Insurance catch-22
June 18, 2010 11:35 AM Subscribe
The insurance has been cancelled on a rental property due to dry rot, and our agent says "no company will touch it". The mortgage, as well as common sense, requires insurance. What now?
Background: We are renovating a four-unit apartment building my parents own. Complication: Amid bankruptcy.
My dad, who has dementia, was never one for proactive maintenance. Despite our strenuous objections he let several small problems become big ones. One of these -- an area where the rehabber/prior owner did a half-assed job of flashing -- developed into a dry rot problem and part of the soffit, fascia, and short sections of rafters supporting them developed dry rot. There was never any water infiltration into living areas.
Due to the pre-bankruptcy foreclosure, our last remaining tenants moved out (they were slow or no-pay anyway). This made the property vacant, so the long-standing insurance on the building, paid by escrow, could not be renewed. We just got a new policy through a company that does cover vacant buildings. They sent out an inspector -- I had one hour's notice of his arrival and could not meet him -- who found a missing deck railing and this soffit issue, and the company sent us a ten-day drop-dead cancellation notice.
The agent says we can fix it and send in photographs and hope for the best, but he doesn't think any other company will insure the building "in this condition". (The agent has not seen the building.) This is really a very limited problem at the bottom of a roof valley and I'm in the process of fixing what I can. It's a 19th-century building that was gutted/converted in the 90s to four relatively modern apartments. The interiors, save for wear and tear, are up to code and fine. The exterior is clad in vinyl siding and probably covers up other sins but only the weather-beaten jump decks are major issues from a code or safety standpoint.
But now I'm sure they are going to be concerned about these other things and probably find another excuse once the inspector comes inside. So I really don't expect to get the policy reinstated by Thursday, if ever. Without insurance, the bank goes berserk and will find some other insurance to slap on it at exorbitant rates.
We can't make the Chapter 13 work without the income from this building. If we can't keep it, we have to liquidate two other properties as well. Difficulty: Adjacent to my 73-year-old mother's family home, in a neighborhood where "rental" often means "drug house". I don't want that to happen. I have been working desperately to get tenants into the four-unit.
Other buildings get rehabbed all the time. What do people do for insurance (obviously the bank can actually find insurance, which means it exists)? Is this a no-win situation, after months of humping my ass all over this pile? Do I just need another agent? Am I doomed to pay through the nose?
Background: We are renovating a four-unit apartment building my parents own. Complication: Amid bankruptcy.
My dad, who has dementia, was never one for proactive maintenance. Despite our strenuous objections he let several small problems become big ones. One of these -- an area where the rehabber/prior owner did a half-assed job of flashing -- developed into a dry rot problem and part of the soffit, fascia, and short sections of rafters supporting them developed dry rot. There was never any water infiltration into living areas.
Due to the pre-bankruptcy foreclosure, our last remaining tenants moved out (they were slow or no-pay anyway). This made the property vacant, so the long-standing insurance on the building, paid by escrow, could not be renewed. We just got a new policy through a company that does cover vacant buildings. They sent out an inspector -- I had one hour's notice of his arrival and could not meet him -- who found a missing deck railing and this soffit issue, and the company sent us a ten-day drop-dead cancellation notice.
The agent says we can fix it and send in photographs and hope for the best, but he doesn't think any other company will insure the building "in this condition". (The agent has not seen the building.) This is really a very limited problem at the bottom of a roof valley and I'm in the process of fixing what I can. It's a 19th-century building that was gutted/converted in the 90s to four relatively modern apartments. The interiors, save for wear and tear, are up to code and fine. The exterior is clad in vinyl siding and probably covers up other sins but only the weather-beaten jump decks are major issues from a code or safety standpoint.
But now I'm sure they are going to be concerned about these other things and probably find another excuse once the inspector comes inside. So I really don't expect to get the policy reinstated by Thursday, if ever. Without insurance, the bank goes berserk and will find some other insurance to slap on it at exorbitant rates.
We can't make the Chapter 13 work without the income from this building. If we can't keep it, we have to liquidate two other properties as well. Difficulty: Adjacent to my 73-year-old mother's family home, in a neighborhood where "rental" often means "drug house". I don't want that to happen. I have been working desperately to get tenants into the four-unit.
Other buildings get rehabbed all the time. What do people do for insurance (obviously the bank can actually find insurance, which means it exists)? Is this a no-win situation, after months of humping my ass all over this pile? Do I just need another agent? Am I doomed to pay through the nose?
ask your agent (or another agent at a different company) about the state risk pool or special lines, which is who does stuff like this. basically, the state insurance commission creates a special risk pool (coastal, high risk, bad record, etc) and pretty much all insurers licensed in the state do take clients out of that pool, but at much higher rates.
it's called JUA (joint underwriting association), and there are lines for auto, residential, commercial, general liability, etc. etc.
posted by toodleydoodley at 1:31 PM on June 18, 2010
it's called JUA (joint underwriting association), and there are lines for auto, residential, commercial, general liability, etc. etc.
posted by toodleydoodley at 1:31 PM on June 18, 2010
Response by poster: OK, I actually did get a referral to the state pool in the mailed materials, although my agent did not mention it to me. (We inherited this agent after our local guy retired, and I'm not exactly happy with him, least of all because he's one city over.) The state does require applying through a "producer", which I assume means our agent, but also warns that it may not be active for up to six weeks. What am I supposed to do if that's the case? How do I ensure uninterrupted coverage?
posted by dhartung at 8:22 PM on June 18, 2010
posted by dhartung at 8:22 PM on June 18, 2010
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Also, you can always just pay for pricier insurance for a few months, then go back to your old insurance once you can show them the repairs.
posted by Vaike at 11:55 AM on June 18, 2010