Are Your Property Transfers and Acquisitions at Risk?

Over the past several years, exclusions for mold, microbial matter and lead-based paint have consistently appeared on general liability policies to create substantial coverage gaps.

As a result, uncovered claims can be significant. Take, for instance, the discovery of mold in an apartment community in the State of Delaware. A leaking kitchen sink was the verified cause of discoloration and foul odor in a bedroom ceiling as well as the dark-rimmed holes in the bedroom ceiling.

Despite repeated complaints, building management was slow to respond resulting in health-related issues for the two women living in the apartment. During the law suit, the women demonstrated that the owners rarely performed repairs beyond cosmetic patchwork. After two weeks of testimony, the jury awarded $1.04 million to the complainants for personal injuries.

Another example of catastrophic loss occurred at a condominium complex in the Northeast. It included the sickening of two people as well as the death of a 50-year-old woman who contracted Legionnaire’s Disease. The resulting effects included evacuating the entire complex, disinfecting the water system and a significant law suit.

As the above-mentioned situations show, habitational property owners have significant environmental worries.

Other environmental risks commonly associated with habitational real estate may include, but are not limited to:

• Contaminants from known and unknown historical usage/operations or neighboring properties
• Construction debris containing hazardous materials
• Sick Building Syndrome i.e. carbon monoxide, mold, or bacterial air releases from faulty heating, ventilation or air conditioning systems
• Hazardous chemical storage (such as maintenance degreasers, pool chemicals, pesticides and herbicides used both indoors and outdoors)
• Lead, asbestos, polychlorinated byphenols (PCBs)
• “Midnight dumping” on vacant land parcels
• Leaking underground or aboveground storage tanks or piping.

Managing the risks

Despite the obvious challenges, environmental liabilities needn’t be an obstacle to property transfers and acquisitions if they are proactively identified, managed and mitigated.
In recent years, habitational real estate developers and owners alike have mitigated their environmental exposures through contractual means, the use of environmental insurance or the combination of both. This trend is also likely to continue due to the ever-increasing need of financial institutions to protect their loans in today’s economic climate and the desire of sellers, who would prefer to be free from potential claims related to unknown legacy issues.

At the top of the ($2.5B annual premium) environmental insurance market are the five leading environmental liability insurers of AIG, XL Capital, Zurich, ACE USA, and Chubb, which account for approximately 90 percent of the total premiums written. However, the remaining 10 percent of the environmental liability insurance market is growing with a number of very solid insurers providing at least some form of environmental liability insurance. These markets include Liberty, Markel Underwriting Managers, American Safety, Freberg Environmental/Endurance and Great American.

Available coverages

Each environmental liability insurer offers its own manuscripted coverage forms. To complicate matters even more, each insurer also offers a portfolio of environmental liability coverage forms, with the largest offering up to 15 different coverages totaling over 100 forms in the marketplace.

Among these is Premises Environmental Liability/Pollution Legal Liability (PLL), which provides coverage for pollution conditions or events on, at, under or migrating from a covered location(s). Coverage is afforded for third-party bodily injury, property damage, clean up costs and legal defense expense. A unique feature of many PLL policies is their ability to offer various and different coverage parts under one policy form. This includes, but is not limited to:

• New pollution conditions
• Existing pollution conditions
• On site clean-up coverage
• Transportation coverage
• Non Owned Disposal Site (NODS) coverage
• Business interruption including Loss of Rental Income
• Mold liability coverage and clean-up
• Legionella coverage
• Fines and Penalties and Punitive Damages where allowable by law
• Natural Resource Damages.

PLL is an effective risk management tool for commercial real estate since it helps to fill the “environmental gap” left in most general liability policies. It also helps reduce the uncertainty about environmental liability associated with the property and provides simple asset protection from potentially catastrophic environmental events associated with day-to-day operations.

In today’s environmental insurance market, available programs can even be tailored to address the diverse needs of each property and then structured to meet a variety of requirements that include regulatory obligations, contract requirements, lender requirements, landlord obligations, and business objectives. Another important aspect of coverage offered under PLL is that it can be structured to provide coverage for contamination, even if it is known certain environmental conditions already exist on site.

