Close Call: Hurricane Dorian Passes Miami, But Is CRE Ready For The Next Storm?

Now that the winds have slowed down and evacuations have stopped, South Floridians agree: unpredictable Dorian was the most annoying hurricane ever. The near-miss should nudge commercial property owners to get ready for the next storm. 

Insurance rates could see a bump following Dorian, said Ryan Cassidy, Franklin Street's senior director of insurance services.

"It's like gas prices," he said. "On the commercial side, they look at each other to see what can be charged, and when a catastrophic event happens, [insurers] start jacking the prices."

In the reinsurance market, rates had fallen for a few years, but because of natural disasters the past two years, rates are expected to rise up to 5% in January, Reuters reports. Standard & Poor's said rates would likely rise around 5%, while Fitch predicted 1% to 2%. 

For commercial property owners, "the biggest thing is checking their policies, even having an outside agent ... review the policy, or even a public adjuster, to see if potential gaps could be present," Cassidy said.

While insurance companies that offer residential coverage are largely "admitted" by the state — meaning that the state has agreed to pay claims if they go bust — no carrier admitted by the state will write commercial property policies here unless it is a condo association, Cassidy said. He said that AmRisc, a managing general underwriter, largely controls the market for South Florida commercial properties. 

Cassidy said that post-Dorian, it's a good time to consider swapping in impact windows or new roofs if need be.

"Don't wait until a hurricane blows the roof off to fix it," which a lot of people in Florida do, he said. "Sometimes people don't even realize that their wind deductible won't even pay for the roof. And if the roof gets blown off, it causes more damage to the building."

Joshua Atlas, a partner in the West Palm Beach office of Saul Ewing Arnstein & Lehr who often represents developers, general contractors, subcontractors and suppliers, said the best practice is to be prepared before a storm. Parties may want to review all their contracts for weather contingencies.

“For the most part, we try to address this risk at the outset of a project,” Atlas said. “There’s not much we can do to prevent a storm, so we mitigate risk, insure it, and understand who’s got what responsibility if and when a storm comes. It’s like any other enterprise risk on a project — address it contractually.”

Contracts should specify what a developer is responsible for and what a contractor is entitled to as far as additional money and time due to weather or delays, he said. All parties should be sufficiently insured, he said, and when purchasing builders’ risk insurance, developers might choose to add coverage for construction delays. That often comes at an extra cost, and kicks in 30 days after a storm, but can still be useful, Atlas said.

“If you’re at a point that you need materials brought in, and you can’t get them, you may have all the labor ready in the world, but if you don’t have anything to build with, there are going to be delays," he said.

Property owners should take photos or video of their holdings, and whomever runs project billing should set up special codes in the software to classify certain expenses as being impacted by the hurricane. This makes it easier to account for hours dedicated to hurricane preparation, hurricane cleanup and extra supplies, all of which can be part of an insurance claim.

Businesses should have plans in place for dealing with the aftermath of a hurricane. Atlas' basic advice is: “Get out there as soon as the site is safe and secure, without putting personnel at risk.”

The hurricane plan should include contact information for project personnel, emergency operations personnel and building departments, Atlas said. It should be mindful of workforce safety — workers should not be called back until roads are safe to drive on and they have been able to tend to their families. No one wants to hear of workers rushing back to a job site, only to get hurt.

“Not only is that straight-up liability, it’s bad PR,” Atlas said.

The first leaders back on-site should evaluate damage, again taking photos and video. Some parties may be contractually required to send out delay notices, warning that a project could involve extra time or expense.