A Westchester condo thought it had an insurance deal from a new carrier. But after the carrier inspected the property, it decided the physical conditions weren’t up to snuff and it wanted to walk, leaving the condo in the lurch. In this episode, Jason Schiciano, co-president at Levitt-Fuirst Insurance, explains what happened next, and offers some words of insurance wisdom to others who might be facing the same situation. Jason Schiciano is interviewed by Bill Morris for Habitat Magazine.
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[00:00:00] Bill Morris: Welcome to Habitat Magazine's ongoing Problem Solved series, in which we look at challenges facing co-op and condo boards and how their professionals help them solve those problems. I'm Bill Morris, and with me today is Jason Schiciano, co-president at Levitt Fuirst Insurance. Welcome back, Jason.
Now the Surfside condominium collapse in Florida is still having a ripple effect as far away as the New York City condo and co-op world. Are you feeling any of those ripples in your insurance business these days?
[00:00:40] Jason Schiciano: Absolutely, Bill. The focus of the insurance world on the Surfside condo collapse was almost a situation that resulted in a potential loss of a new client. And fortunately we were able to do what was necessary to avoid that outcome. We had a condominium building in Westchester County that was looking for a new insurance carrier. Their prior carrier was actually non-renewing the policy, through nothing in particular, just a change of underwriting requirements.
We thought we had come up with an unbeatable option, including a very attractive package insurance policy quote. The package insurance policy includes both coverage for the property insurance and the liability insurance, and the package carrier represents about 80% or more of the total premium of a condominium or a co-op's insurance premiums.
We had a great package quote, very competitive. And we thought that a couple weeks before the policy renewed, we'd gotten the go ahead to place the insurance. Then we hit a big big bump in the road.
[00:01:46] Bill Morris: What happened?
[00:01:47] Jason Schiciano: It is typical for a new package insurance carrier to inspect a property after they bind the insurance coverage; they'll go out to the property and a qualified inspector will look over every nook and cranny of the building. They'll go everywhere from the basement or the garage up to the roof and everything in between, inside, outside, and make sure that the building is in satisfactory condition and that there are no obvious sources of potential insurance claims, such as something that could lead to fire or water damage, a leaky roof or clutter in a basement that could catch fire or impede exit of people that are in the building, or potential liability situations like cracks in the sidewalks or in the driveways.
And that was the case here. They went out to inspect this building and they noticed some deterioration in the underground parking garage. Some of the concrete was deteriorating. There was some evidence of water infiltration and some evidence that the deterioration in the water seepage was potentially causing some corrosion to the structural steel and the concrete structural posts within the garage that in essence are holding the building up. And of course this is exactly the condition that eventually led to the collapse of the Surfside Florida building.
They did have access to a report which had been done because in fact, the board of this condo was already aware that there was some repair needed. They had solicited a study that said, yes, there are some issues that need to be addressed here, some repairs that need to be done. It's nothing urgent. The building is currently stable. The structural integrity of the building is sound. But if these things are not addressed, they could be eventually problematic. But still, the insurance carrier was like, we're not gonna get into this. We just would rather walk away.
[00:03:44] Bill Morris: What happened next?
[00:03:47] Jason Schiciano: A new carrier has 60 days from the time that insurance is bound to decide whether or not the conditions of a property that they insure are acceptable or not. And if not, they can issue written notice that they're not going to proceed. We decided we had to have a conversation with the carrier. So we got on a Zoom call. They expressed to us their concern. We expressed to them that this was going to put us in an untenable position with the client and the managing agent. So we said, look, why don't you give us the opportunity to go to the building? Find out what their intentions are in terms of making the repairs sufficient to alleviate any future structural compromise issues. And if they can do it such that you have a comfort level, you can go on and ensure this building for the rest of the term, then everybody wins. If things don't go that way, you can always pull the trigger and get out of the deal.
[00:04:44] Bill Morris: Okay. And they bought that?
[00:04:46] Jason Schiciano: They did buy it. We went back to the board, to the managing agent, and said, look, the carrier needs within the first 30 days to see a contract signed for the work to be done and verify that the scope of the contract, the work to be done is going to be satisfactory to address the concerns that were brought to their attention during the inspection.
In addition to that, they want the insurance information on a contractor to make sure the contractor is reputable and properly insured and not some fly by night contractor with no insurance that, if something goes wrong, there's going to be no insurance behind the contractor's work. And then they also wanted us to give them reports at 30 days, 45 days and 58 days as far as the progress of the work that was being done.
[00:05:35] Bill Morris: And the board agreed to this. The deal went through and the co-op got insured and they fixed their garage. That's a nice, happy ending. But are there any lessons that other co-op and condo boards might glean from this episode, Jason?
[00:05:46] Jason Schiciano: There are. I think first and foremost, unfortunately, the Surfside building collapse is just such a tragic example of what not to do. As far as the reports that I've read, not only the existing board, but boards before that were well aware of structural problems. It was a combination of various things. But I don't think they had the money to do the work, nobody wanted to raise the association's monthly dues in order to get the money to commence the work.
Boards need to know you can't defer maintenance, especially on major capital projects. Roofs, structural issues, brick pointing: these are things that have to be done. If you don't do them, they're going to lead to major insurance claims or possibly much worse. That's the first lesson.
[00:06:31] Bill Morris: And how about the second lesson?
[00:06:32] Jason Schiciano: I think this example is really evidence of the importance of good relationships between the broker and the insurance carrier, and the broker and the managing agent and the board, the ability when something goes wrong to think a little bit outside the box about how can we resolve this to everybody's mutual benefit.
[00:06:50] Bill Morris: A lot of people think of insurance as a dry, boring world, but when you get right down to it, it's really about relationships between human beings and I think this story illustrates that nicely.
Jason Schiciano, thank you so much for joining us. We really appreciate the story.
[00:07:04] Jason Schiciano: Hey, thanks for having me, Bill. I appreciate it.