All Forum Posts by: Bo Bond

Manco,

To add to Aaron's great response above, the reason your agent responded in this fashion is because they don't actually "underwrite" your account.  In lay terms, the carrier/underwriter is there to apply rates to your account, review loss history, review market conditions, apply debits/credits to your account, and send the agent a quote. This is "not" what an agent does (in most cases).  If the underwriter isn't willing to specifically answer your question via your agent (which in most cases they won't), then your agent certainly won't provide you with any specific direction either.  However, a tenured agent will give you an idea of what they've seen and experienced over the years with other clients in similar situations.  I believe you've received some of that direction above from other agents and investors.

If you’re more than 2 months out from your policy renewal when a claim takes place, then you're not likely to get much direction from the underwriter when you ask a question like this. Carriers/underwriters typically don't want to commit to anything specific unless your policy is soon to renew.  Just as we've witnessed in the past year or so, catastrophic storms, market uncertainty, economic issues, inflation, tightening reinsurance markets, etc. can all have a significant impact on a carrier’s rates and how they approach the renewal of "every" policy they write .  

I do think you have some good direction above about whether to file a claim or not.  I don’t believe things will go wrong for you either way given this is a pretty small claim in general.  

Hope this helps! Good luck!

Varinder,

Sorry for the issues.  I know claims can be difficult to manage and understand at times.  

I know it's too late now, but it may have been best to wait a little while to see if the tenants liability insurance could have been triggered due to "potential" negligence, or simply because the tenant let their insurance carrier know that their fire caused your property to be damaged.  Unfortunately, if their carrier were to deny helping you, the burden to prove the tenant's negligence would be up to you to prove (likely in court/mediation).  

Just keep in mind that if the fire wasn't due to negligence, but was because a wire shorted out in a light switch, plug, in the wall, in an appliance, etc., then you're going to be hard pressed to get their insurance carrier to reimburse you anyway.  There's no negligence in these situations 99.9% of the time.  As you can imagine, even a prudent person doesn't / can't survey the internal components of their switches, plugs, wiring in the walls, wiring in appliances, etc.  If this was the case, then it's simply an extremely unfortunate situation, and both parties will have to file claims and allow their insurance carriers to respond.  

The other unfortunate truth is that the claim is likely too small for your insurance carrier to subrogate against the tenants liability coverage.  Most carriers weigh the cost of the legal fees that go into subrogation, and quickly determine whether it's worth the cost/effort or not.  If the payout for your fence is minimal (in your carrier's eyes), then I would guess that your carrier isn't going to subrogate, which means the loss and claim stays with you and hits your loss history record.  

Lastly, if you haven't had any (or many) claims in the past 3 years, and the payout of this claim is minimal to the carrier, then I wouldn't imagine your premium would be influenced too much due to this loss.  In fact, I think the insurance industry, tough economy, and a hardening insurance market would likely have more impact on your premiums in CA, than this loss.  I've recently seen folks in CA receive renewal quotes with 20% + increases in premium and they haven't had any claims at all.  They incurred these increases simply due to market conditions.  

I would suggest you visit with your agent about how they think this loss might influence your renewal premium versus the influence of a hardening insurance market.  If you don't like the response, look to shop your insurance with another agent and/or other carriers.  The best news is that CA (west coast states) typically have some of the most aggressive rates when compared to the rest of the country.  So while it may seem awful that your rates jump from .10 cents to .15 cents, at least your not paying .40+ cents (on average) like folks in the central and eastern U.S.  

I hope you find this information helpful.  Good luck!

Justin,

There could be a whole slew of reasons why a carrier might do something like this in my experience.  Below are just a few of those reasons.  I'm not saying any of these apply to your specific situation, but any of these could be the case if you're being non-renewed and haven't had any losses and don't know why.  That said, if you ask your agent, they should certainly be able to find out.  Now whether the reply makes any sense at all to you or your agent is another story, and in most cases it doesn't have to make sense as long as the carrier gives you ample amount of notification (30 days written notice in most states, 60 in some).

* They no longer have an appetite for residential landlord type exposures.

* They've been burned in your area (city, county, state) writing landlord policies.  This is more about their overall loss ratio when it comes to landlord policies and exposures, and not about your specific account (with no losses).

