Author: Nancy Germond 

Managing commercial real estate risks has never been more challenging. Especially on CRE risks with 24-hour access, preventing and controlling liability claims can be problematic. Your clients should report incidents that may not be serious, because even when a person does not complain of an injury at the time, they can change their mind a few days later if they develop symptoms. Early claim intervention can help to prevent attorney involvement.

Let's review some of the top liability exposures CRE owners and managers encounter and determine how they can strengthen their loss prevention programs to avoid claims and expensive litigation.

Assaults on CRE Properties

When CRE property owners encounter on-site injuries or assaults, no matter how minor, underwriters will closely scrutinize loss prevention at renewal, or even mid-term if the claim department notifies underwriters of the event. Here are a few of the issues CRE owners face.

• Bar patrons who overindulge and become unruly. Even the best security staff can generate assault and battery claims.
• Sexual assault, especially in darkened parking structures, laundry room, common areas, or when doors or windows are not secure in apartment complexes.
• Active-assailant occurrences, some that arise out of employee domestic-violence incidents that occur in the workplace.

While the perpetrators may land in criminal court, premises liability civil suits frequently arise as those injured seek deeper pockets than those facing criminal charges possess. The most likely defendants in the civil case is the crime scene's property owner and/or property manager.

According to FBI data, more than half of active assailant events occurred at commercial sites like retail outlets, apartments, condos and hotels. Violent crime is up in major cities post-pandemic, according to Time Magazine.

One of the easier recommendations you can make to your CRE clients to protect them against premises liability claims and prevent crimes is with improved lighting. Changes like improved exterior lighting not only helps prevent vandalism, vagrancy and other opportunity crimes, but more importantly can limit assaults on your client's CRE portfolio locations.

Today's agents have a product they can offer to help defray costs that the general liability policy may not cover or may not cover adequately. Active assailant/active shooter coverage can provide your clients with peace of mind and help protect you against an errors and omissions claim should a mass casualty incident occur.

Added coverages available under the active assailant policy like public relations advice after an event can help you keep your client's reputation intact and provide other needed services not typically found under the general liability policy, such as templates for a pre-event action plan.

Gas Leaks Can Explode Your Clients' Loss Runs

Not only do gas leaks cause facility issues, but they can also cause serious injury to tenants and CRE customers. With service vendor raising prices due to recent gas hikes and higher labor costs, your CRE clients may be seeking repair services “on the cheap." Now is a great time to remind them that they may get what they pay for. For example, using a handyman to repair a gas line can create liability any jury would find inexcusable properly presented by a skilled plaintiff attorney.

Additionally, although apartment management companies may provide carbon monoxide detectors, many tenants will fail to replace batteries. Your CRE facility managers may want to upgrade to hard-wired carbon monoxide detectors to reduce the chance of dead batteries.

Landlords can build frequent inspections into their leases to check HVAC filters, carbon monoxide detectors, smoke alarms and other life-safety equipment. It's also a great time to look around while inside to ensure the tenants are keeping their spaces habitable.

Reminding your CRE clients to use only licensed, bonded and insured plumbers and other service providers can help prevent claims.

You can also suggest to your CRE apartment managers that, if they have not already done so, they put a renters' insurance requirement into their leases. This can be a win for your agency as you can act as the agent for their tenants, furnishing them with HO-4s and HO-14s.

Slips, Trips and Falls

A frequent problem in CRE risk is the need to reduce slips, trips and falls. According to Zurich Insurance, the most common causes of falls in commercial real estate include these.

• Slip resistance or surface composition
  
• Substances on floors, such a spilled liquid, floor wax, or weather-related moisture
• Changes in surface elevation
• Poor lighting
• Stair incidents, especially in older buildings where stairs may not meet building code
• Human factors, such as footwear that contributes to a fall, or poor vision

Sidewalk cracks, large sidewalk displacements, faded reflective paint on steps and curbs, poorly illuminated changes in elevation – all these hazards can cause serious injuries leading to large personal injury settlements. Remind your clients to encourage employee and tenant hazard reporting, then that they act quickly on those reports. Failing to act once reported creates additional liability where none may have existed pre-report. 

Keeping “wet floor" signs handy and responding quickly to problems like damaged parking blocks with rebar protruding can help prevent costly injuries.

Plumbing Repairs Can Prevent Expensive Water Damage

Water damage claims can cause many issues in CRE risks.

Water damage claims cause many losses in commercial habitational properties. According to Water Damage Defense, which supplies water leak detection systems and other devices designed to prevent water damage, the insurance industry pays $2.5 billion annually due to mold and water damage claims in the U.S. Due to this fact, insurance underwriters seeing a pattern of water damage claims may limit or decline writing coverage.

Some simple changes can help your clients limit water damage losses. Zurich Insurance offers water damage prevention tips at this link, which you can furnish to your CRE clients by email or in social media. Additionally, here's a link from an Arizona contractor to plumbing tips to prevent water damage claims for your clients that is thorough and free.

CRE clients should have pre-vetted vendors on contract – plumbers and restoration companies – who can quickly respond to water leaks and resulting damage. However, it's best if you recommend that your CRE clients work with their insurance companies to see which restoration companies they recommend, because there's a big difference in quality and cost among these providers.

Facility plumbing inspections can prevent many water leaks. Plumbers will evaluate supply lines, water heaters, toilets and more to suggest preventative plumbing maintenance. Spending money before a leak can mean less costly leaks and hits to loss runs. Especially in aging buildings, plumbing fixtures and piping are probably on their way to “obsolete."

The Commercial Insurance Market Continues to Harden

Whether your clients' portfolios are mixed use, habitational, office, or retail, rates will continue to harden given social inflation, dampers on reinsurance availability and climate risks. It may be harder to obtain the property or liability limits you could easily get in the past. Your clients' best defenses are to improve their loss histories so you can sell their story – solid risk management – to your commercial underwriters.

Here are some media updates you can use across email, social media, or other communication forums.

• Worried about potential water damage claims in your real estate units? This water damage prevention tip sheet can help.
• Water damage claims can hit your pocketbook and your loss runs. This free book provides tips on understanding how your plumbing works and how you can prevent water damage claims.
• Escalating verdicts on premises liability claims can seriously hamper your commercial real estate insurance premiums. Improving lighting across your facilities can reduce trip and falls, assaults and improve your loss history.
• Commercial real estate rates continue to rise. Risk management is critical to controlling your losses. Contact us for more tips on reducing losses in your commercial real estate portfolio.