Fortunately, the environmental insurance marketplace is continually adapting to keep pace with the growing risk management demands of real estate owners and lenders—demands that are not likely to subside in the near future due to the costly nature of environmental liabilities.

DIFFERENT TYPES OF COMMERCIAL INSURANCE

The most common types of commercial insurance are property, liability and workers’ compensation. In general, property insurance covers damages to your business property; liability insurance covers damages to third parties; and workers’ compensation insurance covers on-the-job injuries to your employees. Depending on your business, you may want additional specialized coverages. Listed below are some of the different types of business insurance.

PROPERTY INSURANCE Property insurance pays for losses and damages to real or personal property. For example, a property insurance policy would cover fire damage to your office space. You can purchase additional coverages for business property, including:

Boiler and Machinery Insurance Boiler and machinery insurance, sometimes referred to as “equipment breakdown” or “mechanical breakdown coverage,” provides coverage for the accidental breakdown of boilers, machinery, and equipment. This type of coverage usually will reimburse you for property damage and business interruption losses. For example, this coverage would cover fire damage to computers.

Debris Removal Insurance Debris removal insurance covers the cost of removing debris after a fire, flood, windstorm, etc. For example, a fire burns your building to the ground. Before you can start rebuilding, the remains of the old building have to be removed. Your property insurance will cover the costs of rebuilding, but not of removing the debris.

Builder’s Risk Insurance Builder’s risk insurance covers buildings while they are being constructed. For example, a Builder’s risk policy would cover losses if a windstorm takes down your partially constructed condominium complex.

Glass Insurance Glass insurance covers broken store windows and plate glass windows.

Inland Marine Insurance Inland marine insurance covers property in transit and other people’s property on your premises. For example, this insurance would cover fire-damage to customers’ clothing from a fire at your dry cleaning business.

Business Interruption Insurance Business interruption insurance covers lost income and expenses resulting from property damage or loss. For example, if a fire forces you to close your doors for two months, this insurance would reimburse you for salaries, taxes, rents, and net profits that would have been earned during the two-month period.

Ordinance or Law Insurance Ordinance or law insurance covers the costs associated with having to demolish and rebuild to code when your building has been partially destroyed (usually 50 percent). For example, your three-story building is 100 years old. A flood destroys the basement and first two stories. Because more than 50 percent of your building has to be rebuilt, a local ordinance requires that the building be completely demolished and rebuilt according to current building codes. Property insurance covers only the replacement value, not the upgrade.

Tenant’s Insurance Commercial leases often require tenants to carry a certain amount of insurance. A renter’s commercial policy covers damages to improvements you make to your rental space and damages to the building caused by the negligence of your employees.

Crime Insurance Crime insurance covers theft, burglary, and robbery of money, securities, stock, and fixtures from employees and outsiders.

Fidelity Bonds A bond company covers losses due to a bonded employee’s theft of business property and money.

LIABILITY INSURANCE Liability insurance covers injuries that you cause to third parties. If someone sues you for personal injuries or property damage, the cost of defending and resolving the suit would be covered by your liability insurance policy. A general liability policy will cover you for common risks, including customer injuries on your premises. More specialized varieties of liability insurance include:

Errors and Omissions Insurance Errors and omissions (“E & O”) insurance covers inadvertent mistakes or failures that cause injury to a third party. The act must actually be an inadvertent error, and not merely poor judgment or intentional acts. For example, an E & O policy would cover damages arising from an insurance agent failing to file policy applications, or a notary forgetting to fill out notarizations properly.

Malpractice Insurance Malpractice insurance, or professional liability insurance, pays for losses resulting from injuries to third parties when a professional’s conduct falls below the profession’s standard of care. For example, if a doctor makes a mistake that other doctors of his specialty would not have made, his patient might sue him. A malpractice policy will pay his defense costs and any judgment or settlement. Malpractice insurance is available for doctors, dentists, accountants, real estate agents, architects, and other professionals.

Automobile Insurance Commercial automobile policies cover the cars, vans, trucks and trailers used in your business. The coverage will reimburse you if your vehicles are damaged or stolen or if the driver injures a person or property.

Directors’ and Officers’ Liability Insurance This type of insurance is generally purchased by corporations and nonprofit organizations to cover the costs of lawsuits against directors and officers.

