The Habitational Casualty market in continues to see higher rates and diminished capacity as a result of losses that include abuse claims, pool drownings, assault and battery, and a rise in habitability claims, as seen in the U.S. Casualty Market Outlook: Mid-Year 2021 report. These losses have some carriers no longer providing General Liability (GL) and Excess insurance, while other insurers are quoting renewals with restrictive terms that include Sexual Abuse & Molestation, Assault & Battery, and Habitability exclusions for habitational risks. Many carriers are asking for significant deductibles or retention levels on the GL.
"The biggest challenge in the marketplace today is with mid- to high-hazard accounts, of which habitational risks are a part. Carriers continue to push rates and have changed their underwriting philosophy. They are also assessing whether they want to write risks with specific exposures – such as heavy auto, Sexual Abuse & Molestation, Assault & Battery (A&B), Liquor, Cyber and Wildfire – at any price, or focus on low-hazard accounts where they can build their book," said Adam Mazan, RPS Area President, Southern California.
Today's Litigation Landscape
"Habitational insureds are also being drawn into lawsuits if an incident took place at their location regardless of whether or not negligence existed,” explained Mazan. “At the very minimum, defense costs can run into the tens of thousands of dollars."
In Texas, for example, two residents of a first-floor apartment got into an altercation. One of the residents retrieved a gun and shot the other resident in the foot. Although the property owner was not responsible for the dispute in any way, the entity was named in the lawsuit.
"Whether or not negligence exists" seems to be an ambiguous concept in today’s litigation environment.
The Habitability Exclusion
Habitability exclusions are common in California due to the state’s civil code, which outlines standards expected for tenantable living space. The Habitability exclusion excludes liability coverage from claims arising from alleged or actual violations of any health and safety, civil or federal law as it pertains to habitability. It also excludes all associated legal defense.
Going to Market
Engage with underwriting partners early on strategy and objectives to approach the marketplace with a clear understanding of what success looks like. Every underwriter has a pricing bandwidth it needs to fit between. Starting the renewal process as early as possible will enable more productive pricing conversations. It’s also important to provide underwriters with extended loss histories and the risk management techniques adopted by the habitational risk to help with the account’s renewal process.
In addition, set and manage expectations by being direct with the buyer to help them understand the reasons behind today’s tough market, including its ongoing inconsistency and unpredictability, which impacts pricing, coverage limits and terms, and capacity.