By Kari Negri, Chief Executive Officer, SKY Properties, Inc.

• Hi, Kari! I own an older property, and I am finding it nearly impossible to obtain habitability coverage from any insurance carrier. What’s going on?

If you’re an apartment building owner, you probably know that insurance coverage is a hot topic these days, especially when it comes to habitability and mold liability coverage. The game has changed, and for those with older properties, the stakes are higher than ever.

Habitability liability, including mold coverage, used to be a given for newer properties. Insurers were happy to include the coverage as part of their standard packages. But for older buildings, securing this coverage has become a Herculean task. Why? Because claims in this area have skyrocketed. Insurers are either pulling out of the market altogether or offering coverage with laughably low limits of $50,000 to $100,000.

Let’s break down the costs. Imagine you own a 50-year-old, 33-unit property. The best liability insurance option without habitability coverage? Around $7,000. Now, if you want that habitability coverage included, even with a meager $100,000 sub-limit, brace yourself—the price jumps to $14,500. Yes, that’s more than double for just $100,000 of coverage. A recent conversation with a top underwriter shed more light on this gloomy scenario. He revealed that stand-alone policies for habitability liability, with a respectable $1,000,000 limit, would set you back a cool $100,000 a year, minimum!. And that’s with deductibles of at least $50,000 per claim. Ouch!!!

Rising claims for habitability issues, including mold, are not just a trend—they’re a significant risk that can have devastating financial consequences. Without adequate habitability coverage, property owners face the full brunt of potential lawsuits and out-of-pocket repair costs. These costs can quickly escalate, putting immense financial strain on property owners and potentially jeopardizing their investments.

Mold-related claims, in particular, entail extensive remediation efforts, tenant relocation expenses, and the looming threat of long-term health impact lawsuits. Recent jury awards ranging from $71,060 to $780,000, excluding attorney’s fees, underscore the gravity of these liabilities. It’s crucial to note that California courts tend to favor tenants in such cases, adding further urgency to securing comprehensive habitability coverage.

So, what’s a property owner to do? Stay vigilant. Keep an eye on market trends and work with a savvy broker who can sniff out the best opportunities as they arise. In this shifting landscape, being informed and proactive is your best defense. For those grappling with these challenges, open dialogue with insurance professionals is key. Don’t hesitate to reach out, ask questions, and explore every option. The insurance market might be tough right now, but staying informed and agile can help you weather the storm.

On a practical level, consider taking the $14,500 for very little insurance coverage and instead put your premium money each year into a bank account. This may not be a bad idea to prepare for an eventual claim. Notice the word “eventual.” I use that word because it is likely based on the current climate that you will have a habitability claim no matter how pristine your building is.

Kari Negri is the Chief Executive Officer of Sky Property Management and is a member of the Board of Directors of the Apartment Association of Greater Los Angeles. Do you have a question for me? Please send your questions and comments to me at Kari@SKYprop.LA.