WORKERS’ COMPENSATION INSURANCE Workers’ compensation insurance covers you for an employee’s on-the-job injuries. Businesses with employees are required by various state laws to carry some type of workers’ compensation insurance. In most cases, workers’ compensation laws prohibit the employee from bringing a negligence lawsuit against an employer for work-related injuries.  

Source: Findlaw.com

Real-Estate Markets Still Plumb for Bottom

Have you seen the cost of other insurance?

By Anton Troianovski / Wall Street Journal

What began as a bad year for real estate turned into one of the worst on record, driven by an unprecedented drop in home prices, a tide of foreclosures and a credit crisis whose magnitude few anticipated.

“I thought it would be a bad year,” said Mark Zandi, chief economist at Moody’s Economy.com. “I didn’t think it was going to be a complete washout.”

And as bad as 2008 was, few are ready to say the worst is over. The troubles in the residential sector are expected to continue, while problems are just beginning for the other side of the real-estate market — office buildings, hotels, shopping malls and other commercial properties — as the recession starts to have an effect.

“The question on everyone’s mind is, ‘How is the government going to try to solve this?’ ” said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.

On the residential side, many are urging the Obama administration to push for broad programs to limit foreclosures, stimulate demand for homes, and stop the slide in prices. The Treasury Department is considering a plan that would push down rates on home mortgages to 4.5%.

One of the government’s highest-profile efforts so far, Hope for Homeowners, lets banks move borrowers into government-insured loans if lenders agree to write down a portion of the principal. But very little of the $300 billion pledged by the Department of Housing and Urban Development has been put to use so far, in part because investors who hold those loans would incur big losses.

Commercial developers are also hoping for a lifeline from Washington, perhaps guaranteeing chunks of new commercial mortgages.

House prices fell 23% from their July 2006 peak to October 2008, the latest data available, based on the S&P/Case-Shiller Home Price index, which tracks home values in 20 cities. Mr. Zandi expects an additional 10% drop to a bottom late this year.

One in 10 homeowners with a mortgage is either in foreclosure or delinquent on payments, the Mortgage Bankers Association said last month.

Banks have tried loan-modification programs to stem the crisis but with limited success. More than half the mortgage loans that were modified were more than 30 days late six months later, according to a government report last month.

Regions that had been booming were hit especially hard by the bursting of the real-estate bubble. In the Southwest and Florida, homes lie vacant along the winding streets and cul-de-sacs of brand-new subdivisions.

In Phoenix, home values have fallen 41% from their peak in June 2006. “Boomers who we counted on coming down here when they retire can’t sell their homes in Chicago or Michigan or other places, so they’re not coming,” said Betsy Kurasch, a local real-estate agent with ReMax Achievers.

Wall Street is feeling the effects as well as Main Street. Securitization, the packaging of loans into investment products, had allowed new mortgages to be issued at huge volumes and helped to inflate the housing bubble. It essentially disappeared as credit markets seized up amid problems with subprime loans, with some of the biggest financial institutions in the country taking a hit. Residential-mortgage originations fell to $300 billion in the third quarter — a 50% drop from a year earlier, according to Inside Mortgage Finance, a trade publication.

For commercial real estate, the troubles that lie ahead could hurt pension funds and college endowments that moved money into real estate in recent years as the market was booming, as well as real-estate magnates.

The commercial market “is going to be ugly for the next 12 to 24 months,” said Michael Restuccia, chairman of the San Joaquin County (Calif.) Employees’ Retirement Association. “Not just bad, but ugly.”

A preview of the ugliness — as well as opportunities for investors with cash to spend — came last spring, when loans coming due forced New York property titan Harry Macklowe to sell some of his prized office towers.

It’s hard to know how far commercial-property prices have fallen because the lack of credit has made it hard to buy big buildings. In the office market, for instance, only $1 billion of deals on fewer than 50 properties closed across the U.S. in November, according to research firm Real Capital Analytics. That’s a 90% drop from November 2007.

The stock market provides clues to how investors are pricing commercial real estate, and the picture isn’t pretty. The Dow Jones Equity All REIT Index, which tracks many public real-estate company stocks, fell 40% in the last three months of 2008.

