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Page 10 — Property Management Quarterly — April 2017
Insurance
I deally, commercial property
and community managers play
an integral role in the insur-
ance procurement process.
After all, they are the stewards
of the property and run the day-to-
day matters of the property. Howev-
er, the role of the property manager
in the insurance procurement and
claim process varies greatly depend-
ing on the type of property and the
number of properties managed. It
also may depend on the level of
ownership, if any, that the property
manager has in the property.
For example, large portfolio manag-
ers who have an equity interest in
the properties they manage might be
charged with procuring the property
and casualty insurance under one
program for all of the properties that
they own and manage. This would
normally involve selecting the insur-
ance producer (agent/broker), provid-
ing all the underwriting data, select-
ing the insurance coverage, paying
the premiums, and notifying the
insurance company of additions and/
or deletions to its portfolio.
In the event of a claim, this type
of property manager would report
the claim to the insurance company,
engage a construction contractor
to perform the necessary repairs,
engage the necessary professional
assistance (e.g., public adjuster,
forensic accountants and, if neces-
sary, legal counsel), prove his claim to
the insurance company as required
by the insurance policy, and negotiate
the final settlement.
Conversely, smaller third-party
property managers may be charged
only with providing
information for the
underwriting and
claim process to the
owners of the prop-
erty. This might
include provid-
ing current rental
income for apart-
ment communities,
assisting with site
visits, mitigating
damages after a
loss, etc.
Finally, associa-
tion managers for
communities may
serve in a hybrid
mode, wherein they
assist in or manage
the procurement of insurance and
claim process but not in the decision-
making or selection process.
As you can see, roles vary greatly.
The actual versus the most efficient
role depends on the type of property,
the number of properties under man-
agement and the level of ownership
in the property. A risk management
consultant, such as member of the
Society of Risk Management Consul-
tants, can help you decide the best
role for your organization.
• The insurance product – who’s who
in the procurement, maintenance and
claim processes? Property and casu-
alty insurance producers (aka insur-
ance agents/brokers) sell policies that
guard individuals and businesses
from financial loss stemming from
events that cause property damage,
such as floods, fires, earthquakes or
storms.
The duties of a
property and casu-
alty producer vary
from state to state.
Normally, they are
the legal agent of
the insurance com-
pany, but also may
have certain duties
owed to you, the
insured.
In Colorado, the
courts have been
active in establish-
ing the role of an
insurance producer.
Please note that
absent “special cir-
cumstances” an insurance producer
has no legal duty to counsel you –
the insured or insurance buyer – as
to specific matters regarding insur-
ance coverage, valuations of prop-
erty or adequacy of coverage. If you
need qualified independent counsel,
engage an attorney or member of the
Society of Risk Management Consul-
tants to assist you.
Excluding a catastrophe/disaster,
once you notify your insurance pro-
ducer, most insurance producers
will come out to survey the damage
right away. Please note that most
insurance producers can assist in
reporting the claim, but do not nor-
mally have much hands-on claims
experience. Normally, they will only
be involved in the process as long as
you want them involved. Again, note
that, in most cases, the insurance
producer has no legal duty to counsel
you.
To further this point, in the event
of a property loss, your insurance
company will assign an adjuster to
your claim. The adjuster may be an
employee of the company or an inde-
pendent adjuster. Please don’t let the
words “independent adjuster” fool
you. An independent adjuster works
for the insurance company, not you
– the insured. If you need indepen-
dent advice and/or help proving your
property claim, engage an attorney
or a member of the National Associa-
tion of Public Insurance Adjusters.
• What is the role of the insurance
producer (broker/agent) in the revenue
and expense for the insurance? In most
cases, the insurance producer (agent/
broker) can assist property managers
in estimating what the insurance-
related expenses will be for budget-
ing purposes. With larger insurance
programs, your insurance producer
should be able to assist you in esti-
mating your total cost of risk related
to your program. Furthermore, if
insurance sales to your tenants are
part of your operations, then your
insurance producer should be able to
assist you in forecasting your poten-
tial revenue for budgeting purposes
and any accounting assistance that
you may need.
• The scope of responsibility and
authority for properly insuring the
real estate. As stated above, it is the
insured’s responsibility to determine
if he is properly insured. One of the
most complicated coverage items to
determine is the replacement cost
value of the property. The replace-
ment cost has little correlation to
COMMERCIAL
REAL ESTATE TAXES
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