Cleaning Up Insurance Doesn't Cover Moderate Hurricane Damage After four hurricanes leveled parts of Florida last fall, they left in their wake apartment owners picking up the phone to dial their insurance agents. But many owners didn't exactly get good news. Because of high deductibles, caps on debris-related damages and cleanup, and per-building deductibles on windstorm damages, many apartment firms had to reach into their own pockets to cover hurricane damages.
Mark Sanders, CEO of the Fifteen Group, an apartment owner based in Miami Beach, Fla., had hurricanes touch four of his properties in Florida. Hurricane Charley tore part of the roof off of one Orlando property, and later storms compounded the damage. As one might expect, company executives filed an insurance claim for the destruction.
But a clause covering windstorm damage on multi-building properties made it much more difficult for The Fifteen Group to make claims on three other properties. The problem: The company's deductible for windstorm damage at the properties was per building, not per apartment community. “When you have $15,000 worth of damage to five buildings each, you get to the point where you say it's not worth it,” Sanders says.
Other property owners had a similar issue: Their deductibles were so high that it didn't make sense to make an insurance claim. The Chicago-based Laramar Group was about to sell a Ft. Myers, Fla., property when it was hit by a hurricane. Since a hurricane deductible is a percentage of the property's total value, CEO and managing partner Dave Woodward figured that he would have to pay nearly $700,000 deductible before recovering any money from the insurance—more than the estimated damages the property sustained. (Fortunately, the hurricane damage didn't affect the property's sale.)
In many cases, apartment landscaping sustained more damage than the buildings, as storms knocked over trees and destroyed shrubbery. “It doesn't sound like a big deal, but if you start blowing 30 50-foot trees over in a community, it can get huge,” says Keith Oden, president of Houston-based Camden Property Trust, which sustained some damage to its Florida properties. “The cost of getting them cut up, hauled off, and getting the property back to some semblance of repair could be as much as $1 million.”
In fact, debris cleanup costs cannot exceed 10 percent of the total claim on many insurance policies, according to Oden. So, if the landscaping took the brunt of the damage at a property, many owners were out of luck. “The substantial amount of our dollars was debris removal,” Oden says. “That's probably what got more people than anything. I'm guessing some people had some big uninsured hits in the debris removal category.”