The poster child so far: Retail landlord General Growth Properties Inc., which received an extension last month on an overdue loan as it struggled to pay down its $27 billion debt load. The share price of the Chicago-based owner of more than 200 U.S. malls plunged to $1.29 from $41.18 over the course of the year.

Investors are especially concerned about sectors of the market most exposed to cutbacks in spending by consumers and corporations: shopping malls, warehouses, office buildings, and most of all, hotels, which are suffering as consumers and businesses cut spending on travel. Companies involved in health-care facilities and senior housing are considered somewhat safer, in part because of the coming wave of retiring baby boomers.

There are questions facing commercial real estate this year: How much further will real-estate stocks fall? Will property owners with debt coming due find ways to refinance? And will the investors who committed billions to commercial property in the past few years be willing and able to make good on those commitments?

“For economists now to make forecasts is a pretty difficult thing,” said Ray Torto, chief global economist at real-estate firm CB Richard Ellis. “All of our models are outside the territory in which they’ve been built.”

Commercial Insurance Prices Dropped 4% in Q3, Reports Towers Perrin

December 17, 2008

Commercial insurance prices dropped four percent during the third quarter of 2008 compared to the same quarter a year ago, according to Tower Perrin’s most recent commercial lines insurance pricing
and profitability trends (CLIPS) survey.

This deterioration, while less severe than the five percent drop seen in the second quarter of 2008, comes at the front end of the decline in the financial markets, and the full effect of the current global economic downturn on commercial prices has not yet been captured.

Property pricing softened considerably, while price changes in specialty lines remained fairly flat for the second consecutive quarter, according to the survey.

Updated loss ratio indications from the survey show accident year 2007 loss ratios deteriorating 11 percent relative to 2006, and the partial indication for accident year 2008 shows a 10 percent decline.

“The overall deterioration in pricing is a continuation of the trend cited
when we published our first survey almost four years ago,” said Jeanne Hollister, Towers Perrin managing principal and Property/Casualty Insurance practice leader for the Americas region. “We do, however, expect to see abatement in soft market conditions in the U.S., as companies consider a number of factors in their pricing decisions, including equity and credit-related losses to asset portfolios, a continuation of poor underwriting results in many sectors, heavy weather-related losses and a forecasted spike in directors and officers liability claims.

“In our view, the industry is fast approaching a point where the underwriting results are no longer favorable relative to economic hurdle rates, and that generally signals a ‘tipping point’ in terms of companies’ pricing actions,” added Hollister.

Towers Perrin said that CLIPS data are based on both new and renewal business obtained directly from carriers underwriting the business, and indicate more conservative price reductions than other marketplace surveys.

CLIPS participants include the majority of both the top 10 commercial lines companies and the top 25 insurance groups in the U.S.
Source: Towers Perrin
www.towersperrin.com

Retail Shopping Center Loss Prevention Program

The Retail Shopping Center Loss Prevention program is specifically designed for

building owners or managers who rent or lease, in whole or part, their buildings to

others. Named insureds will be from a broad range of varying types, and can

include partnerships, corporations, trust funds, or property management firms.

The real estate industry is one of America’s largest and most important tangible

assets. The development, construction and growth of increasingly sophisticated

commercial businesscenters and retail centers is projected to continue well into the

future as more and improved buildings will be needed to suit the expanding needs

of America.  Success in real estate ownership lies in the ability to professionally manage the

investment. Whether you turn this responsibility over to a professional property

management firm or retain direct control, the following guide will assist you in

your safety efforts.

 

CLICK ON: My Shared Files to get a FREE COPY of our Retail Shopping Center Loss Prevention Program

Office-space landlords willing to bargain in tough economy

by Andrew Johnson – Nov. 20, 2008 12:00 AM – The Arizona Republic

Consumers have cut back discretionary spending. Credit is harder to obtain. Energy costs have been on a roller coaster.

Operating a small business has become something of blood sport in the past year.

But an area of the economy where small-business owners are getting breathing room is commercial real estate.

Fundamental factors that turned the Valley into a commercial-development hot zone – rampant in-migration and job growth – have slowed. Leasing and sales velocity in the commercial market has stalled. Vacancy rates for office, retail and industrial properties are at their highest levels in several years.

