Why Your Building Could Lose Insurance Coverage Tomorrow

Your building's insurance renewal just became a high-stakes game, and many boards don't even know they're playing. In this episode, risk control specialist Brice Reynolds of Mackoul Risk Solutions reveals how insurance companies are now aggressively using "loss recs" to cancel policies within 30 days, leaving buildings scrambling for coverage. You'll discover what these are, why simple sidewalk cracks and damaged curbs have become threats to your building's insurability and why old strategies for getting insurance no longer work. Reynolds shares real case studies, including how one Manhattan co-op nearly lost coverage due to administrative delays, and explains the specific timeline pressures boards face. This isn't theoretical — it's happening to buildings across New York City right now, and your board needs to know what to do to protect your community's future. Habitat's Carol Ott conducts the interview. 

Thanks for listening. Subscribe to this podcast for more stories on how New York co-ops and condos have solved a myriad of problems. Brought to you by Habitat Magazine, the "bible" that hundreds of board directors turn to every day!

Transcript

Carol Ott: Welcome to Problem Solved, a conversation about challenges facing New York co-op and condo board directors. I'm Carol Ott with Habitat Magazine, and I'm joined today by Brice Reynolds, a risk control specialist at Mackoul Risk Solutions. Brice, thanks so much for being here.

Brice Reynolds: Thank you for having me, Carol. 

Carol Ott: Today we're going to take a deep dive into the insurance business and try to understand why so many co-ops and condos are facing the possibility of their property insurance carrier walking away from their building. Or as those in the insurance business call it, a non-renewal.

Of course, there are many reasons why a building could be non-renewed, but not paying attention to what an insurance company sees as a risk is a major one. And risk possibilities in the insurance world are called loss recs. Brice, your firm worked with a small self-managed co-op in Manhattan that faced the non-renewal possibility and risk was at the core.

What was the issue there and how did it get resolved? 

Brice Reynolds: So the issue that this small self-managed building was dealing with was their curbs were damaged. Usually, when we get lucky, although they're cracking down, and I'm sure we will get into that, but usually when the curbs are damaged anywhere around New York City, it is the responsibility of the city.

They do not want the insured to touch it. So a request and application will need to be sent to the Department of Transportation to report that your damaged curb needs to, be inspected. And once the city is able to confirm that request, they send you back confirmation, which we would send to the insurance carrier up until the last several months, accept as proof of compliance and the file would be complete. So for this particular insured, it was a sad story because we had a contact that was essentially the property manager, although they did not have a management company, it was self-managed.

And unfortunately the woman who we were dealing with, lost her husband. So there was a lot of time that, things as completely understandable were not getting done, at this building. And unfortunately, the insurance carriers were still cracking down with regular follow-ups. I get a phone call one day and I don't know who it is, I don't know who's calling me.

And the woman says that she is the sister of this property manager and she has moved in to help relieve the sister during these trying times of, the duties and everyday tasks of the building. And that's where the loss rec, fell onto her lap. So she gave me a call and she asked exactly what is this?

What are we dealing with, and how severe is it? What needs to be done ultimately to get this, completed? I explained to her that, the request needs to be sent to the Department of Transportation reporting the damaged curbs. They're gonna send you back the confirmation and it will be that confirmation that we need to send back to the carrier.

Now again, completely understandable for a seasoned property manager around Manhattan. These loss recs, the way the insurance carrier is going about them now is completely different than, say, even two years ago. It's a completely different game surrounding these loss recommendation requirements from the carrier.

The woman asked exactly what she needed to do. I explained to her once she went on this website, it's an application that you have to fill out with detailed information and it can be overwhelming again for a seasoned property manager, let alone someone just trying to step in and help their sister out.

I offered to go on the website. We zoomed, go on the website with her so I can walk her through every step filling out that application, making sure it was correct. And once that was completed, we were able to send it to the city in which they did send us the confirmation, which is what we ultimately needed to get this loss recommendation file closed on the carrier.

We were not up against non-renewal for this one. We were able to get that rescinded and allow the insured to stay on their current policy for this upcoming term. 

Carol Ott: So I wanna jump in here. I am curious how did the insurance company know there was a curb problem? 

Brice Reynolds: So the insurance company, usually several months before your upcoming renewal, will send out an inspector affiliated with each individual carrier.

They use their own companies. We'll set up an inspection with the property manager. The inspector will come out and they will survey the entire property inside, outside, railings exterior facade, roof fire escapes, and they will make a detailed report and note if anything at the building needs to be updated or fixed, or if the sidewalk was cracked.

