Every building carries insurance, but no building manager wants to use it. In an ideal world, you’d pay regular premiums to cover your facility in case of property damage, injury, or a natural disaster – and never deal with filing a claim.
Unfortunately, that’s often not the case. Understanding your insurance options and addressing the building’s most vulnerable areas will go miles toward keeping your premiums – and your risk – as low as possible.
Cover Your Assets by Understanding Risks
At a bare minimum, most buildings carry property and general liability insurance. These two policies will protect against the vast majority of major commercial building issues, says Steve Bushnell, senior director of insurance provider Fireman’s Fund. You may also benefit from additional coverage to protect your business operations and equipment.
“With physical damage, the most common causes of loss are electrical fires, plumbing leaks, and envelope leaks that cause damage to the interior,” Bushnell explains. “If you have a structure with electrical wiring, you’re running the risk of an electrical fire – it’s just endemic to owning a building. Plumbing connections can leak, and in colder climates there could be frozen pipes that crack.”
Water intrusion in particular can cause astronomical damage in a short timeframe, says Frank Westfall, vice president of ESIS Inc. Health, Safety, and Environmental. Cleaning must start within 48 hours of a moisture intrusion event to avoid mold growth, which can cause bigger issues than the water damage.
“In the past three years, we are seeing a trend of losses associated with water intrusion and mold,” Westfall says. “The majority of the calls we get, especially on emergency response calls, are related to mold – a flood at the building, a leaking pipe, a roof replacement with leaks through the roof, or leaking roof drains with a mold issue. About every third call we get is related to mold.”
General liability covers bodily injury or damage to people’s property based on your negligence. Slip and fall incidents are by far the most common source of loss in this area, Bushnell says. A general liability policy would also cover car accidents in your parking lot caused by faulty striping or improper signage and other fiascos that fall under your responsibility.
“Water on the floor or ice building up lead to these kinds of issues,” Bushnell says. “We also see things like uneven sidewalks, parking lots with stops, or raised areas where trees are planted. Curbs or uneven surfaces everywhere are common places where people find ways to trip.”
Minimize the Building’s Vulnerability
You can’t prevent a natural disaster, but you can minimize your building’s vulnerability to general liability claims and property damage unrelated to natural disasters. Knowledge is your best weapon against both, so it pays to arm yourself with as much information as you can. Your team is the best choice to tackle this task – FMs know their buildings better than any outside provider and are best positioned to respond if the building starts malfunctioning.
“You have folks who do routine maintenance and inspections of a property, whether it’s a light industrial property or a mid-rise in New York City. They’re looking at boilers, HVAC units, roofing systems, and other building systems,” Westfall says. “As you’re going through the building, make sure you’re also looking at how your chemicals are stored. Look at the integrity of the tanks and the systems that are in place to test those things. Take a look at building materials if you know they’re hazardous, like lead-based paints, asbestos, or PCB-containing elements such as ballasts or transformers.”
Be sure to take notes every time you conduct this type of informal in-house inspection and store copies of the notes off-site. In the event of a loss, you can use your notes to prove that you regularly inspected and maintained the building as necessary. Even if the walkthroughs don’t turn up any potential problems, the regular maintenance you conduct at the same time may stop a problem from developing in the first place, Bushnell says.
The potential for preventable accidents increases when maintenance is delayed or deferred, so even though putting off parts of your maintenance program may save money and labor now, it can cause serious issues down the road.
“If you stop paying attention to the basic risk management things you should do, you’ll start having issues,” Bushnell says. “Older buildings have a greater probability, greater frequency, and higher severity of all of the causes of loss than do newer buildings, so as they get older, the systems are more prone to loss. What you need to do as a building owner is pay attention to that, and maintenance is an important part of this.”
When to Bring in Outside Consultants
Occasionally, you may want to consider enlisting another set of eyes to help pinpoint and address common trouble spots. The insurance company, an independent risk prevention consultant, or a safety engineer can conduct a thorough examination of building systems, examine your maintenance logs, and provide you with recommendations about what to address.
However, it’s still the building owner or manager’s job to fix any hazards the inspector finds.
“First, they look to see if basic safety procedures are being followed, what form of inspections are being done, and whether they meet code requirements,” says Chris Browne, managing director of facility management for the Americas at Jones Lang LaSalle, a global real estate services firm. “For example, they’ll evaluate a fire extinguisher to see whether it’s fully charged. A risk prevention consultant will also check the building systems – what is your fire system? How is it monitored? What types of coverage do you have? Is there a command center on-site in the event of a fire?”
A risk control consultant may also have access to specialized equipment that most buildings don’t have.
“These companies will bring in an infrared camera to look for hot spots and heat loss. They can also look at water intrusion and find leaks you may not know about,” Bushnell says. “Look for experience, a track record, and references – someone who you know has done this job for others. Use the same kind of basic check you would use for any person you’re hiring to do work in a building.”
Bring in a third-party consultant any time you lease space or conduct a renovation project, if not more often, Westfall recommends. Regular building audits help you protect what you have and can lead to lower insurance premiums.
“If you’re going to do any renovation work, it’s very helpful to have a professional come in and see if there’s anything left by the former tenant that impacts your ability to lease the space, or to see if any building materials will be impacted by that renovation,” Westfall explains. “If you’ve got a floor in a high rise and you’re thinking about turning it into a day care center, think of lead paint. We do building audits on a regular schedule for a number of clients simply because they want to protect their assets.”
A combination of due diligence and a proactive, safety-centric attitude will help you catch and eliminate many potential issues and respond to any problems that do occur. Adhere to a regular maintenance and in-house inspection schedule and know where the building and its tenants are at risk, Bushnell says.
“I don’t think there’s a secret to running a safe building. Most of it is common sense,” Bushnell explains. “Understand what can happen in your building that could hurt someone or hurt the building. Make sure it’s well-lit on the exterior and interior so you eliminate slip and fall hazards. Make sure you have the right kind of security to match the neighborhood the building is in, and if there are issues with crime, add additional security. Maintain the building systems and replace them as you have to. It’s the same as your home – you do what you have to.”
Janelle Penny ([email protected]) is associate editor of BUILDINGS.