The news may sound dour, but the ailing market has opened new and, in some cases, classier doors for small businesses. To fill space, landlords offer a bevy of concession packages: several months of free rent, reduced parking rates, money for improvements and greater move-in flexibility.

The specials enable companies in older buildings or less-than-ideal locations to move into Class A space without necessarily paying Class A prices.

 

 

The downturn has taken a toll on businesses in all sectors. Many have scaled back hiring or postponed expansion because of skittish consumer demand. Others have gone belly up.

The result is fewer tenants available to fill the growing pool of commercial space. That has delivered a hefty blow to building owners and property managers, who struggle to attract and retain tenants.

 

Very shallow’ market

 

“The market’s very shallow right now in terms of activity,” said Don Mudd, a senior vice president in the Phoenix office of commercial-brokerage firm Grubb and Ellis/BRE Commercial LLC.

In addition to the rising number of businesses that are vacating space altogether, many are trying to sublease. Some want to sublease space they don’t need; others are looking for cheaper space elsewhere and can’t prematurely end the contract for their current location.

Subleasing is one way small-business owners can move to a premier location without paying premier prices.

“On the sublease side, there is a significant reduction of (rental) rate,” said Nicole Cooley, a senior associate with Cushman and Wakefield of Arizona Inc. in Phoenix. Cooley works with office tenants seeking 3,000 to 10,000 square feet.

Many tenants are taking advantage of the slow market by “either stepping into Class A space in a better submarket or into a more ideal location for their employee base,” she said.

Lisa Perez, who co-owns a document-shredding business, is subleasing about 500 square feet from an office-furniture company in east Phoenix. She pays about $1,200 on a month-to-month basis.

Other properties she looked at cost $3,800 to $5,000 per month.

“I thought, ‘Gosh, we’re going to burn through cash pretty quickly,’ ” recalled Perez, CEO of AZ Docushred LLC.

 

 

Flexible terms

 

Many landlords have become more accommodating to potential tenants as the commercial real-estate market has softened.

When Ultimate Shade Alternatives in Tempe was looking to relocate its office and warehouse last fall, price was important – so was space configuration and move-in time.

The company installs outdoor shades on commercial and residential properties.

The shade materials are as long as 50 feet, so the company requires large swaths of unobstructed space. The business also was growing, making it difficult to pinpoint exactly how much space it needed.

The owners decided to stay put in a multitenant office-warehouse building in Tempe. A deciding factor was a change in the building’s ownership. The new landlord’s offer to let the company move into the space during the course of several months instead of at one time helped seal the deal.

“They allowed us to utilize some of the new space before we even had an agreement, so they really were going out of their way to help us as a business manage our growth,” president Joy Whitfield said.

Tenants often focus on lease rates when they should keep an eye out for other factors that can affect the bottom line, too, said Greg Mayer, a senior associate with CB Richard Ellis in Phoenix.

“There are 40-plus points in an office lease,” said Mayer, who brokers lease agreements for office tenants. “Most people focus on rent as being the biggest point in a lease, (but) you have parking, you have operating expenses, you have insurance, you have remedies if something happens in a building.”

 

 

Staying put

 

Despite plentiful deals, other tenants are making do with what they have.

Earlier this year, John Beck was considering moving his office equipment firm, WORKspaces LLC, into a new building because the business could use more space.

The company had moved from a 1,000-square-foot Camelback Corridor office into a 4,000-square-foot multitenant building in northeast Phoenix two years ago.

“We were growing like crazy,” Beck said. “We had too many people stuffed into a small office.”

The company’s office is starting to get crowded again, but the economic downturn has Beck putting potential moving plans on the back burner.

The company could financially afford to take on a couple of thousand more square feet, especially with the some of the deals landlords are offering, he said. Still, the office-furniture business is particularly susceptible to economic downturns, and Beck doesn’t want to risk having to pay for more space than he’s going to need.

In many cases, it’s more difficult for businesses to add locations or relocate headquarters because of financing issues.

“With the tight credit markets, it’s really difficult, if not impossible, for companies to borrow on a business line of credit or (obtain) business loans,” said Thad Seligman, president of the Phoenix office for commercial brokerage firm NAI Horizon.

For some businesses, the only option is to dip into cash reserves.

