After the Freeze: How to Ensure You Get the Full Benefit of Your Insurance Policy 20

After the freeze: How to ensure you get the full benefit of your insurance policy

BY BRANDI SMITH

For a state that has weathered its share of storms, Texas was unprepared for the record-setting deep freeze that hit in mid-February and the initially estimated $50 billion in damages.

“According to Enki Research disaster modeler Chuck Watson, the severe weather event could cost as much as $90 billion, making this the largest insurance claim event in history,” said public insurance adjuster Scott Friedson, CEO of Insurance Claim Recovery Support (ICRS).

REDnews connected with Friedson while he was making the trek to Houston, where he was slated to inspect more than 35 different properties that week.

“There is no insurance risk model that accounts for a catastrophic loss to an entire state, especially the state of Texas,” he says.

Hurricanes, Friedson explains, typically cause damage along the coast. Even a hail storm or tornado has limited exposure. The freeze, on the other hand, stretched from the westernmost point of Texas to its easternmost point. “Many property owners are juggling pipe repairs, water damage mitigation, satiating tenant demands and dealing with their insurance claims simultaneously,” says Friedson, who exclusively represents commercial and multifamily owners, as well as management companies. “The carriers’ adjusters are coming as quickly as they can as policyholders are grappling with understanding their policy, as well as their contractual obligations in order to ensure a fair and prompt settlement.”

Typical policy language requires policyholders to “take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim.”

Fully understanding and interpreting what “all reasonable steps to protect from further damage” means could leave policyholders in a vulnerable and adversarial position with their insurer, putting their claims in jeopardy, receive the full amount they deserve. It’s why public adjusters, like Friedson, play such a vital role. He is licensed and bonded by the state and, in his role, represents policyholders’ interests, not those of the insurance company.

“When water damage occurs, we advise our clients to immediately put your insurer on notice of a claim,” he says. “We go through the policy and determine if only one deductible applies regardless of the number of locations, professional fee sub limits and we make ourselves available to meet the carrier’s representative as soon as possible to get the process moving forward.”

Friedson says the primary issue he’s seen is water mitigation due to burst pipes. While property owners are understandably concerned about getting plumbers to fix the broken pipes, he worries they’re ignoring the proper mitigation needed to prevent further damage.

“While they're focused on repairs to keep tenants happy and retain occupancy in their buildings, they're not engaging water extraction mitigation companies

as quickly as they should,” Friedson says. “That means they run the risk of getting mold, which may not be covered under the policy. Even if it is covered as ensuing damage, typically there are both conditions and limits on how much can get covered.”

According to board certified policyholder commercial insurance attorney Shannon Loyd, if mold goes over the amount of a policy limit and it grew because of the delay in the investigation, then the overage amount is an independent injury.

“One of the biggest issues we see is policyholders fear their insurer will dispute full payment of the water mitigation bill,” advises Loyd. “Water mitigation contractors understandably have the challenge of defining the full scope and cost until they inspect and moisture map affected areas not visible to the naked eye. So they typically provide time and material costs. Insurers are reluctant to approve vendor published price lists, leaving policyholders vulnerable and exposed.

She adds that many large commercial policyholders have in-house or third-party contractor resources they trust and don't want to get burned by an outside water mitigation company.

“We get it, but there is a method to managing risk while also performing your contractual duty in your policy to mitigate, prevent further damage and maximize your insurance claim,” says Loyd. “Using untrained and uncertified crews to tear out contaminated materials, can result in an improper dry out, create cross contamination liability and mold issues for property owners.”

To ensure a water mitigation vendor will defend their work to your insurer, moving any obligation you pay any additional cost, Friedson and Loyd encourage clients to ask their insurer to help provide resources. Try to get upfront approval before engaging a third-party water mitigation contractor or consultants.

A few more tips from Friedson:

- Request the remediation is performed in phases with adjuster approvals along the way.

- Negotiate contract terms and conditions that hedge policyholder risk while holding vendors accountable to defend their work in the event of disputed charges - Look for a water mitigation contractor using professional certified restoration/remediation crews that implement S500 and S520 Restoration industry standards set by the IICRC process

- Document every part of the process to hedge risk and ensure maximum settlement in minimum

If that all sounds like a lot, that’s because it is. Friedson handles all that when he’s engaged early in the process, though he knows he’ll soon get calls from property owners unsatisfied by how the process is moving along with their carriers. Friedson has considerable experience stepping up when needed at any point in that process. Best of all, there is no fee for his services if there’s no recovery. That, he emphasizes, has never happened.

