A new client of mine is the focus of this case study. The situation is one that reminded me of the challenge property owners face when looking shopping for insurance for old buildings.
The particular property is like many in the Portland downtown. It is a 9,000 square foot one story brick building with wood trusses built in 1927. The tenant is a retail business with a showroom. The building is wide open with a small mezzanine and a small area walled off for some storage. There is one bathroom, and a small break room with a sink. There are two perimeter walls visible to the sidewalk and busy city street which are showroom windows. The other two walls are solid brick, with no openings.
The estimated replacement cost estimate generated by a replacement cost estimator used by insurance companies. $1,332,780.00.
The current rents are $12,000/ month, $144,000 annually.
Building systems: It is widely held belief that building systems have a limited life expectancy. Therefore, insurance companies require that systems, roof, electrical, plumbing & heating and cooling systems be replaced every twenty-five to forty years. If not replaced, a carrier will require an inspection from a licensed contractor stating the condition of the system is sound.
Current code does not require the building to be sprinklered based on square footage and occupancy.
Critical Updates when Purchasing Insurance for Old Buildings
- Roof: 1990 the roof was replaced prior to when the owner purchased the building. The owner has the roof cleaned regularly, removing all of the leaves from around the drains to prevent pooling of water, and staining of the roof. The roof has been inspected in the recent past, and the roofing contractor said it is sound and with regular care could last another fifteen years.
- Electrical: In 2001, the new tenant needed some electrical updates to provide for lighting in the showroom windows. All electrical panels are circuit breakers, and electrical wiring is housed in conduit.
- Plumbing: There is limited plumbing as described above. The updates are limited to new fixtures.
- Heating & Cooling (HVAC): The building has a gas fired furnace that hangs from the ceiling. This is a common style of heater for warehouse, large showroom’s. In 2004, a newer ductless heat & air conditioner unit was installed to provide air conditioning.
The owner received a notice from his insurance company notifying him that they would not be offering renewal due to the age of the building. When he contacted his agent, the agent, said there was nothing he could do.
I discussed with the building owner the history, and prepared applications in order to tell the story of the building to potentially willing carriers.
CLICK HERE to get the complete results of our case study on insurance for old buildings.