“The problem is there’s so much unknown about what’s going on in the business environment that no one wants to spend their own cash,” Seligman said.

Tips to CUT COST on your Commercial Building’s Insurance Policy!

Higher Deductibles, Loss Prevention Among Ways to Save Money

SOURCE: The Insurance Information Institute

NEW YORK, October 7, 2008 — More than 25 million small businesses operate in the United States today, yet many of these business owners did not take advantage of the many ways to save money on their insurance. In lean times like this, it is even more important to evaluate your business and consider ways to reduce spending while boosting profits, according to the Insurance Information Institute (I.I.I.).

The I.I.I. suggests eight ways business owners can save money on their insurance:

1. Shop around.
   Prices vary from company to company, so it pays to shop around. Get the names of companies or brokers who specialize in your type of business. Call several so that you can compare prices and get a feel for the types of services they would provide. Ask the agent or company that provides your personal insurance whether they offer business insurance. It is also important to pick a company that is financially stable. Check the financial health of your potential insurer with rating companies such as A.M. Best and Standard & Poor’s.
2. Look at Group Rates.
   Purchasing your insurance through a business or professional organization can save you money. Many different business organizations offer insurance plans and/or discounts on business insurance to their members. The bigger the group, usually the lower the insurance premiums. The savings typically outweigh any member dues. There are professional organizations for almost every business occupation from electricians and plumbers to writers and artists. General business organizations, such as your local Chamber of Commerce and the Better Business Bureau also offer business insurance discounts. Your local home-based business association may offer lower prices on home-based business insurance.
3. Choose a higher deductible.
   Deductibles represent the amount of money you pay before your insurance policy kicks in. The higher the deductible, the less you will pay in premiums for the policy.
4. Consider a package policy.
   A Business Owners Policy (BOP) is often significantly less expensive than a self-designed plan. BOPs include: property insurance for buildings and company owned contents; business interruption insurance, which covers the loss of income resulting from an insured event (such as a fire) that disrupts the operations of the business; and liability protection, which covers a company’s legal responsibility for the harm it may cause to others. To determine whether a package policy suits your needs, inventory all of your business property to determine its value and whether it needs to be insured, then compare the property and values to what is available in a particular package.
5. Set up a risk management/loss reduction program.
   Insurers will often lower your rates if you put a program into place that will minimize losses from fire, theft, and employee and customer injuries. These can include workplace safety training programs, disaster preparation and human resource intervention. Consider installing a security or fire system. If your line of business uses vehicles, install anti-theft devices and hire drivers with good driving records. If possible reassign drivers with bad driving records to non-driving tasks. Ask what you can do to reduce risks such as fire or work-related accidents and review the procedures that should be in place in the event your business suffers a major catastrophe.
6. Consider relocating your business.
   Deciding whether to relocate depends, to a large extent, on what kind of business you operate and where you move to. Moving from a downtown area to a suburb, for example, may reduce premiums on your property and vehicle insurance, and even your workers compensation insurance.
7. Work closely with your agent or broker.
   An insurance professional can provide invaluable advice to help protect your business. It is important to keep your insurer informed about any changes in your business operations. This includes major purchases, expansions or changes in hiring or in the nature of your operations.
8. Have the right amount and type of coverage.
   Part of the decision about what insurance to buy depends on the nature of the business. For example, if your business has a lot of assets, you might consider theft and property damage insurance. You may want life insurance on you and critical personnel in your organization. You also may want to consider various other forms of insurance, for example, Directors and Officers (if you have a Board of Directors) or business interruption. Having the right amount and type of coverage along with a carefully developed business plan that includes disaster preparedness can save you money in the long run. Be sure to keep your agent fully apprised of any changes within your business that might necessitate changes to your insurance coverage. Such changes may include: adding employees, expanding your business, increasing your inventory or materials, purchasing major equipment such as tools or vehicles and adding suppliers.

Federal judge says commercial general liability policy didn’t cover

Danny Jacobs

A building contractor’s insurance policy does not cover the amounts an arbitrator awarded to a Sparks couple for faulty home construction, a federal judge has ruled.

Mutual Benefit Group, which issued the commercial general liability policy to Wise M. Bolt Co. Inc., successfully argued that the CGL did not cover the $115,000 arbitration award to Herbert and Elaine Tracey.

