Ask a Broker: NYC building insurance questions, answered

Why did our building's insurance premium jump at renewal?

Most NYC buildings have seen bigger renewals in recent years, even with no claims. A few things usually drive it. Insurers pay more for their own backup coverage (reinsurance), and those costs get passed on. Higher labor and material costs raise what it would take to rebuild your building, so property limits and premiums go up with them. On the liability side, New York is one of the most expensive states for injury lawsuits, partly because of the Scaffold Law (Labor Law §240), which makes owners responsible for many worker falls.

Your own building matters too: claims, especially water leaks, along with the age of the plumbing, wiring and roof, any open violations, and having fewer carriers bid on your account.

A broker can show you which of these drove your increase and which ones you can actually change.

Read more: What drives NYC building insurance premiums

What affects how much an NYC apartment building pays for insurance?

Underwriters look at the building itself and its history. The main factors are:

• Size, construction type, age and number of stories
• Replacement cost (what it would take to rebuild), which sets the property limit
• Updates to the roof, plumbing, electrical and heating, with the years they were done
• Claims over the last three to five years, especially water and slip-and-fall claims
• Commercial tenants: a restaurant on the ground floor rates differently than an office
• Open DOB or HPD violations, facade (FISP) status and sprinklers
• The deductible and the limits you choose

Two buildings on the same block can price very differently for these reasons.

How can we lower our building's insurance premium?

There's no guaranteed trick, but these usually help at renewal:

• Document every upgrade (roof, risers, electrical, boiler) with years and invoices; underwriters price what they can see.
• Consider a higher deductible if the building's reserves can absorb it.
• Prevent water claims: leak sensors, automatic shutoff valves and regular checks of risers and washing-machine hoses.
• Collect certificates of insurance from every contractor and commercial tenant, so their accidents don't land on your policy.
• Fix open violations and keep the sidewalk, stairs and lighting in good shape.
• Start the renewal 60 to 90 days early so more insurers can quote.

An independent broker can also take the same building to several insurers and compare real offers, not just the renewal.

Our insurer non-renewed our older building. What now?

Don't panic, and don't wait. For most commercial policies, New York Insurance Law §3426 requires the insurer to give written notice of non-renewal at least 60 and no more than 120 days before expiration, which gives you time to shop. Ask why: it is often the building's age, past water claims, old wiring or plumbing, or the insurer simply shrinking its NYC business.

Then gather what a new insurer will ask for: years of updates to the roof, plumbing, electrical and heating, five years of claims history (loss runs), the rent roll and photos. Older and prewar buildings can still be placed, sometimes with a different insurer type (excess and surplus lines) or a higher deductible.

Start early. A gap in coverage can put you in default on your mortgage.

Does a co-op or condo board need D&O insurance?

Yes, in practice. Directors and officers (D&O) insurance covers claims that the board made a wrong decision: an admissions denial, an assessment, a renovation or sublet ruling, uneven enforcement of house rules. The building's general liability policy covers injuries and property damage, not those decisions.

D&O pays for lawyers, which is often the biggest cost even when the board did nothing wrong. Most board policies are "claims-made," so when you switch insurers, make sure the prior-acts date carries over to avoid a gap. Many lenders and attorneys expect boards to carry it, and few volunteers will serve without it.

Read more: Co-op and condo board D&O, explained

How much umbrella coverage does our building need?

There's no single right number. An umbrella (or excess) policy adds liability coverage above the building's general liability and auto policies, and in NYC a single serious injury lawsuit can exceed a basic liability limit.

Things that call for higher limits: more units and stories, retail or restaurant tenants, a parking garage, a roof deck, gym or pool, and lots of foot traffic. Start with the minimums your loan documents, management agreement and commercial leases require, since those are firm requirements. Then decide how much more the board is comfortable with.

Also check that the umbrella sits over every underlying policy, including auto and employer's liability for building staff.

Read more: Umbrella insurance for apartment buildings

Does Local Law 11 (FISP) affect our building's insurance?

It can. Under the Facade Inspection Safety Program (FISP, often called Local Law 11), buildings taller than six stories need a facade inspection every five years. A facade rated "unsafe" means sidewalk sheds and repairs, and underwriters ask about it. An open unsafe condition can limit which insurers will quote.

The repair work also brings risk: scaffolds and workers at height fall under New York's Scaffold Law. Before facade work starts, the contractor should carry general liability, workers' compensation and umbrella coverage, and should name the building (and usually the managing agent) as additional insured. Get the certificate and the endorsement before anyone goes up.

What is Labor Law §240, and why does it matter to building owners?

Labor Law §240(1), New York's "Scaffold Law," holds owners and contractors responsible when a worker is hurt in a fall from height or by a falling object during construction, repair or similar work. In many cases the owner can be liable even if it did nothing wrong. That's one reason NYC liability insurance costs more than in most places.

How to protect the building: hire insured contractors, require them to carry their own liability and workers' comp with the building and managing agent named as additional insured, and have a written contract with indemnity (hold-harmless) language your attorney has reviewed. Your own liability policy is the backstop, so check whether it has any contractor-related exclusions.

What's the difference between the building's master policy and an HO-6?

The building's master policy, bought by the co-op or condo, covers the structure, common areas and the building's liability. An HO-6 is the individual owner's policy. It covers your belongings, your liability inside the apartment, additional living costs if you have to move out after a covered loss, and often your share of a building assessment (loss assessment coverage).

