Umbrella Required

I’m told that we've entered what's known as a hard market in insurance. Tell us briefly what that means.

Basically, in a hard market, carriers tighten their underwriting guidelines while increasing premiums.

So the market is driving coverage down and prices up. Where do you see this affecting co-ops and condos the most?

We're seeing it across the board, but it has really affected the general liability and property policies, as well as the umbrella policy. The umbrella sits over your general liability policy, your directors and officers policy and your worker's compensation coverage.

What's happening with the premiums and the coverage?

For the past few years, we've had property management programs in place. So essentially what that means is that all the buildings that property managers had in their portfolio were given high-limit umbrella policies – $100 million was the limit, and these programs had subsidized rates. Due to the current hard market and, obviously, the New York State Labor Law and a number of other factors, these programs were terminated this year, and that has caused premiums to rise from $1,300 to $4,000.

That’s a sizable jump. Now when you approach a co-op or a condo board with this bad news, they're probably not happy. How do you handle that?

I try to explain it in a way that makes sense. Not everybody understands insurance, so I try to give them the information about what's happening in a way that can be interpreted by anybody. It’s a little bit of an education process, and I think that's the biggest challenge. They do understand it; they're not happy about it. I think that until a board is actually affected by a loss – such as a Labor Law loss that triggers the umbrella coverage, or a general-liability lawsuit that triggers the liability coverage – until then, they don't really get it. I think that once they see why that coverage is important, it becomes like, "OK, well we still need this."

So do you think an umbrella policy is necessary insurance?

Absolutely. It also provides additional coverage for your directors and officers policy. So if the board of directors had a lawsuit that exceeded its $1 million limit on its D&O policy, this umbrella provides additional coverage.

Now the hard market hit right before the coronavirus pandemic, kind of a double whammy for co-op and condo boards. How long do you see this hard market lasting?

We can hope for a year. I don't really know. I imagine it'll probably go into 2021 before we see any softening again. But this coronavirus could change that. We don't really know because we don't know what's going to happen or how the carriers are going to handle anything related to COVID-19.