Insurance: Recent city tragedies spotlight on how building owners can be better prepared for disasters

The building explosion in Harlem killed eight people - and destroyed the lives and homes of countless more. Just a week later flames swept through a beautiful Upper West Side brownstone as residents grabbed their pets and ran for their lives. Luckily, this time no one died, but the four-alarm fire left many families homeless with all their possessions gone. These two recent incidents and others have thrown a spotlight on New York City's aging buildings and infrastructure. Today, it is more important than ever for building owners and tenants to stop and take note to make sure they are prepared when disaster hits. For starters it is not just enough for owners to have insurance policies. It is very important that all tenants carry their own 'renter's policy' (HO-4) to cover their own belongings within their apartment. Tenants' personal contents are not covered under the landlord's insurance policy. A recent study shows that only 34% of American renters have renter's insurance. While landlords may be well covered for their buildings, it is very painful to watch tenants left with only their clothing on their back (if they are lucky). The biggest advantage of requiring all tenants to purchase a renters policy is that they will be less likely to sue the landlord in the event of a fire, collapse, water damage, etc. When tenants don't carry insurance, they often seek reimbursement for their belongings by filing suit against the landlord, which incurs significant legal expenses and endless headaches for the landlord. Building owners should be well covered and not just go for the cheapest policy that often excludes many significant exposures that would be covered under other higher premium policies. Here are some additional important factors to consider when reviewing coverage and comparing quotes. * Lead Paint Liability - Worst scenario: A building owner recently lost his 35-unit multifamily Bronx apartment building due to a lead contamination lawsuit filed against him by one of his tenants; Any building that was built prior to 1978 has been exposed to lead poisoning in the paint. Recently the Environmental Protection Agency, EPA, tightened the allowable level of lead in children's blood streams, which has caused a sharp increase in the amount of lawsuits against landlords for lead poisoning. There are only a handful of insurance companies that will cover lead liability - so make sure Lead Liability Insurance is included in the policy. * Open HPD violations can increase premiums significantly. In many cases insurance companies will reject covering a building with too many open violations. We highly recommend that building owners settle their violations in advance to avoid unexpected price increases; * Coverage for loss caused by enforcement of building ordinances is extremely important, especially for older buildings that may need upgrades. Ordinance or law coverage has three parts to it; * Part A provides coverage to repair the undamaged part of your building that is required to be torn down. Many communities have a building ordinance(s) requiring that a building that has been damaged to a specified extent (typically 50%) must be demolished and rebuilt in accordance with current building codes rather than simply repaired; * Part B covers the demolition expenses for an undamaged portion of a building that has to be removed after a partial loss, according to local regulations; * Part C provides coverage for increased cost of new construction, deriving from new building codes that have not yet been in force at the time the building was originally built, i.e. sprinkler systems, elevators, wiring, septic system, etc.; * Construction/Renovation - Owners doing construction or renovations in a building must notify the insurance company. Often there may be specific exclusions on the policy that would limit the coverage if the building is undergoing renovations. Sol Eisenberg is the co-founder at Evergreen Insurance & Risk Management, Monsey, N.Y.