The gray area is the inside of the apartment. Some condo master policies cover original fixtures; others stop at the bare walls. In co-ops, the proprietary lease usually spells out who repairs and insures what, including renovations an owner has made. Read your building's documents and size your HO-6 so it picks up where the master policy stops.

Read more: Co-op insurance · Condo association insurance

Water leaked from the apartment above. Who pays?

It depends on where the water came from, your building's documents and the policies, not just whose apartment it started in. A leak from a building pipe or riser is often the building's responsibility, while a leak from a unit owner's appliance, toilet or renovation may fall on that owner. In co-ops, the proprietary lease and house rules usually set who repairs what; in condos, the bylaws do.

In practice: report the leak to the managing agent right away, photograph everything, and notify your own insurer (HO-6). Your insurer may pay you first and then go after the responsible party (subrogation). Keep repair estimates and receipts, and don't sign anything with the neighbor's insurer until you understand your own coverage.

We're buying into a co-op. Can we see the building's master insurance?

You should, and your lender will usually insist on it. Buyers' attorneys and lenders generally request the building's insurance information during due diligence, typically through the managing agent: the property insurer and limit, general liability and umbrella limits, and often D&O. A building that won't share it, or has gaps, deserves a closer look.

Ask: Is the building insured for full replacement cost? What's the deductible, and does the building pass part of it to shareholders? Were there recent large claims or a non-renewal? Then buy an HO-6 that matches what the master policy doesn't cover. Your attorney handles the legal side of this review.

What insurance does a landlord of an NYC rental building need?

Most rental buildings carry:

• Property insurance on the building at replacement cost, with loss of rents if a fire or flood forces tenants out
• General liability for injuries in common areas, sidewalks and stairs
• An umbrella over the liability
• Workers' compensation and New York disability and Paid Family Leave insurance if you employ anyone, such as a super or porter; New York requires these for most employers
• Boiler and machinery (equipment breakdown) coverage, often included in the property policy

Buildings with five or more units are usually written on a commercial policy, not a homeowners or dwelling form. Your lender's requirements set the minimums.

Read more: Landlord insurance in NYC · Property vs. general liability for landlords

Is my building covered while it's vacant or between tenants?

Check before it happens. Many standard commercial property policies limit coverage once a building has been vacant for more than 60 days in a row. Common results: no coverage for vandalism, glass breakage, sprinkler leaks, water damage or theft, and a reduced payout for other losses. What counts as "vacant" is defined in the policy, often by how much of the building is rented or used.

A few empty apartments in an occupied building usually isn't a problem. A building emptied for a gut renovation, or one sitting empty while it's sold, is. Tell your broker before the building empties out; a vacancy permit, a vacant building policy or a builders risk policy can fill the gap.

Read more: Vacant building insurance

My building is owned by an LLC. Does my personal umbrella cover it?

Usually not. Personal umbrella policies generally exclude business property and anything owned by an entity, and the insurer looks at who the named insured is. If the building is in an LLC, the property, liability and umbrella policies should name that LLC (and usually you and the managing agent as additional insureds).

Make sure the names on the deed, the loan and the policies all match. A mismatch can cause trouble with a lender or after a claim. Owners with several LLCs can often put them on one combined policy with a shared umbrella, which is simpler and sometimes cheaper.

Does our building insurance cover flooding or sewer backup?

Usually not by default. Standard property policies exclude flood: rising water, storm surge and heavy rain coming in at ground level. Flood coverage is a separate policy, from the federal flood program (NFIP) or a private flood insurer. Lenders require it when the building is in a FEMA high-risk flood zone, but basements in other parts of NYC flood too, as recent storms showed.

Water backing up through drains or sewer lines is a different exclusion. It is often covered only if you add a sewer or drain backup endorsement, usually with its own limit. Ask your broker to confirm both in writing, especially if the building has a basement apartment, boiler room or laundry below street level.

What insurance does a lender require for an apartment building loan?

It's in the loan documents, and lenders are strict about it. Typical requirements: property at full replacement cost, a maximum deductible, loss of rents (often 12 months or more), general liability and umbrella at set limits, flood insurance if the building is in a FEMA flood zone, and the lender named as mortgagee and loss payee. Co-op loans often add D&O for the board.

Send the lender's insurance requirements to your broker before you close or renew, not after; finding out about a missing coverage at closing can delay the loan.

Read more: What does my lender require?

What is a certificate of insurance, and what should we ask contractors for?

A certificate of insurance (COI) is a one-page summary showing a contractor or tenant has insurance: the insurer, policy numbers, dates and limits. It's proof, not the coverage itself. In New York a certificate can't change or add to the policy, so being listed as "certificate holder" doesn't make the building an insured.

Ask contractors for general liability, workers' compensation and an umbrella, with the co-op or condo, the managing agent and the owner named as additional insured by endorsement. Ask for the endorsement too, plus a waiver of subrogation if your contracts call for it. Check that dates are current and limits meet your building's requirements before work starts. Many boards also require this from movers and from shareholders' renovation contractors.

How does a building insurance claim work, and should we file small claims?

After a loss: make the area safe, stop further damage (shut off water, board up), take photos and video, and keep damaged items until the adjuster says otherwise. Report it to your broker and insurer quickly; late notice can hurt a claim. For injuries, report as soon as you hear about them and don't admit fault. An adjuster will inspect and pay based on the policy terms and your deductible.

About small claims: every claim stays on the building's loss history for years, and frequent small claims can raise the premium or cost you the insurer. If the damage is barely above the deductible, it may make sense to pay it yourself. Talk to your broker before deciding.