* They like to jump in and jump out of certain types of niche markets every few years or so.  If this is the case, they may build up their portfolio and then back away from any new business going forward, or even start to non-renew accounts in certain areas that are more prone to certain weather related events.

* New director/VP of underwriting who's had a bad experience with the landlord policies in general, and has brought that hesitation to the company.

* Something material has changed about the account (values have exceeded their acceptable threshold, total insured value is too large for all properties combined, liability issues have arisen in the area where your rentals are located, etc.).

* Carrier gets uneasy about an exposure at one of your properties (you allow certain dog breeds, you don't require tenants to carry renters coverage, you have a pool at one of your rentals, etc.).

* Carrier inspected some of your homes and didn't like the exposures or condition of the homes (roof is too old, plumbing/electrical concerns, overgrown trees around the home, other hazards, etc.).  In most cases they might send you a request to fix these items before they send a non-renewal.  Some may not.

 * Carrier might send a non-renewal if you haven't sent them any updated details or information about your properties/exposures that they've requested.  

* Due to a hardening insurance market, carriers might be looking to non-renew clients/accounts that they feel have a higher probability of filing claims than other clients/accounts.  This isn't based off your current loss history, but more about the industry you're connected to.

Hope this helps.

Nazgul,

99.99% of the time no property or liability policy will pay for subsidence (shifting soils that cause cracks in the foundation/walls of your home).  Certainly no renters insurance is going to pay for something like this.  

This happens everywhere across the U.S. (some places are far more susceptible to shifting than others).  There are "many" factors that go into subsidence (poor foundation work, older foundation, soil conditions, trees, etc.).  Watering can help, but the lack of water isn't the only reason for subsidence issues.  Even with professional proof that a lack of water is 100% the problem, you likely won't get very far with the tenant reimbursing you.

Honestly, if they're not paying a few hundred dollars (at most) for renters insurance, they're certainly not going to pay for any foundation work you do.  They may pay for some patching and painting of interior walls/cracks, but perhaps not even that.  In many cases, if you can get the ground back to where it needs to be, the cracks will close back up.  You'll have to touch things up once it does, but that's cheaper than piers.  

Then I'd put a system in place (whatever you can do) to ensure the foundation is watered as needed.  Perhaps the sprinkler guy or someone else could be paid to check on the status of your soils every weeks (mainly during the months of heavy drought)?  Not sure, but this seems like the best and least expensive approach.  If the cracks are bigger than 1/8 of an inch, then you may want to have a professional look at it and provide suggestions.  Multiple contractor opinions would be advisable if you go down that road.  Hope this helps.  Sorry for the issues.  

Great direction above from Cameron, Nathan, and Maranda. One item I would add is that the Property Manager/Management Company "does" have an insurable interest here, and so yes, it's common and acceptable for them to be added to the landlord's policy as additional insured and/or additional interest. This isn't any different from a community manager and their management company requesting to be added to the HOA's/Condo's policy as an additional insured and/or additional interest. Happens all the time, and is granted in most cases.

Tyler,

As insurance agents and lenders we know this battle all too well.  It can certainly be frustrating for all parties involved.  From the landlord position, "most" just want the deal done and to move forward, but understand that there are certain standards that must be met on both sides before that can happen.  It's been my experience that communication between the agent, lender, and landlord is the most vital part of this process.  That's because while most lenders and insurance agencies are similar to the next, some may be willing to do more than others (or things a little differently).  That said, this really hinges on the flexibility of the lender your dealing with in my personal opinion.  Some have good flexibility, work in this niche a lot, and understand the process pretty well from both sides.  Others can be difficult and create more hurdles.  I have to believe this is due to the guidelines they're following (forced to follow) if looking to sell the loan on the secondary market, how often they work with real estate investors/landlords in general, or how new your loan officer is.

I've been most successful in telling both the lender and the landlord that we "prefer" to hold off on proof of insurance / binder until we have a "very firm" closing date (and explain why via email or phone).  That's most often 5 days out from their closing date.  This allows both the lender and title to ensure they're 95% in possession of what they need to close the loan.  Once we have that date and we're a week out, we look to bind and issue the COI that same day.  Typically having that COI 5 days in advance of their closing date is plenty of time for all parties to get things done in a timely manner (usually with room to spare).  We don't like to bind anything more than a week out, but sometimes have to make exceptions depending on the pressure the investor is getting from their lender.  We just always remind the investor and lender of the hassles and delays they can expect when/if the date is pushed out and we have to cancel and rewrite everything.