For more information about public adjuster Scott Friedson or Insurance Claim Recovery Support, visit InsuranceClaimRecoverySupport.com.

“When water damage occurs, we advise our clients to immediately put your insurer on notice of a claim,”

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and office, and focus on industrial, the industrial investment market is getting “extremely competitive,” according to Rives Nolen, Senior Vice President of Investments at CenterPoint Properties.

“Investors are very interested in putting money into industrial real estate, whether it's in the form of acquisitions or development,” he says. “Even with the competitive marketplace, it’s a great time to be in industrial real estate.”

Nolen is based in Houston, which he points out has always offered a businessfriendly environment.

“We don’t have zoning and it’s easier to get projects permitted and built here in Houston compared to other markets,” says Nolen.

As a result, infill locations are difficult to find, but not impossible. Logistics Property Company’s CityPark offers more than 450,000 square feet of investment-grade rear load and cross-dock buildings and 50 acres of available land right off Beltway 8 and Hwy. 90 in Missouri City.

“We are ideally positioned for the 75,000 - 100,000 square feet tenant, a corporate campus requirement, or an e-Commerce user who needs excess auto or trailer parking,” says Robert Wheless, LPC’s Senior Vice President -- South Region. “We are attracting interested prospects for all three of the above use classes.”

The value of infill locations, more than ever, is their proximity to the very consumers industrial tenants hope to reach, Wheless explains.

Every retail segment posted gains in January, led by the Stimulus Bill and e-Commerce sales growth. These users of space have to adapt their operating models, supply chains and distribution plan to meet the needs of the consumers under pandemic restrictions.

“The Houston MSA covers more than 9,500 square miles, larger than five New England states. The population of the MSA, at 7 million, has an appetite for consumer goods, home building and home furnishing products,” he says. “Traditionally, these goods were conveyed via retail storefront; today, these goods are more likely to be conveyed from warehouse fulfillment centers. The distribution centers which store and deliver these products on the periphery of the MSA will not perform as well as the in-fill and ‘close-in’ locations along the traditional industrial corridors.”

Even so, because of the challenge of finding affordable infill locations, Nolen says developers are beginning to focus on new and emerging micromarkets in the outlying areas, such as Katy, where they can build much larger distribution spaces.

“Whereas 10 years ago, we would have considered 150,000 square feet a really large deal for the Houston market, we are now seeing much larger deals up to 1,000,000 square feet or more and the volume of larger distribution deals in the market has also increased. The average deal size has grown significantly,” says Nolen. “Developers are responding to this trend with speculative projects of all sizes including the 500,000 to 1,000,000 square feet size range that we previously haven’t seen in Houston.”

The experts we spoke to pointed to Austin, San Antonio and El Paso as markets they’re watching, but all are primarily focused on Dallas and Houston.

As always, they’re analyzing trends to help them stay on top of the market.

“We have seen predictions that e-Commerce sales will rise to levels of over 40 percent of all retail transactions over the next few years,” says Wheless. “This level of sales will require freeway accessible warehouse distribution facilities that are proximate to population centers for same-day deliveries.”

“With land being sold at a record pace and increased development costs, we do expect to see rents to continue to follow,” says Shoults. “Compared to other parts of the country, we are still relatively affordable, so we know there is runway on rent growth.”

These industrial pros say, as always, they’re ready for whatever the market throws at them. But for now, they’re enjoying riding this wave.

“We've seen cycles in the past that were pretty strong, but I’ve never seen anything quite like this in my career,” says Nolen.

Summarizes Baumgardner: “It’s just good to be in industrial right now.”

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moving freight via land, sea, and air.

Bullets:

• 20 million square feet absorption anticipated this year; lots of land for future development in NW sector is already tied up now; developers are going as far as Richmond-Rosenberg on the SW and Porter on the NE sides of town.

