Insurance - unable to effect renewal - Help needed

Discussion in 'Property Management' started by Lesley Watson, 3rd Dec, 2018.

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  1. Lesley Watson

    Lesley Watson New Member

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    Atherton
    Hi,
    I am an experience property investor of over 20 years, investing in residential property. One of my properties is a set of 6 units, 2 story townhouses, bathrooms on the 2nd story. When originally purchased back in the 90's the property was on a single title with multiple dwellings. In 2009 I strata titled the block and the property now has 6 titles all still owned by myself. The property was originally insured under a standard landlords insurance policy. The insurer at the time was happy to continue to insure the property post strata titling and included the body corporate details into the policy.

    Over the past 5 years I have had 5 claims over 3 of the apartments. 4 have been the result of water leaks in the upper level bathrooms and 1 claim for a burst hot water system on the lower ground floor that damaged the floor coverings. The property was built in the 1980's and no water proofing membranes were used.

    This property has always been very well maintained and all aspect of recourse addressed. They are currently managed by a professional property manager.

    The insurer has now issued me with an "Unable to Effect Renewal" notice due to 5 claims in 5 years and from what I can determine are not willing to continue with the policy due to the commercial risk of the remaining 3 bathrooms suffering the same consequence.

    I have all my properties with the same insurer, and the fact that my other properties have not had claims against them seems to be irrelevant.

    Body Corporate insurance in mandatory, I understand that standard body corporate insurance is very different to standard landlord insurance and looking for some advice on what will be my best avenue to ensure this asset is protect. The current policy expires on the 8th December 2018.

    I would dearly appreciate any assistance this forum is able to provide.
     
  2. Marg4000

    Marg4000 Well-Known Member

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    Your main problem now is that an insurance company has refused to renew your policy.

    This fact will have to be disclosed to any other company you approach to insure the property.

    You will have to read the fine print on any documents you sign. There is usually a question (or clause) asking if you have ever been refused insurance or renewal of a policy. Failure to answer honestly will void the policy.

    The issue is that insurance is intended to cover you for unknown and unexpected events. With no waterproofing, and three out of six bathrooms failing, it is only a matter of “when”, not “if” the other bathrooms suffer the same fate. That is not what insurance is for.

    You have a maintenance issue.

    The insurance company is thinking:
    Question: why aren’t you repairing the other three bathrooms that you know are defective?
    Answer: I’ll just wait till they leak and the insurance company can pay.

    Your best (and possibly only) option is to fix the problem.
    Marg
     
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  3. Lindsay_W

    Lindsay_W Well-Known Member

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    Is there any way you can show that you have taken steps to mitigate the risk of the remaining 3 bathrooms suffering the same fate as the others?
    I completely agree with what Marg has said above, this is a maintenance issue.
     
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  4. Lesley Watson

    Lesley Watson New Member

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    Marg and Lindsay,

    Yes you are both absolutely correct, it is a maintenance issue and I have taken precaution and preventative measures on all other 3 remaining units. They are currently in sound stable condition. As a property investor, does anyone repair something that isn't broken?

    I think it is worth noting here that the first event was a slow leak resultant from deteriorated grout repaired in 2014. At this time an inspection was carried out on the remaining 5 units and were all in sound condition. The second event at the end of 2017 from the same cause and the last in May this year 2018, a result of a crack in the shower basin.

    Can you both honestly say if you were in the same position as myself, that an event where a previous claim was accepted that you would not submit a claim with the occurrence of a similar event?

    At no time was I ever advised by the broker who has handled all my insurance policies for well over 20 years that an excess of claims could result in the insurer issuing an unable to affect renewal notice, leaving me incredibly exposed and ability to find another insurer difficult to say the least. Yes I have had 5 claims in 5 years on this one policy but my claims history on the total of all other policies have had no claims at all. In saying this, the insurer is more than happy to retain the remaining polices. I am not an insurance abuser, I have insurance for the same reason everyone takes out insurance, to cover unexpected events and I deem the events that have occurred to be that. I also appreciate the risk profile of the insurer and am looking for advice from members who have encounters similar situations and how they have overcome them.

    Moving forward, I am more than happy to take on the future risk of water leakage resulting in myself being responsible for any repairs that may occur in the future by way of have either an exclusion on such an event written into the policy or have an imposed applicable excess for such an event.

    All 6 units are currently in sound, solid condition, I maintain them regularly, I actually live in one of them. Due to previous events I am more than happy to share the risk. Strata title insurance in mandatory, my question is how do I present such a proposal to a prospective insurer and mitigate past events and my future acceptance of risk sharing?