And in this case, they noted that the curbs were damaged at the building and that they did need to be reported to the city. 

Carol Ott: And I'm assuming something has changed in the insurance company inspections that have made the threat of non-renewal greater. What has changed? 

Brice Reynolds: It all stems from claims. The insurance carriers right now are just getting absolutely crushed in claims and paying out settlements, which they have never seen before.

Trip and falls are a big one, so every time we get a lost rec for any of our insureds and clients, nine times outta 10, if not more, I'm gonna see a sidewalk needs to be fixed or a crack needs to be filled in. Curbs need to be reported. But going back a couple years ago, even, the inspection was not done at every renewal.

The inspection was not required to be done for every insured at every renewal. But again, as the claims and settlements have gone up, the, urgency on the carriers have gone up with it as well, to which now these loss recs have become one of the most top priorities for the carriers. Addition to being non-renewed, we are seeing cancellations not only be issued within 30 days, but cancellations be issued with these loss rec letters that we're receiving to the insured stating that they have 30 days upon receipt of the letter to get whatever their particular list completed, or they will be canceled from the policy and there'll be a lapse in coverage, if they were not to be able to get chopped, which creates many different problems as well, because when you shop the policies with open loss recs, this could be one of the first things the carrier asks you: why midterm?

If they're being canceled, why are you shopping this policy? And we have to report that, well, they have open loss recommendations that they were unable to complete. Cancellation was issued because of that. So now their potential new carrier has that information at their disposal and they can either not write you at all, because you have open loss recs. They can you offer you a quote that you will complete the items that you already received, but in addition, the previous rec loss that you were working on with your previous carrier. This new carrier is gonna set up their own inspection, come out to the building, survey the entire property, and they're gonna make their own list of loss recs.

So back a couple years ago, property managers be like, just shop the policy. I don't want to deal with this. And the carrier may never follow up for inspection, ever again if they just took care of the loss rec. Now it doesn't work that way. Not only will you get loss recs upon every renewal for your property and general liability policies, that is but they will follow you.

There's no getting away from them. There's no shopping the policy and leaving loss recs behind. They'll just stay with you and additional items will just be sent to you regardless. 

Carol Ott: And just gimme a timeframe here. So I'm on my board, my insurance renews April 1st. When is the insurance company sending an inspector and how much time do I have to fix whatever it is they find objectionable?

Brice Reynolds: So it's not exactly a set amount of days the inspector's gonna come out. Everything is different. That's why I say it's usually about several months beforehand. So if you had a renewal on April 1st, I would say the inspector, at least by December, has been at the building to look at everything.

And as far as how much time would you have to complete each item on the list? Every item comes essentially with its own timetable. Some things are more severe than others, so carriers, one thing that we are noticing changing that has made this more difficult of a process is that carriers used to label the severity of each rec.

If you've got a critical recommendation, you had about 30 to 60 days to handle that. And a critical recommendation would be something like federal Pacific, stab block uh, electrical panels, something that the carrier treats very urgent to get updated and repaired. 'cause God forbid something, they knew about was outdated and the building went up in flames, again, this all stems from claims.

So carriers are being over the top protective and doing their due diligence to just make sure that these buildings are doing their parts to keep everything upgraded to prevent any potential of a fire or any claim. But each item comes with their own severity level. So if it's not a critical rec, then there's just standard mandatory recs.

You get to 'em when you get to 'em, but you do have to do them within your policy term. And then there's advisory recs, and this is a big one, and this is one of the main things that we're seeing changing with the loss recs because carriers would issue advisory recs. Sometimes I would receive rec letters that were only filled with advisory recs.

And advisory recs is essentially the carrier stating , we actually recommend that you do this and handle this, but we are not going to non-renew you if you don't. It is simply a recommendation, and that's what these loss recs really used to be. And carriers still use the term recommendation when they shouldn't because it's a mandatory requirement.

So I just call them loss requirements at this point because advisory recs are going out the window. Simple little items and tasks that used to be advisory items. Very low level loss recs being issued are now mandatory recs that have to be done or the carrier will not renew you if you don't do them. 

Carol Ott: And in the process of getting renewed, I'm assuming the management industry is aware of this by this time and when renewal comes, who's jumping on this to get the fixes? 'cause they are fixes, taken care of? 

Brice Reynolds: It's usually the property manager, for the most part. If they're fortunate enough to have a management company, run the daily operations at their building.

