As property insurance surges, some landlords are “losing their minds”

Jerry Waxenberg keeps a running list of his most egregious personal injury lawsuits. The cocaine slip-and-fall barely cracked the top five.

As the Bronx landlord tells it, a drug dealer was running from police in a building Waxenberg managed. The dealer bolted down the stairs, dropped a bag of coke in front of him, slipped on the powder — and sued.

“One hundred seventy-five thousand dollars,” the owner said of the settlement. “Landlord’s fault.”

Waxenberg said he has fielded dozens of liability suits in the past several years. Some have been settled for as much as $1 million.

In the same period, his insurance premiums doubled. A policy that cost $859,000 in 2018 renewed for $1.73 million this year.

Property damage is not to blame. “Our liability and excess liability — umbrella — has been a nightmare,” Waxenberg said.

He is not alone. Brokers say personal injury firms have increasingly targeted tenants in the Bronx, coaxing them to sue. To offset the outlays, carriers hike premiums.

“It’s the most disgusting thing,” Bobby Hotaling, founder of Hotaling Insurance Services, said of lawyers’ marketing.

Those suits are just one head on the hydra of rising insurance costs in the Bronx, where the housing stock is mostly aging rental buildings.

A melange of factors, including crime, building age, subsidized units and fewer carriers, have saddled Bronx owners with disproportionately high insurance costs. A 2023 study found older, rent-stabilized buildings in the borough paid nearly 20 percent above the citywide average.

“In the Bronx, people are losing their minds,” said Michael Johnson, spokesperson for the Community Housing Improvement Program, a multifamily owner group known as CHIP.

No reversion is in sight.

“There’s no talk of pricing going down,” said Michael Power, who analyzes real estate insurance risk for FHS Risk Management. “We just need to slow increases right now.”

Ginning up lawsuits

Lack of data makes tracing the rise in so-called premises liability suits difficult.

Slip and falls in a multifamily building, for example, are classified as negligence torts and lumped together with medical malpractice, motor vehicle and other Supreme and county court cases that don’t involve owners and tenants.

Torts filed in Civil Court — seeking damages up to $25,000, which include many tenant complaints — aren’t broken out by case type.

Still, CHIP says anecdotal evidence that torts are driving premiums up is compelling.

“Insurance brokers will tell us over and over again that’s what’s happening: There are personal injury lawyers going to tenants, saying you can file a lawsuit and you’re gonna get paid out,” Johnson said.

“[Suits] are probably up 300 percent this year, and they’re growing and growing,” Hotaling said.

Personal injury firms find clients through complaints to the city’s 311 hotline. Lawyers comb public databases to find tenants complaining of cracked sidewalks or leaky roofs, then send a letter advertising their services.

One solicitation shared with The Real Deal went to an occupant of 2555 Bainbridge Avenue in the Bronx who complained of a broken kitchen floor.

“Lawsuits are probably up 300 percent this year, and they’re growing and growing.”
Bobby Hotaling, insurance broker

“YOU MAY BE ENTITLED TO A FINANCIAL SETTLEMENT BECAUSE OF THIS INCIDENT,” the letter reads. “If you or anyone else in your apartment has been injured as a result of this condition, please call us immediately.”

Landlords say they should be held responsible for poor maintenance and accept that lawsuits are an occupational hazard. But they view the complaints, such as the cocaine slip-and-fall, as increasingly frivolous — bets that providers will settle quickly.

“Let’s just say they’re suing for $15,000,” Hotaling said. “It’s easy for some of these insurance companies to say, ‘We’ll settle for $10,000 to make you go away.’”

Industry observers point to liability suits filed by construction workers as the impetus for cases brought by tenants.

Under New York state’s Labor Laws 240 and 241, collectively known as the “scaffold law,” property owners and contractors are 100 percent liable for any gravity-related injury on a job site, even if it was mostly the worker’s fault.

“There has been a huge rise in these claims, in people saying, ‘Hey, I fell on a construction site,’” said Michael Mintz, founder of property management firm MD Squared.

The scaffold law, which dates to 1885, has long been blamed for high insurance premiums in the state. But an insurance renewal shared with TRD pegs payouts related to the law as “the single biggest driver” in rising insurance costs.

“The combination of plaintiff attorneys, unions and opportunistic claimants seeking large paydays is a recipe for disastrous outcomes,” the document states.

Guilt by association

Tenant and worker lawsuits not only increase premiums for the landlords, but sometimes for the neighborhood or borough as well, because carriers deem the area riskier.

Hotaling recently brokered a renewal for a landlord whose liability premiums have risen each year for a decade, despite the owner never filing a claim. Then, this year, the owner had five claims. “I’m petrified of what my increase is going to be,” he told the broker.