• New development is not aimed at the smaller users, thus intensifying for Class B, which is older and closer in, and…more expensive; build-to-suit and spec buildings vary from submarket to submarket and this keeps developers on their toes, to anticipate needs.

• New users are demanding 32 ft. minimum and up to 40’, dock levelers, and LED lighting, and since prospective tenants want to see the finished building, the amenities need to be right to land the tenant; Covid has not affected interior buildouts much.

• WalMart, Home Depot, Lowes, and others will follow Amazon with warehouse needs, so developers are gearing up.

• Today’s warehouses consume a lot of electricity and many are fully airconditioned, unlike in the past; energy efficiency is a focus and some LEEDS guidelines can be followed, but not all.

• Spiking construction costs and hesitancy during the Covid year paused some projects, but activity is returning; industry is bullish on leasing this year and beyond.

• Industrial construction nationwide is driving up cost of steel, lumber, and concrete; site prep is getting more complicated and expensive; as land prices increase dramatically and more site detention is required, the question is: who absorbs the cost? Ultimately it is the tenant in the form of higher rents.

• ndustrial land that was $3 square feet is now $5

• Houston has traditionally had moderate annual rent growth, but that seems to be coming to an end, as growth accelerates, following existing trends in Dallas; there is some trend toward shorter term leases.

• Capital should be available as equity and debt in coming year in our market if sources can move on from thinking only of Houston as an oil & gas city; these sources must realize that now in Houston consumers and growing population matter more than fossil fuels.

Panel 3- Emerging Trends in Logistics and Industrial Real Estate

Moderator: Craig Rhodes, Greater Houston Partnership Panelists: Walker Barnett, Colliers International; Maureen Solomon, WATCO Companies; Bob Wheless, Logistics Property Company, LLC

Takeaway: Houston has a booming port, two international airports, 4,800 warehouse and transportation facilities, 1,000 logistics service providers, and 6,500 manufacturers, making us one of the nation’s largest manufacturing cities; we are a major container distribution center with increased incoming rail from Mexico, as that country becomes more competitive with Asian manufacturers; bottlenecks at West Coast ports and other supply chain disruption are re-routing containers here and they can be distributed faster and more cheaply overland as far as the Great Lakes and the entire mid-section of the country; Houston has become ‘the’ major Third Coast port, as Amazon and other large retailers continue to import much of their inventory from Asia.

Bullets:

• Cold storage needs and indoor agriculture (hydroponic growing of vegetables) is starting to create warehouse demand, although TI costs are very high; being close to consumers is the key, and thus reducing transportation costs; rail is important to many industrial sites, and Houston has rail; a ‘green’ locomotive is in development for use at the Port, since trucking and rail overall make a huge contribution to pollution; more overall consideration is being given to solar and wind power in the industrial sector; Houston’s area ports handle distribution of wind turbine blades; the West Coast is setting the standards for reducing emissions at Ports.

• Change in logistics and storage is happening so fast that it is hugely challenging for industrial park developers to anticipate very far into the future; increasing air freight is creating demand, and tighter labor market in some sectors is creating new dilemmas.

• There is some consolidation among logistics providers, as they strive to become more efficient.

• Houston benefits overall from the sheer size and scope of our labor market; as oil & gas releases employees, the industrial sector benefits.

• Packaging manufacturers and their warehouse facilities are locating next to the mega distribution centers.

• Logistics and distribution systems are under pressure to reduce any possibility of interruption of service and to control all elements from arrival of product to its delivery to the customer; Amazon has 15-20 buildings in the Houston MSMA and is adding large cargo jets to its fleet to ensure more control over its own logistics.

• Houston attracts new companies because of its business-friendly, can-do attitude; there are four major ‘incubator’ projects under way in Houston for biomed and other scientific start up encouragement; hopefully this will result in biomed manufacturing and need for warehouse space.

• Houston’s central location in the state enables truckers to deliver to about 50% of the state’s population and return the same day; we can service San Antonio and Austin and the I-35 corridor in one day round trips; Interstate highways on all sides of Houston are in major widening/expansion.

• Houston has some of the country’s largest industrial parks.

• “America First”, i.e. onshoring of manufacturing will benefit Houston’s industrial segment; Houston is well-positioned to take advantage of developing trends in logistics, manufacturing, and distribution.