Binding 10-30 days in advance of a closing date and then having that date changed causes the lender little issues (from what little I know about their processes), but can cause many agents/carriers significant issues.  Again, more specifically for those agents who do a lot of work for real estate investors and who get 10-50+ of these requests a week.  

This situation causes us significant issues because we now have to cancel everything, rework the account internally and with the carrier, produce new COI's, binders, policies, adjust payment / premium details, billing, etc.  For some agents (direct writers) this may be easier than others, but I think that depends on the type of account your writing and what systems they're using.  Unfortunately for most, it's not just clicking a button and everything's undone. In most cases, this takes quite a bit of time and will certainly delay things depending on agency/carrier processes, agency/carrier systems, carrier/underwriter workload, carrier/underwriter response time, etc.  

While we don't mind work, if every property added in a day/week to a policy is processed in this fashion (10-30 days out from closing), and half of them have to be completely canceled and reworked, you can only imagine how much this might quickly overwhelm an agent/agency staff.  In your case, if you deal with the same lender, title company, and insurance agent majority of the time, you may get them all on the phone to dig into their processes and come up with a solution.  While most won't need to do this, investors who consistantly buy new properties might consider doing this if they're having issues and can't get resolution.  Understanding what each party needs and what their processes are certainly helps.

Hope this helps!  Good luck!   

Scott,

Great direction and details from both John and Caroline above.  Just remember that property and casualty insurance is almost always written on what's called a "per occurrence" form.  Therefore, the policy that was in place in the spring (at the time of this loss) would be the policy to review as John stated above, and the one to respond in this situation.  If you weren't the policy holder, then you would have to get the person who had that policy in their name at the time (sounds like your brother) to file the claim and get things going.

One other item to keep in mind is that you also need to know what the deductible is for water damage under that policy (if there was one in place).  I'm 99% sure the carrier will determine the peril to be water damage based off what you've described above.  If the water damage deductible is significantly less than the cost to clean and repair everything, then you should strongly consider filing a claim.  However, if the cost to clean and repair everything is about the same as (or less than) your water damage deductible, then you shouldn't file a claim.  There would be no significant payout for damages in this case, and no reason to ding your loss history record with that agent/carrier.

The last thing is that "some" policies do have certain stipulations on how quickly you should file a claim, but if the damages are significant enough, it can't hurt to just file it.  Make sure you have the date when the damage originally occurred.  If you don't have the exact date, an estimated date should be fine.  Keep in mind that mold is a very common exclusion in most policies.  If you expect any of that to be cleaned up and gotten rid of, it will most likely be out of your pocket.  Lastly, if any damage was compounded over the months while just sitting there unrepaired, you can expect the carrier/adjuster to likely reduce the payout.  This is because the policy holder has the responsibility to put a stop to the leak, and clean up as quickly as possible to keep from further loss/damage.  Not saying this wasn't done, but if it wasn't, expect it to complicate matters or the payout.

Sorry for the issues, but hope this helps!  Good luck!

The tenant's cost to move to a temporary location is always on them or their renters insurance.  If it's prudent for you to carry insurance on your rental dwelling, it's just a prudent that they carry renters insurance as well.  Neither party can predict a burst pipe in the wall/slab of the home, so both parties need to insure what they're responsible for.  Both parties are put out after a loss.  While the investor/landlord takes on the majority of the issues after a loss, they aren't responsible for everything.  That's why any decent renters policy has relocation coverage for the tenant in the event their displaced after an unfortunate loss.  

I'm sure many folks on this platform have stayed in a house after water damage.  I know I have.  I suppose it just depends on the tenant, if they have renters coverage, and if they feel it's necessary to move.  Some people might love the noise those fans make, while some may not be able to sleep.  Either way, 99% of the time, the cost to move to a temporary location is up to the tenant personally or their renters insurance policy.  

I would certainly look at giving the tenant a little reimbursement for additional water and electric, but can't imagine it being more than $100 total.

