Questions Surface in Surfside Condo Collapse
With the recent collapse of the Champlain Towers South condominium in Surfside, Florida, the concept of an unexpected catastrophe is suddenly poignant to many.
How might the Surfside disaster change the risk management review process moving forward for other commercial organizations?
Leader’s Edge spoke with building and construction insurance expert Greg Hughes, vice president of Poms & Associates Insurance, to explore the different risks involved in commercial property and ways to mitigate future tragedies.
The increased cost of construction notwithstanding, this has always been an issue as building owners have been reluctant to insure to value as it can get costly. There are incentives within the property policy to push owners to insure to value, but there is and has been resistance among owners to do so because of the cost. The issue is not whether the policies provide enough coverage, the issue is, are owners willing to pay for it?
Carriers have taken steps to address this such as raising limits in line with inflation, but for a large property owner, they will have influence over the blanket limit of coverage. They can also move limits around on a per location basis, but for the individual property owner or HOA with one location, they are responsible for [insuring] the building to value.
We see issues most often where the economics are not there to support all of the desired safety features that would be common place in an A-class market rate property. We have clients who have had buildings condemned because of fire and earthquake events that wouldn’t harm buildings built to code today. The result has been that hundreds of low income tenants are forced to move. We have a situation right now where the developer of a large multi-story apartment complex didn’t build the structure to the earthquake code of the day, circa 1980, but they were able to get the building signed off as if it was built to code. Forty years later, a seismic event has rendered the building unlivable, and it was only then that engineers realized how unstable the structure was. Fortunately, no one was injured.
Currently, the present owners are dealing with how to rebuild the property and who will pay for what. This is an unfortunate example as the owners did maintain the building and even had engineers inspect it, but as it happened, the faulty structural components were only revealed after the building was destroyed because they were interior to the foundation. In the case of the Champlain Towers South, the issues were exposed and documented.