they can to make sure their board has the appropriate risk management in place, and that they have the proper ‘hold harmless’ in place when they work with a contractor so they’re protected as much as possible.
“It’s a game of trying to protect yourself as much as possible because judgements under the Labor Law can get pretty big. They often go into the hundreds of thousands, resulting in complete liability limit losses and going into the umbrella limit. It’s the one big thing that everybody in New York faces on the liability side. It’s easily the biggest issue here.”
Unless you’re blessed with an amazing streak of luck, any insurance professional involved in urban property coverage, whether that’s for condos, apartments, or commercial buildings, will have a familiar foe in water damage. It’s the nature of the beast in metropolis hubs, where the buildings are a mixture of old and new.
“New York is unique in that there are thousands of older buildings, and then there’s a lot of new construction going on, but you don’t find too many buildings in the middle of that spectrum,” MacKoul told Insurance Business. “A lot of the older buildings have water issues. They’re suffering water damage claims from burst pipes and sprinkler heads – things of that nature. Water damage has easily been one of the biggest issues for us on the property side.”
Like a lot of other property-related fields, the condo insurance market is tightening, and this is partly due to the two key loss drivers of liability and water damage claims. According to MacKoul, there are some “pretty dramatic rate increases” in the market, and some of the bigger carriers are changing their risk appetites. Capacity in New York is “never much of an issue,” he added, because of the concentration of real estate in the North-eastern hub, but as the market hardens, the more specialized players, like New Empire Group’s CondoPak program are gaining new advantages.
CondoPak is an exclusive package program that provides a comprehensive property and general liability policy for condominiums, cooperatives and community associations through select appointed brokers. It offers building limits of up to $35 million and focuses on higher-end buildings with better construction.
“We’re impacted by the hardening market in a positive way. We’re seeing a lot of submissions and we’re extremely busy,” MacKoul commented. “The select group of brokers that we work with is affected by the hard market like everyone else, and they’re looking for homes for their business. We’re working hard with our brokers to try and cater to their needs.”