Once again, a reminder that I’m working on a book project with an October publication deadline (it’s gonna be tough to make it). The working title of the book is “20/20 Vision: Why Insurance Doesn’t Cover the COVID-19 Pandemic.” Because of that, my blogging has been sparse.
However, I have noticed some recent news stories that reminded me of existing blog articles you may not have read. So, I’m taking a break from the book for an hour or so and providing a couple of article links below that you may not have read but might find interesting given current events.
The first one is a reminder that this week is the 19th anniversary of “9/11.” Here’s is something I posted last year:
And here is another newsworthy article:
“Owners Say Insurance Inadequate to Cover Demolition of Riot-Destroyed Buildings”
According to the article, “Some commercial property owners whose businesses were torched by rioters are learning that they don’t have enough insurance to clear away the debris. The Star Tribune newspaper reported that many property owners in the Minneapolis-St. Paul area purchased policies that limit payouts for demolition costs to $25,000 to $50,000, but contractors have submitted bids of $200,000 to $300,000. In many cases, the cost of demolition is greater than the value of the property, the newspaper said.”
This reminded me of an article I wrote in 2018 called “Debris Removal.” Many policyholders are not aware that their property policies may restrict how much coverage is provided for debris removal. That is especially true in commercial lines. It might surprise you how often the amount available is inadequate, which is about 100% of the time following a widespread event like a hurricane, tornado, or wildfire.
According to a risk management consultant I know:
I use the following formula developed by myself and a fellow architect friend:
- For every 6000 sq. ft. of solid brick construction, it takes $70,000 to haul it away.
- For every 6000 sq. ft. of steel construction, it takes $60,000 to haul it away.
- For every 6000 sq. ft. of frame construction, it takes $50,000 to haul it away.
These costs are about 60% dump fees and 40% labor/trucking.
And these are just the costs to remove the debris, not total demolition expenses. Following a catastrophe, expect the labor costs for demolition and removal to skyrocket with increased demand.
So, do you recommend and/or quote increased debris removal coverage?
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Bill, do you think the industry should adapt and include higher debris removal limits in policies? All insureds could benefit from the change. Many agents likely don’t even know this is an underinsured exposure for their clients.
I was telling someone today that 99% of agents don’t offer it and, if they did, 99% of insureds would decline. I’m sure that’s an exaggeration, but I bet it’s not much of one. The Big I’s national technical affairs committee and the Mid-America Insurance Conference (www.matc.com) stay on ISO about increasing automatic debris removal coverage and making it easier to provide extra coverage. There’s also been a lot of work on special catastrophe related boosts in debris removal coverage. For anyone with a customer newsletter, sharing news stories like this may be worthwhile if it encourages them to think about this.
From the risk management consultant I referenced in the article:
A conversation with the owner of a company that demolished and removed foundries early in my career provided unique insight into demolition and removal cost. Their company was demolishing, salvaging, and disposing of closing foundries all over the country. The foundry sites had every type of building and structure you could imagine. Offices, occasionally houses, bulk materials handling and storage, equipment storage, blast furnaces, enormous buildings to house iron product awaiting delivery, etc.
His range for demolition and removal was 12% to 15% of the cost to build new. There were 2 additional variables. One being the distance to haul the material to be removed. The nearest disposal site at one foundry was on the opposite side of a major city and the haul bill was enormous. The foundry was on the river side of the city and the only compliant disposal facility was on the opposite side. The 2nd was related to access. Removing structures adjacent to other buildings greatly increased the cost. Demolition and removal may be limited to nights, weekends, etc.
I’ve worked with engineers to help address Debris Removal costs in a number of cities. A diamond dealer in Philadelphia had a nice 4 story building in the historical district near Independence Hall. Their consulting engineer told us there was no competitive bidding for demolition and removal in Philadelphia. The work in that area could only be performed at night had must stop before 6:00 AM. Their DR estimate was 40% of the cost to build new.
This past year I saw the DR costs for some open and accessible Gatlinburg buildings destroyed in 2015. They were right on 12%.