Real Estate Finance: Evaluating Property Insurance Under Current Lender Standards

Determining Replacement Cost, Business Interruption, Flood, Windstorm, Earthquake, Ordinance and Law, and Terrorism Coverage

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, January 11, 2017
Recorded event now available


This CLE webinar will provide real estate counsel with an understanding of the various components of property insurance and the current requirements of lenders with regard to each type of coverage. The panel discussion will include replacement cost, business interruption, ordinance and law, flood, windstorm, earthquake and terrorism coverage, when each coverage is required, and how coverage amounts are determined.

Description

Evaluation of property insurance has become a complex undertaking in commercial real estate finance. It is often the final item to be resolved in a transaction, in part because insurance companies frequently need information taken from other third-party reports before insurance policies can be finalized.

Real estate counsel must have an understanding of when various insurance policy coverages are required and how they are impacted by the appraisal, title, survey, zoning report and engineering report. Loan document provisions may need to be revised to reflect deal-specific insurance requirements.

Listen as our authoritative panel, consisting of an insurance consultant and closing counsel, discusses replacement cost, ordinance and law, flood, windstorm, earthquake, business interruption and terrorism insurance, and how coverage amounts are determined. They will also discuss how certain coverages are tied to information taken from survey, zoning and other third-party due diligence, how insurance requirements are addressed in the loan documents, and insurance company ratings required by CMBS and other institutional lenders.

Outline

  1. Discussion of standard and optional coverages included in property insurance policies
    1. Replacement cost
    2. Business interruption
    3. Ordinance and law
    4. Terrorism
    5. Flood
    6. Windstorm
    7. Earthquake
    8. Boiler and machinery
  2. How third-party due diligence affects the foregoing coverage
    1. Appraisal—breakdown of property value and income calculations
    2. Survey—flood zones, zoning designation and related information
    3. Title—appurtenant easements and other issues
    4. Zoning—conforming vs. legal non-conforming
    5. Engineering report—earthquake zones
  3. Drafting tips with regard to deal-specific insurance provisions
  4. Insurance carrier ratings—lender requirements

Benefits

The panel will review these and other key issues:

  • What types of coverage are currently required in real estate finance transactions?
  • What information is needed from appraisal, survey, title, zoning, and engineering reports to finalize coverage?
  • How are coverage parameters determined?
  • What are the current rating requirements for insurance carriers, and what do the parties do when the existing carrier is not approved?
  • How are insurance requirements (and deviations therefrom) reflected in the loan documents?

Faculty

Michael J. Bordy, Principal
Michael J. Bordy, A.P.L.C., Los Angeles

Mr. Bordy is a transactional attorney who has 26 years of experience handling a variety of issues in business, corporate law and real estate. He regularly advises clients on real estate finance and leasing. His expertise encompasses real estate contracts, property rights, commercial property transactions, eminent domain, zoning, land-use and building permits, and negotiating real estate agreements.

Alexandra Hayden, Esq., Transaction Counsel
Harbor Group Consulting, New York

Ms. Hayden serves as Transaction Counsel, conducting insurance risk analysis on transactions ranging in size from $2 million to over $600 million on behalf of lending clients. Prior to joining her firm, she practiced law with a firm that specialized in commercial real estate transactions. She worked with the lending group representing banks in the drafting and negotiation of the loan documents for commercial properties.

Katherina Komisarjevsky, Chief Operating Officer
Harbor Group Consulting, Miami

Mrs. Komisarjevsky is responsible for the management oversight of the firm’s large loan transactions, including balance sheet, syndication and CMBS loans. As Head of CMBS, she is responsible for managing, negotiating and closing CMBS transactions for the firm, including all stand-alone securitizations. She has overseen transactions totaling more than $500B, including many of the largest and most noteworthy. She also consulted on the first financing completed by the Federal Reserve utilizing the TALF program. She is called upon for speaking engagements, insurance seminars and contribution to publications and internal presentations of many prominent law firms. 

Kevin D. Smith, CPCU, ARM, Vice President
The Graham Company, Philadelphia

Mr. Smith is the leader of his firm's Real Estate Division and the International Division. He also manages the firm’s Group Captive and is an active member of the Risk Management Division. He spearheads his firm’s involvement in several real estate industry organizations. He presents and is a published author on key issues in the risk management industry, including but not limited to captive insurance, international insurance issues, contractual risk transfer and real estate portfolio insurance programs.


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Real Estate Law Advisory Board

David A. Barksdale

Partner

Ballard Spahr

Jacob Bart

Partner

Stroock & Stroock & Lavan

Brian W. Blaesser

Partner

Robinson & Cole

Ronald B. Grais

Of Counsel

Jenner & Block

Ren R. Hayhurst

Partner

Bryan Cave

Thomas C. Homburger

Of Counsel

K&L Gates

Susan C. Tarnower

Counsel

Kilpatrick Townsend & Stockton

Clark T. Thiel

Partner

Jones Day

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