    Would be most grateful for your advice.
     
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  5. wylie

    wylie Moderator Staff Member

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    Can your broker of 20 years help you out by looking for another insurer, or offering perhaps to the current insurer that you pay for a building inspection to prove the other bathrooms are not suffering the same fate as the ones you've claimed already?

    We once had an insurer refuse to insure us when we admitted the condition of the property we had just contracted to buy. It was in "original" condition, but was solid. We made the mistake of describing it "as it is" (which we would do again - why risk telling lies or gilding the Lilly and then having it bite us should something that needs to be claimed happen before we renovated) but also said we were about to completely renovate it as soon as it settled. That was mostly new kitchen and bathroom, rip up old carpets, paint, mostly cosmetic.

    Lesson learned. They took our "house is shabby" truthfulness as "house is too risky" and for years afterwards we had to answer that question "has any insurer ever refused you insurance". We had a form ready to attach to any other insurance application, which clearly spelled out that there was nothing that was not cosmetic or going to be replaced immediately on settlement that caused this stupid situation we found ourselves in.

    What a PITA and I guess you will have this problem going forward for years now each time you want to insure something.

    Insurance companies want and expect the truth, but in our case, whoever read the application to insure over-reacted and caused us problems for years.

    You mention being willing to take on some responsibility for events. I would not do that.
     
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  6. Hosko

    Hosko Well-Known Member

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    What has your current broker done about placing your insurance elsewhere? Maybe with exclusions around certain events or having higher excesses applicable could work.
    If you haven't already done so, get a copy of your claims history as this could well be required as you try to place this insurance elsewhere, it will also show that you have only had 5 claims worth x amount of dollars in comparison to x amount of insurance policies and not just this single policy.
    Best of luck with this, let me know if there is anything else that I can help with
     
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  7. Marg4000

    Marg4000 Well-Known Member

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    Of course you were perfectly entitled to make those legitimate claims. And, should the policy have been renewed, you would have been entitled to make any future claim from an insured event. Even a similar bathroom event. This was never disputed.

    But, I suspect the insurance company thought along the same lines as I did - that the other three bathrooms are just claims waiting to happen. Or had concerns about the overall condition of the property. And bailed out.

    Moving forward....

    I would expect the best advice would come from your broker.

    But my suggestion would be to try to negotiate with your existing company to get the rejection rescinded.

    Maybe accept a larger excess?

    Set out the circumstances of your previous claims, and any steps you have taken to ensure the other three bathrooms are sound. Unfortunately, if bathrooms in a 1990s building are still original, leaks are almost inevitable despite inspections showing they are presently sound (as far as can be seen - you can’t look under tiles).

    But the issue may not be the number of claims, but the total amount paid in claims (bathrooms are expensive) relative to premiums paid.

    Our house was built in 1978. We renovated the en-suite (leaks) in the 1990s and the main bathroom about ten years later. Again a leak. Both times the shower tray under the tiles failed.
    Marg
     
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  8. Marg4000

    Marg4000 Well-Known Member

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    Insurance companies look at financial ratios - premiums received versus claims paid. Otherwise they would go broke.

    I suspect that it is not the number of claims that is the issue but the total amount paid. Bathrooms are expensive.
    Marg
     
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  9. Lesley Watson

    Lesley Watson New Member

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    Thank you to everyone who has commented on this post and offered me guidance and advice, it has been greatly appreciated.

    I have managed to renegotiate with the existing insurer, with any future claims for water leaks omitted, a hefty excess and double premiums. I am happy with this out come as the decision to originally decline the policy has now been rescinded.

    I completely understand the position of the insurance company and I am very happy to share the risk of potential reoccurrence of the remaining bathrooms.

    I still feel a little jilted at the fact I have been a property investors for 20 years, at the peak of my investing I had a total of 13 titles, and my previous claims history (other than the 5 claims associated with this property) have equated to just 2 claims that were property related in that time. This block of units is one of the first investment properties I purchased, with the first 13 years claims history free. Feeling a little bit like a naughty school girl who broke the rules I didn't completely understand. Lessons learnt I guess.

    Thanks once again.
    Lesley
     
  10. TMNT

    TMNT Well-Known Member

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    although a different scenario totally, but a similar idea,

    this is something I have become wary being a slum lord over the past few years,
    afer one stage making 2 large insurance claims on the same property in6 months,
    they either said they wotn reinsure me, or were thinking about it,

    that put a lot of things into perspective, including my investment strategy
     
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