Insurance Online : New Insurance Agency Formations Offset Consolidation

AM Best released an interview with this author at NAPSLO last week where we discussed insurance agency/broker consolidation. The trade press reports on the highly active M&A market for insurance agencies and brokers, with acquisitions of agencies and brokers announced most every day. However, new insurance agencies and brokers are being formed every day and are not being covered by the trade press. Comments from the interview: What you don't read about are the new [insurance agent] operations being formed every day… The barriers to entry used to be systems, compliance and markets... It is a lot easier these days for new [insurance agent] operations to form, to get into business and to be successful. (starting at about 2:00 in...

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Insurance Online : Fixer-Upper or Fixer-Downer?

Shopping for a home can be a nerve-wracking process. Consider all the factors that going into the decision, including whether or not you’re willing to invest in a fixer-upper or opt for a home that’s move-in ready.

Many overlook fixer-uppers due to the financial and time commitments required. And they can be considerable. But don’t dismiss the idea until you’ve also evaluated the benefits of choosing the fixer-upper.

Start with these:

Fixer-uppers can be less expensive

Because even the seller acknowledges that work must be put into the home, fixer-uppers rarely are listed at full market value because they simply wouldn’t attract offers. So opting for a fixer-upper could allow you to afford a larger home and/or a home that’s located in a pricier neighborhood. If you’re searching for a home located in the nicest school district and don’t want the financial burden of paying full market prices, you might opt for the fixer-upper.

As an added bonus, since you paid less for the home, you’ll have lower mortgage payments even after renovating the space and turning a fixer-upper into the home of your dreams.

Fewer bids

Many will shy away from fixer-uppers because they either don’t want to commit to or don’t have the time and resources to dedicate to getting the home up to snuff. Because of this, there are usually fewer competitors if you’re considering this type of abode. With fewer bids likely on the table for a home, you can often swoop in and negotiate a better deal.

Clean slate

Oftentimes when buying a move-in ready home, you have to settle for the previous tenants’ tastes. However, if you choose a fixer-upper and have the time and money to put into it, you can customize the entire place to reflect your style and completely make the space your own.

Along with having a blank canvas to work with and tailor to your tastes, if you perform the renovations yourself, you’ll have a great sense of pride in your home.

More potential savings and tax benefits

First of all, fixing up a subpar home could allow you to qualify for renovation loans – specifically, Federal Housing Authority 203k loans. These loans are available to assist with a wide variety of needs, including cosmetic fixes and large-scale structural work in order to make the home habitable.

Along the same vein, renovating a fixer-upper will likely increase your home’s value, which, in turn, could afford you quicker equity. Better equity can boost your net worth and allow you to refinance sooner, if needed.

Lastly, purchasing a fixer-upper could result in tax savings as property taxes, initially at least, are based on the home’s sale price. These types of houses also could qualify for an investment tax credit for eligible rehabilitation costs.

Just keep in mind…

Before you go running off to bid on a fixer-upper, remember the amount of time, work, and money that would be required. Have a home inspector that specializes in older homes check out the space and know your limits before you buy.

Realistically, you won’t be able to move into the home until most or all of the fixes are finalized, so make sure you consider your plan for the future and have enough time and money to put into the project.

Remember, however, that your repairs and renovations ultimately will increase the value of the home – and the cost to rebuild it. That means you’ll likely need  more dwelling coverage, which could result ina larger home insurance premium. Be sure to address this with your home insurance provider.

Fixer-uppers will test the limits of your patience, but they can be so worth the effort in the long run.

(Photo credit for preview image: Flickr user/Bill & Vicki T

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Insurance Online : Fixer-Upper or Fixer-Downer?

Shopping for a home can be a nerve-wracking process. Consider all the factors that going into the decision, including whether or not you’re willing to invest in a fixer-upper or opt for a home that’s move-in ready.

Many overlook fixer-uppers due to the financial and time commitments required. And they can be considerable. But don’t dismiss the idea until you’ve also evaluated the benefits of choosing the fixer-upper.

Start with these:

Fixer-uppers can be less expensive

Because even the seller acknowledges that work must be put into the home, fixer-uppers rarely are listed at full market value because they simply wouldn’t attract offers. So opting for a fixer-upper could allow you to afford a larger home and/or a home that’s located in a pricier neighborhood. If you’re searching for a home located in the nicest school district and don’t want the financial burden of paying full market prices, you might opt for the fixer-upper.

As an added bonus, since you paid less for the home, you’ll have lower mortgage payments even after renovating the space and turning a fixer-upper into the home of your dreams.

Fewer bids

Many will shy away from fixer-uppers because they either don’t want to commit to or don’t have the time and resources to dedicate to getting the home up to snuff. Because of this, there are usually fewer competitors if you’re considering this type of abode. With fewer bids likely on the table for a home, you can often swoop in and negotiate a better deal.

Clean slate

Oftentimes when buying a move-in ready home, you have to settle for the previous tenants’ tastes. However, if you choose a fixer-upper and have the time and money to put into it, you can customize the entire place to reflect your style and completely make the space your own.

Along with having a blank canvas to work with and tailor to your tastes, if you perform the renovations yourself, you’ll have a great sense of pride in your home.

More potential savings and tax benefits

First of all, fixing up a subpar home could allow you to qualify for renovation loans – specifically, Federal Housing Authority 203k loans. These loans are available to assist with a wide variety of needs, including cosmetic fixes and large-scale structural work in order to make the home habitable.