“The repair and replacement damages awarded as a result of Bolt’s poor performance are simply a cost of doing business, not a component of the insurance objective of shifting risk,” U.S. District Judge William M. Nickerson wrote in granting summary judgment for Mutual Benefit last week, ending a seven-year legal dispute.

William C. Parler Jr., Mutual Benefit’s attorney, said the decision provides guidance to insurers on contract-based damages awarded to builders on home construction projects. Previous rulings in state and federal courts had reached a similar conclusion for commercial projects, he said.

“If there are damages awarded based on a contractual obligation … then there will be no duty to indemnify,” said Parler, of Parler & Wobber LLP.

The Traceys are still living in their home on Thornton Mill Road, said their attorney, Douglas T. Sachse of Towson. Sachse declined to comment on Nickerson’s decision.

David B. Applefeld of Adelberg, Rudow, Dorf & Hendler LLC in Baltimore, who represented Bolt, also declined to comment. Court records indicate Bolt’s filings in the lawsuit were based on Mutual Benefit’s duty to defend and attorneys’ fees.

The Traceys entered a construction agreement with Bolt in October 1998, according to court records. The couple moved in seven months later even though construction was not completed.

The Traceys first sued Bolt for negligence and breach of contract in July 2001 in Baltimore County Circuit Court. Amended complaints were filed in 2002 and 2005 as more construction defects were found.

The complaints all alleged structural defects and code violations. The Traceys also blamed improperly installed windows, heating and cooling systems for “unexpected damage” to their furnishings and the food in their pantry, according to Nickerson’s memorandum.

The case went to arbitration in January 2007 before retired Judge Paul E. Alpert, who two months later awarded the Traceys more than $115,000 from Bolt, which was about $200,000 less than they had sought.

Alpert denied the couple’s motion for reconsideration in March 2007, a decision upheld by Judge Robert E. Cahill Jr. in circuit court in August 2007, according to court records. The judgment was recorded last March.

Mutual Benefit, meanwhile, had filed a complaint in federal court in December 2001 for declaratory judgment to determine if it had a duty to defend or indemnify Bolt. In October 2002, Senior District Judge Alexander Harvey II found Mutual Benefit had to defend Bolt, but stayed the indemnification and attorneys’ fees issues pending the outcome of the case in state court.

Nickerson administratively closed the federal case in August 2005 because of delays in the state case. The federal case was reopened in June 2006 at the request of Bolt, which was granted $34,000 in attorneys’ fees from Mutual Benefit that August, according to court records.

The Traceys requested the stay on the indemnification issue be lifted last November, a motion Nickerson granted in April.

Andrew H. Vance, a veteran construction lawyer not involved in the case, said Nickerson’s ruling last week is consistent with case law that excludes insurers from covering repair work done by a policy holder.

“This is what I’ve seen time and time again in the commercial realm,” said Vance, of counsel at Hodes, Pessin & Katz P.A. in Towson.

Copyright 2008 Dolan Media Newswires
Provided by ProQuest Information and Learning Company. All rights Reserved.

AROUND THE COUNTY

Ryan, Kelly

Projects, developments and other activity in cities in and around OC

IRVINE

Construction crews are making progress on what’s billed as an environmentally friendly apartment complex near Jamboree Road and Main Street. Main Street Village, also known as the MetLife Apartments, is set to be Orange County’s first apartments certified for environmentally sound construction and building management techniques under the U.S. Green Building Council’s Leadership in Energy and Environmental Design standards. The developers hope to attract renters who value environmental practices. The real estate investments division of Metropolitan Life Insurance Co. has owned the 10-acre site since the 1980s. A single-story industrial building was demolished about four years ago. General contractor White Residential Inc. began building in spring 2007. White Residential is based in Kirkland, Wash., but has an Irvinc office. The complex has two pools, a 12,000-square-foot clubhouse, a 1.000-square-foot fitness center, a basketball court and a children’s playground. Main Street Village will have 481 apartments ranging from 640 square feet to 1,424 square feet. The entire complex is 500,000 square feet. The first of five construction phases should finish in January, with some residents moving Jn then. The final phase should be finished in late 2009. Project and construction management services are being done by Lincoln Property Co. in Irvine. Architects Orange is the architect.

