Assault and battery coverage shrinks for real estate firms

Some real estate insurance buyers are struggling to obtain adequate liability coverage for assault and violent crime exposures because increasing claims have prompted insurers to restrict coverage.

Not all commercial general liability policies cover assault and battery, so businesses should be strategic in how they manage such risks and structure their casualty insurance programs, experts say.

Insurers are narrowing their appetite for certain risks and in certain jurisdictions, said Caitlin Scifo, New York-based U.S. real estate and hospitality casualty leader at Marsh.

Multifamily properties and retail and hospitality businesses, which tend to experience high levels of third-party traffic, are seeing more challenging placements related to violent crimes, such as assault and battery, she said.

“You’re seeing changes overall in limit deployment, program structure, as well as coverage that’s offered,” Ms. Scifo said. The most challenging jurisdictions for claims are California, Florida, Georgia, Illinois, New York and Texas, she said.

Settlement amounts are increasing, which has led to higher rates, especially for accounts with substantial habitational exposure, said Thomas Pipala, New York-based senior vice president and Northeast real estate practice leader at Lockton.

Policyholders with significant past claims are seeing high-single-digit to mid-double-digit rate increases, he said. Insurers also are paring back umbrella/excess limits because of an increase in large losses, he said.

Even for accounts with no losses, insurers are curbing capacity, reducing previously quoted $25 million layers to $10 million to $15 million, Mr. Pipala said.

Securing adequate limits for assault and battery, sexual abuse and molestation and firearms risks is a major challenge, said Adam Lowe, Dallas-based principal and senior vice president at Brown & Riding.

“It’s not that you can’t get this coverage, but you can’t get it on every single risk,” he said.

Multifamily apartment complexes are particularly difficult, depending on the tenant makeup and venue, Mr. Lowe said.

“Any premises operations-driven real estate deal is not a simple placement,” he said.

Lenders are requiring full coverage for assault and battery, abuse and molestation, but insurers are reluctant to offer such terms, he said.

Insurers are scrutinizing geographical risks, crime scores, loss history, security and risk management.

A typical single-location habitational account “is going to have some sort of sublimited assault and battery, (sexual assault and molestation), firearms coverage, or it’s going to be excluded,” Mr. Lowe said.

“If we’re going to move forward in accepting sublimits, what our clients really need is a sublimit that matches the general liability limit, which is $1 million occurrence, $2 million aggregate,” said Dan Brown, San Francisco-based senior vice president within Alliant’s real estate and hospitality vertical.

Anything less than that likely would not be covered in the excess or umbrella tower, because excess insurers typically do not drop down to lower than the minimum primary general liability limits, he said.

“That’s created a lot of friction, especially when GL carriers are either looking to outright exclude the coverage, or if they’re willing to offer a much lower sublimit of call it $250,000 or $500,000. It’s providing some coverage for our clients, but it’s not giving the full coverage of the entire excess limit,” he said.

Insurers are becoming more selective about when and where they’re willing to deploy full limits for assault and battery and sexual abuse and molestation risks, said Joey Shapiro, Chicago-based executive vice president at Amwins.

“In certain circumstances, you may have to pay a surcharge on a specific risk in order to obtain that kind of coverage, or look at a different attachment point,” Mr. Shapiro said.

Mid- to large-sized real estate portfolios — 2,500 to 5,000 units — now face deductibles or self-insured retentions of $50,000 to $100,000 or more for full coverage, compared with $5,000 to $25,000 previously, according to an Amwins report issued in July.

“Coverage really starts to open up once you exceed a $50,000 or $100,000 self-insured retention,” Mr. Shapiro said.