Crime plays a role, too. The Bronx has the highest number of reported crimes of any borough.

“Certain neighborhoods in the Bronx where there’s a higher crime score would get a higher premium than a building in Norwood or one of the better neighborhoods,” said Brendan Mitchell, who tracks insurance costs at the University Neighborhood Housing Program.

In a building prone to break-ins, tenants are more likely to sue the landlord for lack of security. Carriers then apply that risk to the surrounding buildings.

The tenant mix also matters. The Bronx has the city’s largest share of rent-stabilized or Section 8 tenants, who are often considered magnets for liability claims. Bronx City Council member Marjorie Velázquez, who is working to address rising insurance premiums, called the practice akin to redlining.

“That’s the perfect term for it, right?” she said. “It’s discrimination.”

Insurance companies will ask whether a building has subsidized units and ratchet up premiums if landlords say yes, brokers say. Some carriers have even denied coverage to buildings that rent to voucher holders, Gothamist reported.

This session, state Sen. Brian Kavanagh introduced legislation that would block insurance carriers from reducing or refusing to renew coverage in buildings with affordable housing. The bill never came to a vote but could be reintroduced in January.

Risk, everywhere

The age and quality of buildings contribute to property and liability premiums.

Property insurance goes up if a building is older and less likely to withstand natural disasters. Increases have been most pronounced in states bearing the brunt of climate catastrophes, such as California, Florida and Texas.

“New York is probably the most benign area for insurance policy increases compared to other parts of the country,” Power said.

But liability premiums have surged as inspectors who check building conditions to assess risk have become more scrupulous.

“Up until 2015, they’d say, ‘There are tree roots pushing the sidewalk up; fix it and we’ll renew you,’” Power said. “Today, we see them asking the building owners to address a whole list of items to minimize liability … some of it sort of silly stuff.”

“What it seems to me is insurance companies finding more ways to increase their rates by adding more methods to their calculations,” said Velázquez.

For rent-stabilized owners, it’s a Catch-22. They can’t afford the fixes because rent increases were severely limited by a 2019 law. But if they don’t make the repairs, their liability coverage goes up — leaving even less revenue to fund improvements.

“It’s almost impossible for them to be successful,” Hotaling said.

Asteroid coverage

Landlords buy insurance to cover property damage and liability, and umbrella coverage for claims that exceed their other policies’ limits. 

“We call it asteroid coverage,” Mitchell said. “If an asteroid takes out 10 buildings at once, what’s going to cover the replacement cost?”

While some owners view the surge in liability premiums as egregious, industry observers call the jump in umbrella costs more severe. Mitchell estimated that umbrella insurance has soared by 40 percent each year for less and less coverage. 

Climate change is partly to blame. As storms’ power has increased, lenders have required multifamily owners to get larger policies to cover damage. And to insulate themselves against losses, insurers are offering less coverage.

“They don’t want the risk, because people have been blowing through their umbrellas,” Hotaling said.

A few years ago, he could find a $10 million umbrella policy through a single provider. Recently, he had to cobble together or “ladder” five policies from five different firms to achieve the same amount of coverage.

“And as you go up the ladder, it becomes more and more expensive,” he said.

Carrier exodus

Insurance companies that have suffered steady losses from the uptick in claims in the Bronx are now refusing to renew policies.

California and Florida have experienced a similar flight. Farmers Insurance this summer stopped writing or renewing policies in the Sunshine State and capped its coverage in California. Allstate and State Farm quit writing new policies in California this spring.

Valentina Gojcaj, who manages about 700 units in New York City, most of them rent-stabilized, estimated that her choice of property and liability insurers has decreased by about 75 percent. “The numbers don’t make sense for insurance carriers,” she said.

“You can count on one hand the number of liability insurance carriers willing to write in the Bronx,” Waxenberg said.

Fewer carriers means less competition and higher costs for landlords. Owners who have been dropped by their carrier for too many claims often must turn to a lower-rated provider that charges more for worse coverage.  

“That’s the worst thing about insurance: paying more and getting less,” said Ann Korchak, a Bronx landlord and spokesperson for the Small Property Owners of New York.

Legislators could offer some relief. 

CHIP, in its 2024 legislative agenda, said it would push state lawmakers to build a government-backed insurance program for affordable housing providers that would cap costs at 8 percent of rent collections. CHIP estimated owners in the Bronx now spend as much as 25 percent of revenues on insurance.

That won’t fly with insurers, who base rates on losses — what they pay out — not rents. Absent government intervention, owners have no choice but to weather the increases.

Korchak said she has been able to renew her policies despite the challenges. But the hikes are getting harder and harder to swallow.

“I just got my insurance quotes,” she said. “Fifty percent increase on umbrella.”