Real estate issues – beyond property

The following are summaries of successful real estate client resolutions that went beyond “typical” property and casualty issues. 

When a client announced that they were about to purchase single -family homes for the purpose of long-term rentals, the question was where? The answer was “wherever it made economic sense”. This created a Catch-22 for property underwriters who couldn’t create a model for an unknown risk - nor for a client who had a maximum premium-per-door that was required to make the financial model work.

The solution was to design a series of property insurance “buckets” into which the client poured assets at predetermined rates for potential catastrophe exposures while taking an appropriate self-insured retention for what the capital markets accepted. As each bucket was filled, a new one was created thereby never creating a program that was too limit-heavy and thus imposing unnecessary expenses on the assets. This organization moved from a fund to a $3 billion market cap real estate investment trust (REIT) in less than 2 years along the way, The Gallagher real estate team designed an integrated professional liability, general liability and pollution liability program to meet the requirements of the client and the lenders.

The Gallagher teams researched, designed and implemented an environmental program which integrated insurance, claims administration and risk control consulting for a large national Real Estate Investment Trust (“REIT”). The program was developed in response to the merger and acquisition of two large regional REITS with assets consisting primarily of office and warehouse properties in formerly industrialized areas. A systematic review of all existing environmental reports for locations to be covered was undertaken, and the program was designed to provide insurance for known as well as unknown environmental issues at the covered locations. Insurance coverage was provided for third-party bodily injury and property damage liability claims, first-party environmental investigation and remedial matters, and legal defense expenses arising out of the foregoing. Specific coverage was provided for mold resulting in claims of bodily injury and/or property damage, as well as remediation of mold conditions at covered locations. Further supplemental coverages included business interruption, builder’s soft costs and diminution in value (provided same resulted from environmental issues). 

Our teams designed and implemented an environmental program of insurance coverage for a pool of habitational properties in the western United States. The client was an entity tasked with managing hundreds of locations for apartment-style habitational buildings - each with unique environmental issues and varying degrees of available environmental information and reports. In addition, our Gallagher real estate team designed a questionnaire to be completed by each site owner or operator. The results of the custom questionnaire ultimately allowed underwriter(s) to include or exclude that site from coverage under the Master Group Environmental Insurance Policy. In addition to standard environmental coverage, supplemental coverage was provided for bodily injury and legal defense for claims resulting from exposure to asbestos, lead-based paint and mold.