Along the same vein, renovating a fixer-upper will likely increase your home’s value, which, in turn, could afford you quicker equity. Better equity can boost your net worth and allow you to refinance sooner, if needed.

Lastly, purchasing a fixer-upper could result in tax savings as property taxes, initially at least, are based on the home’s sale price. These types of houses also could qualify for an investment tax credit for eligible rehabilitation costs.

Just keep in mind…

Before you go running off to bid on a fixer-upper, remember the amount of time, work, and money that would be required. Have a home inspector that specializes in older homes check out the space and know your limits before you buy.

Realistically, you won’t be able to move into the home until most or all of the fixes are finalized, so make sure you consider your plan for the future and have enough time and money to put into the project.

Remember, however, that your repairs and renovations ultimately will increase the value of the home – and the cost to rebuild it. That means you’ll likely need  more dwelling coverage, which could result ina larger home insurance premium. Be sure to address this with your home insurance provider.

Fixer-uppers will test the limits of your patience, but they can be so worth the effort in the long run.

(Photo credit for preview image: Flickr user/Bill & Vicki T

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Insurance Online : Insured Versus Insured Clause Does Not Bar Coverage

   The Fifth Circuit considered whether coverage was barred under the policy's insured versus insured provision. Kinsale Ins. Co. v. Georgia-Pacific, L.L.C., 2015 U.S. App. LEXIS 12976 (5th Cir. July 27, 2015).     Georgia-Pacific hired Advanced Services, Inc. for demolition work at Georgia-Pacific's idled plywood plant.  A fire occurred at the plant, damaging equipment Advanced had leased from H&E Equipment for the demolition work.     Several lawsuits followed. One was brought by H&E against Advanced. Advanced filed a third-party demand for indemnification against Georgia-Pacific for any damages Advanced was required to pay H&E.     Advanced was covered by a CGL policy issued by Kinsale. Georgia-Pacific was an additional insured under the policy. Georgia-Pacific filed a claim for coverage under the Kinsale policy for any indemnification it might be found to owe Advanced. Kinsale denied coverage based upon the exclusion that applied to suits brought by one insured against another insured.      Kinsale filed suit for declaratory judgment that it did not owe indemnity to Georgia-Pacific. Georgia-Pacific counterclaimed for a declaration that the insured versus insured exclusion was inapplicable.     The district court granted summary judgment in favor of Kinsale, finding the claim was barred by the exclusion. The exclusion stated: "This insurance does not apply to claims or suits for . . . property damage . . . brought by one insured against any other insured."      On appeal, Georgia-Pacific argued that the exclusion was inapplicable because Advanced's claim or suit was not one for property damage "brought by" one insured against another. The original property damage claim was brought by H&E, who was a stranger to the policy. H&E claimed that Advanced was liable for destruction of H&E's equipment as a result of the fire. Advanced did not, in turn, seek damages from Georgia-Pacific due to a property loss; it sought indemnity based on general tort principles for property damage that occurred to another party.     A claim for indemnity allowed a joint tortfeasor who was only technically or constructively at fault to recover from the joint tortfeasor who was actually at fault. To succeed, Advanced would need to show it was not actually at fault, and its liability resulted from the fault of others.     The Fifth Circuit therefore held that the insured versus insured exclusion did not apply. Advanced "brought" a "claim" against another insured, Georgia-Pacific, but it was not one for "property damage." The plain meaning of the exclusion made it inapplicable to an indemnity claim. 

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Insurance Online : Loss Caused by Theft, Continuous Water Discharge Not Covered

   The insured's claim for loss based on theft and water leaks was not covered under the property policy. SJP Props. v. Mount Vernon Fire Ins. Co., 2015 U.S. Dist. LEXIS 97216 (E.D. Mo. July 27, 2015).    SJP Properties bought and sold foreclosed properties. On July 13, 2006, it purchased at a foreclosure sale a property in St. Louis. The property was not inspected before or after the purchase, and sat vacant for more than two years. No one checked regularly on the property.    The property was insured under a commercial property policy issued by Mount Vernon, effective from March 8, 2006 to March 8, 2009. The policy covered vandalism, but excluded loss caused by theft. An exception for the exclusion provided coverage for "building damage caused by the breaking in or exiting of burglars." The policy also excluded loss or damage caused by fungus, wet rot, dry rot and bacteria or water leaks for a period of 14 days or more.    On October 31, 2008, the property was broken into and burglarized. On November 1, 2008, SJP reported to the police that kitchen cabinets and copper pipes and wiring had been stolen. The burglars damaged the property when extracting the copper piping. An inspection revealed that water was discharged from the plumbing system for more than one month prior to the theft. SJP filed a claim with Mount Vernon, but coverage was denied because the damage was the result of "theft."     SJP filed suit against Mount Vernon and sought summary judgment. It argued the policy was vague and ambiguous regarding the distinction between "vandalism" and "theft," and should therefore be construed in favor of SJP. Next, it argued even if the taking of the copper materials was a theft, the vandalism loss was covered.     The court found the policy was not ambiguous. The policy covered "vandalism, meaning willful and malicious damage to, or destruction of the described property," but excluded coverage for loss or damage caused by or resulting from theft. The theft exclusion appeared within the paragraph providing coverage for vandalism and was clearly intended as an exclusion or exception to the vandalism coverage.     Even if the theft exclusion did not apply, the exclusion for loss or damage caused by continuous discharge of water applied here. It was undisputed that water was discharged into the property. The inspector observed that water had been discharged for many months and perhaps for more than one year. Therefore, Mount Vernon was entitled to summary judgment on SJP's claim for breach of contract.

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