NEWPORT BEACH

Anaheim Hills-based Bomel Construction Co. is building a parking structure for Hoag Memorial Hospital Presbyterian near Pacific Coast Highway and Newport Boulevard. The structure, designed by Parkitects in Irvine, has three levels and 771 parking spaces. Hoag Hospital had a building on the site that was demolished. The building was one of several that housed research and development as well as office space for the hospital. The remaining buildings on the site are being transformed into a new Hoag Health Center. The hospital has several health centers across OC, including in Irvine, Costa Mesa and Huntington Beach. The new center won’t open until the parking structure is complete, which could be as soon as the end of this year.

LACUNA NIGUEL

A Walgreens drugstore is nearing completion at Crown Valley and Alicia parkways. The building replaces a Farmer’s Market and Blockbuster. Demolition of that part of the Laguna Niguel Town Center began in January. The drugstore will span 13,000 square feet with the main entrance near Alicia Parkway. There also will be a second-floor mezzanine in the back for storage. Valencia-based Lundgren Management Corp. is overseeing construction, which should be done in September. Arizona-based Robert Kubicek Architects and Associates Inc. designed the building.

LOS ALAMITOS

A Precious Life Shelter for homeless pregnant women is going up near Katella Avenue and Los Alamitos Boulevard. Nonprofit HomeAid Orange County is developing the $880.000 project with several builders, contractors and suppliers. The 5,631-square-foot project calls for five apartments with 12 beds, a meeting room and childcare facility spread over two buildings. The apartments are outfitted with garages and laundry hookups. The shelter previously had two older houses on the property, which were demolished. There was a groundbreaking at the site in April and construction crews should be done in the fall. Irvine-based Empire Homes is the lead builder for the project. JZMK Partners in Irvine is the architect.

NEWPORT BEACH

The June 23 Around the County column should have said the builder of Newport Harbor High School’s multipurpose theater building is San Fernando-based Bernards.

If you’re a developer or city planner and would like to see a project featured in Around the County, please contact Kelly Ryan at ryan@ocbj.com or (949) 833-8373. The column covers projects in Orange County s cities and unincorporated areas, and some projects in Corona. Commercial, housing and retail projects are the focus of the column. Some larger public works projects also are included.

Copyright CBJ, L. P. Jul 7-Jul 13, 2008
Provided by ProQuest Information and Learning Company. All rights Reserved

CAP REIT Acquires North Toronto Apartment Complex

Canadian Apartment Properties Real Estate Investment Trust (“CAP REIT”) (TSX: CAR.UN) announced today that it has acquired two adjoining apartment properties located in North Toronto close to the Bayview Shopping Centre. The complex, consisting of 143 mid-tier suites, has easy access to Sheppard Avenue, Highway 401 and the subway line. The purchase price for the property was $14.0 million ($98,000 per suite) with a new CMHC insured mortgage of $10.8 million for a 5 year term at an interest rate of 4.69%. The balance of the purchase was funded from CAP REIT’s acquisition facility.

The property has had extensive retrofits to the roof, windows, balconies and heating system. In addition, the opportunity exists to enhance cash flow from the property as a number of existing rents are well below market. Occupancy currently is 98.6%.

“We are pleased to be completing our first acquisition for 2008, and remain committed to achieving our annual target of acquiring between 1,500 and 2,000 suites once again this year,” commented Thomas Schwartz, President and Chief Executive Officer.

As one of Canada’s largest residential landlords, CAP REIT is a growth oriented investment trust owning interests in 27,996 residential suites and two land lease communities comprising 1,233 land lease sites located in or near major urban centres from coast to coast. Since its Initial Public Offering in May 1997, CAP REIT has grown monthly distributions per Unit by 51%. For more information about CAP REIT, its business and its investment highlights, please refer to our web site at www.capreit.net .

Contacts: CAP REIT Mr. Michael Stein Chairman (416) 861-5788 CAP REIT Mr. Thomas Schwartz President & CEO (416) 861-9404 CAP REIT Mr. Yazdi Bharucha CFO & Secretary (416) 861-5771 Website: www.capreit.net