As insurers contend with the increasing costs associated with nuclear verdicts and high-severity claims, many are adopting a more conservative approach to underwriting by adding exclusions and imposing tighter restrictions on coverage.
When it comes to habitational portfolios, RPS Executive Vice President Russ Stein says that we're beginning to see an increase in several new exclusions that previously hadn't been an issue.
"We're definitely seeing an increase in habitability exclusions, weapons exclusions and difficulties in securing assault and battery coverage," he says. "Some carriers are even limiting certain animal breeds in apartment complexes."
And RPS Executive Vice President Mike Mulvey says he's also seeing further restrictions related to maintenance and repair on residential properties.
"It's becoming harder to get silence on any construction-related activity," he says. "Some carriers want restrictions on who can handle repairs, whether it's direct employees or subcontractors.
"In colder regions, there's increased concern over snow and ice removal, making it difficult for accounts with prior losses to secure future coverage."
RPS Area Assistant Vice President Ryan Saltzman says agents must also remind insureds of the importance of risk management.
"The insureds who pay close attention to premises upkeep create much more desirable risks for carriers," he says. "Having well-lit areas and security cameras and addressing issues quickly can make a big difference, especially since many incidents happen outside the building itself.
"These proactive measures also help support the insured if a claim goes to trial," he adds.
RPS Area Vice President Trey Renno says being proactive is particularly important given the increasing propensity for carriers to include exclusions around habitability.
"Habitability exclusions are becoming much more common, and that can be a big issue for apartment complexes that fail to make necessary repairs, like addressing infestations or general upkeep," he says. "A general liability policy is not underwritten to cover a property that has been neglected. Most underwriters review every location online for reviews, pictures and new articles in their underwriting process.
"We are seeing many carriers exclude habitability because of unfit living conditions or sublimit coverage. We have also seen carriers put a per claimant retention on quotes."
He adds, "Agents need to emphasize that property owners must show diligence in maintaining their facilities, rather than expecting insurance to cover claims that arise from poor upkeep."
Saltzman says this diligence needs to extend to things like tenant checks and the wording of third-party contracts.
"Carriers are placing increasing importance on the specifics of tenant checks and the contracts developers have in place, particularly when it comes to property maintenance," he says. "Agents need to check with their insurers that background and credit checks are being done. Who is responsible for maintenance — employees or third-party contractors?
"When third parties are involved, it's crucial to have contracts that clearly transfer risk, with additional insured status and hold harmless agreements in favor of the insured."
Learn more about what's next for the Casualty market in the RPS 2025 Casualty Market Outlook.
