NYC Real Estate Owner Commercial Insurance Case Study

Despite this landscape, the commercial insurance consultants at MB Davis Group were able to lower premiums costs, reduce renewal stress, and secure gap-free coverage for one of the most challenging categories of client: a real estate owner in New York City.

Get to Know the Client

This client of commercial insurance consulting firm MB Davis Group is an apartment owner in New York City.

Rampant Litigation Makes General Liability Insurance Unaffordable and (In Some Cases) Inaccessible

The underlying problem for this client was that the cost of liability insurance in New York City has become out of control. Why? Because of the litigation and settlement climate that has developed there. It’s an incredibly unfriendly place to be a defendant in any kind of insurance claim.

Here’s just one example with real-life numbers.

Take an older building that experiences some kind of partial ceiling collapse. Maybe that means a piece of plaster falls from the ceiling onto a bathroom floor, or maybe the ceiling gets wet because of the tenant upstairs and a piece of that ceiling then falls in a living room.

If someone happens to be sitting in the room when that happens, even if they’re completely uninjured, that could result in a $200,000 to $400,000 settlement.

It’s an out-of-control system that, unfortunately, has an entire legal infrastructure with a vested interest in keeping it going.

Because of this environment, the owner of the apartment units was faced with the prospect of their annual insurance premiums going up by a million dollars.

Beyond the excessive cost, it’s also becoming increasingly difficult to even get adequate insurance coverage. In the same way insurance companies are limiting their risk in hurricane-prone Florida, now those insurance companies are also reluctant to dedicate capacity to litigation-prone New York City.

Two-Prong Commercial Insurance Approach: Large Deductible Option and Safety and Compliance Overhaul

To combat this difficult, expensive commercial insurance situation, MB Davis Group developed a large deductible option for the client’s general liability insurance. This put them into a $250,000 deductible.

Yes, that meant the client was liable for the first $250,000 in claims, which is a large potential financial commitment. But here’s why it made the most sense for this client:

• The litigation climate in New York City is not likely to improve any time soon. This problem isn’t going away, and the client had to make strategic insurance moves to account for that reality.
• Adopting a program with a large deductible helped the client better manage their insurance costs. Even though that deductible increased, the premiums decreased.
• Assuming the risk of a large deductible commercial insurance program also opened more insurance options to the client. In a world where adequate coverage is harder and harder to secure, this was a calculated tactic that helped ensure the client wouldn’t be stuck with massively risky insurance gaps.

The deductible, however, was only half the solution for this client.

While implementing this new insurance program, MB Davis Group was simultaneously developing an entire infrastructure for managing and preventing future claims. (A large deductible insurance program simply wouldn’t work without this infrastructure for dealing with claims.)

Because this client was used to turning everything over to the insurance company, they needed assistance knowing what steps to take next. What would they do if they were sued or became aware of an incident?

To walk the client through this, MB Davis Group helped:

• Establish new preemptive relationships with great personal injury defense lawyers.
• Connect the client to loss control experts who could come examine the buildings.
• Provide assistance on training superintendents (how to keep track of incidents, monitor, and complete maintenance records).
• Design a monitoring and camera infrastructure throughout the buildings.

This camera system was even able to uncover an instance of fraud.

A woman and her boyfriend were fighting in the stairwell of the client’s building, and she ended up knocking the boyfriend down a flight of stairs. They then claimed that he fell. Because there was video surveillance of the entire incident, it was revealed to be an assault followed by a fraud. This saved the client in untold legal fees and potential settlement money.

Better Insurance Premiums, Safety, Coverage, and Renewals

It was a big lift to build an entire safety and compliance infrastructure from scratch, but doing so greatly benefited the client in several ways:

• They had a decent safety rating before. Now they have an even better one.
• They avoided paying unnecessarily on claims that were actually fraud.
• By improving their safety record, they minimized potential future claims.
• For legitimate claims (water on the floor, obstructions, trash), they now had a system to make sure those issues were properly addressed.

Increasing the general liability insurance deductible not only ended up saving the client money, but it also greatly eased the drama and stress of their commercial insurance renewal. When this client recently renewed, they were able to keep their current insurance program with their current providers. No hassle. No drama.

By shifting to the large deductible option and making this client’s entire safety, monitoring, and compliance program more robust, MB Davis Group was able to protect the client from what’s going on at large in the insurance world.

“We designed this large deductible plan on purpose to expand the pool of insurance programs available to the client,” said Mitch Davis, founder of MB Davis Group and lead risk management consultant. “That’s what we do. We strategically create programs that make it easier for our clients to buy adequate, affordable insurance, even as insurance in general becomes more expensive and more difficult to secure.”

But these cases are never just about the insurance alone. Insurance doesn’t operate in a bubble. It takes into account everything about how your business operates, and that’s why a commercial insurance consultant can (and should) be involved in so much more than just picking an insurance plan.

“This client is a great example of how a commercial insurance program entails so much more than just the insurance,” said Davis. “We had to look at the whole business and make these systemic changes. That involvement is what ultimately set them up for success with their insurance. This year and down the road.”

Who’s Looking Out for Your Commercial Insurance Program?

Too many businesses fall into the trap of thinking that securing insurance this year means they’re guaranteed to secure insurance next year. That’s simply not the case with commercial insurance anymore.

From one year to the next, it’s routine to find skyrocketing premiums, less favorable terms, or even a straight denial to cover your entire insurance burden.

Looking for creative ways to combat these problems that are actually tailored to you and your business? Hop on a no-cost consultation with MB Davis Group.

Talk to a live commercial insurance consultant expert for thirty minutes about your business, industry, and insurance needs and challenges. All at no cost.