My communication, day in and day out is with the main property manager that works with their building and they go back and forth. They're essentially the middleman between me and the board, as my job here is essentially the middleman between the insurance carrier and our insureds, so it's a lot of back and forth communicating with the property manager that, oversees the rec file that's being done. That's my main point of contact. But again, in, in the particular case that we discussed earlier, the small self-managed building in Manhattan. It's not fortunate enough to have, a property manager deal with their sidewalk, deal with their curb repairs.

So it can be very overwhelming and people are just learning about these loss recs as they incredibly become more severe. And then you just find out that you're gonna be canceled in 30 days and you have no idea why, as to why you don't even know what a loss rec is. Let alone you have 30 days or you're gone.

Carol Ott: So you said trip and fall is the biggest claim, and I assume that's on a sidewalk in front of a building? 

Brice Reynolds: Yes, it's the most claim that we have to file here, regardless of property damage, things like that.

As far as general liability goes, yes, it's the number one claim that we see, and that would be outside the building, but on their premise though, of their sidewalk. And that's where it gets, interesting and tricky because for the most part, the curbs are the responsibility of the city. But if there's a crack on your sidewalk, that's the responsibility on you. And insurers used to be, very lax with the curb repairs because carriers used to accept, that confirmation email and they mark the whole thing complete. As long as you report the curb, the carrier would be fine with that. They'd issue a renewal, but now they're not doing that anymore.

They wanna see final compliance and the city might not come out to inspect the curb for three to five years, we're seeing, so. 

Carol Ott: And when you say curb. How is that differentiated from a sidewalk? Is that the little part that goes to the street? 

Brice Reynolds: Yeah, so it's actually like the lip off of the sidewalk.

Or it could be the landing up onto a sidewalk if you were a corner building. The curb is just a small lip, connecting the sidewalk to the street. Anything, interior of that is your responsibility for the insured if it's on the sidewalk. And another area that is the responsibility of the city, which is rapidly changing, ask me this question next week, I might have a different answer for you, is the tree pit areas that are around the city . Trees just naturally grow. They lift their roots, lift the sidewalk up, so that used to also be the responsibility of the city. Same exact process. The insured would just send, a request out to Department of Transportation and they would come and fix it, but then the carrier would accept that. Now it's getting trickier. Now the carriers aren't as quick to allow or close the file based off of request to the DOT for a treatment area. They follow up more regularly for a tree pit area now, or they will not even accept a request to the city because they know how long a request to the city can take.

And I've heard that directly from some underwriters, that at this point, carriers know they're reporting these items, the tree pit area, the curb to the city, takes forever to do and may not even be looked at. So some aren't even accepting this anymore, and you just have to get the city's permission to handle it yourself.

Carol Ott: But that's what you'd have to do, is get the city's permission. 

Brice Reynolds: Yes. You'd have to go to the city, get the city's permission that they have acknowledged that your request, that, and that they're not gonna come out , they're not gonna add it onto their list of curbs that they feel that they need to repair.

They will tell you that it is the responsibility of the insured and yourself, and that you need to repair it yourself. 

Carol Ott: Are there any buildings that you have heard of who have said midyear, you know, six months out before our insurance renews, we're gonna bring in, I don't know what kind of professional, to do a survey.

So we, have a chance to raise money, we have a chance to assess what needs to be done. And we don't get hit with a surprise. 

Brice Reynolds: Their own inspection essentially, to kind of review? 

Carol Ott: Yeah. 

Brice Reynolds: Unfortunately not too many, are doing their own inspections. They are just waiting for the doomsday loss rec list to be generated from the inspection of the carrier.

But a lot of insureds don't wanna spend, I can't blame them. They don't wanna spend the extra money. And some of the loss recs we see, which, drives insureds crazy and we fight with the carriers, we push back on the carriers for, are these inspection recs. So very generic inspection record.

For example, we have a carrier that sends out a general, you gotta inspect your plumbing. You have to inspect your electrical. Okay, what does that mean? We're not gonna open up walls to have a plumber. And I have seen directly from plumbers be like, what am I actually looking at here?

There's no problem, there's no leak, there's no issue. So what do you want me to do? And we've pushed back in the carrier. It's getting crazy. Insureds have to spend money, to address these items on top of their daily increasing premiums, and they're very reluctant to do that, and I don't blame them at all.

So with these, some of these generic recs, we still are able to push back on the carriers when we can. We try to, but the list of items that we can push back on these days is getting smaller and smaller. 

Carol Ott: Well, on that note, I thank you so much for joining us. Hopefully this has been informative to board directors.

We've been speaking to Brice Reynolds, Mackoul Risk Solutions. Thank you, Brice. 

Brice Reynolds: Thank you, Carol.