Lastly, this is stressful and an inconvenience for both of you, not just the tenant.  Unforeseen by both of you.  You are not responsible for everything under the sun here.  It's just a really unfortunate issue that both parties have to deal with and work through.  Hopefully your tenant is understanding.  If so, then you should both get through this soon.  Just try to help make things easier and more comfortable for them, and know that you don't have to take on everything just because your the landlord.  They have responsibilities too.

Good luck and sorry for the issues!

Kristel,

This is really a judgement call that depends on your current insurance and financial situation.  

Yes, your premiums will likely go up, but they're likely going to go up anyway due to a hardening insurance market.  However, these two items together may compound your increase in premium, and point you more in the direction of paying out of pocket.  If the roof is close to 15 years old (or older), then I'd certainly be more inclined to tell you to consider paying for it yourself, as the roof has really reached the end of it's useful life in most cases (especially in heavy wind/hail prone states).  As any owner, you have a duty (per most insurance contracts) to "maintain" your roof and even replace it once it gets so old (especially if it's never suffered any significant wind/hail damage).  When you haven't had any significant wind/hail storms cause the damage, then many times the damage is due to "normal wear and tear".  If this is likely the cause for you, most carriers will deny this type of claim anyway since normal wear and tear is a typical policy exclusion.  

All that being said, if the roof is newer (less than 10 years old) and you can point to a storm that may have directly caused significant wind/hail damage to the roof, then yes, you should consider filing a claim.  Again, whether you do or not really depends on your current insurance and financial situation.  In the end, the decision is up to you.  

Claims will almost always influence your premiums, especially 2 with the same carrier in less than a few years.  At this time, we're seeing the hardening insurance market dictate premium increases of anywhere from 10% to 50%, and even more in tougher to write areas.  Many times, this is even for insureds with no losses in the past few years.  A hardening insurance market means rates/premiums go up, coverage forms get more restrictive, deductibles go up, and underwriters get more selective.  When you file claims on top of this hardening market, it usually only compounds things for the insured.  I'm not trying to sway you either way, but hope this direction helps you make an informed decision.

Sorry for your roof troubles.  I hope this helps!  Good luck!

Mak,

These are all viable reasons mentioned above, and can certainly impact your rates directly, but your recent increases may have more to do with the overall hardening of the insurance market in general.  Most consumers (individuals and companies) have enjoyed a soft insurance market for well over a decade now.  However, due to the pandemic and all the recent stresses on our economy (many factors), we've seen the insurance market harden. It's been taking shape for a few years now, but seems to be hitting harder in 2022.  This hardening and softening cycle is common to the insurance market.  

In a soft market, insurance carriers (as a whole) are quoting policies with broader coverage, more coverage enhancements, aggressive premiums, allowing lower deductibles, and less stringent about underwriting details.  Whereas in a hard market, coverage and enhancements become more restrictive, premiums go up (significantly in most areas), deductibles increase, and underwriting criteria is more stringent.  Areas like the Northwestern U.S. where there aren't a lot of catastrophic events still see significant premium increases, but not near as much as those insureds in the central and eastern half of the U.S.

To add fuel to the fire, reinsurance carriers are putting pressure on their clients (insurance carriers) by increasing their rates.  This unfortunately is passed along to the consumer.  If you're not familiar with reinsurance, it's simply insurance for an insurance carrier.  In order to create more capacity to write business and to better protect themselves after catastrophic events, insurance carriers purchase reinsurance.  This protects a carrier so they don't have to take on the full burden of claims when their insureds experience catastrophic losses.  

The last thing to consider is the investments that insurance carriers make with the premiums they collect.  Most insurance carriers make more money off investing their premiums in other markets, than they do off the actual premium itself.  When you consider this, it's easier to understand why rates/premiums tend to jump up drastically in a tough economy.  If the carrier's investments aren't performing well in a difficult or volatile market, then they're more likely to raise premiums to offset their losses.

As for your specific question about roofs, it just depends on the age of your roofs and the carriers you're dealing with.  In a soft market, you might find carriers more open with their underwriting guidelines, but now that we're in a harder market, it may prove to be pretty difficult.  It's not impossible, and certainly recommended to shop for options, but may be more difficult to say the least.  

Hope this helps.  Good luck!