Restaurant with renovations and Triple Net lease

[Rob]

Here's the scenario: Risk is purchasing a restaurant which they will be doing light cosmetic renovations on the interior (utilizing a General contractor and being named as an additional insured) for a period of 90 days. The triple net lease calls for insuring the building and all improvements and business personal property. The building is built in 1931 but is considered a historic building. In the meantime, while the renovations are occuring, they will be doing catering off premises utlizing another kitchen.

Also the lease required "Agreed Value" on the property with no coinsurance clause and also a separate provision requiring the insuring party to keep in force a policy, in the name of the Lessor, that covers "Rental Value" for one year. This is in addition to the requirement to carry BI w/EE.

The challenge is I can't write it as a package (as an open restaurant) during the renovations because I don't know of any carrier that is willing to do that. I'm thinking I can write a 90 day COC to cover the property during the renovation period and a GL policy to cover the premises and off premises exposure, then rewrite as a package in 90 days.

Please let me know if you think there is a better or easier way.

[Croberts24]

Rob,
Whether it is the easier or the better solution I will let you decide, but I believe you are headed in the right direction. Writing a "builder's risk" form for the property while it is undergoing renovations makes sense to me. Just make certain that your underwriter understands the scenario. You can write a short term Builder's Risk policy, but I would ask for a bit more time than the 90 days that your customer is telling you. Folks can be a bit more optomistic than reality calls for and you would hate to be in a position to do all of this work only to find that at the end of 90 days they need another 30 days or more of coverage.

Then I would place the GL with a carrier that may be able to morph your monoline GL need at this time into a package once the renovations are complete. Again explaining this ahead of time to the U/W will make the transition in another 90 to 120 days easier. Hope this helps,

Casey Roberts
Laurus Insurance Consulting

[wariline]

I think there's a good chance a standard carrier, esp. smaller regional carrier that you have a good relationship with, will be willing to insure it as a package. You'll just have to discuss with the underwriter, and show him/her it is truly only cosmetic renovation, all the protection & risk transfer (AI on GC's policy) mechanism in place. You'll probably also need to convince the carrier that they have a reasonablly good chance to retain the risk once the renovation is done. However, many carriers dont have agreed value option, and might have a problem with hsitorical registered properties. Just my 2c. Good luck!

[Rob]

Thanks for the replies so far. I approached Travelers and they said they can't do it until the renovation is complete. I was able to let the broker who is facilitating the sale of this restaurant that the agreed value provision could eliminate several carriers from the running and could potentially make it more expensive and she was able to get the owner of the building to agree to replacement cost instead.

[wariline]

If you have Golden Eagle or Capital Ins., I'd suggest you discuss it with their UW. Traveler's MasterPac's UW doesnt really offer much flexibility in terms of eligibility.

[Rock54]

I guess there is not enough time to underwrite as a restaurant since the owners have commenced renovations and catering operations. Check with the contractor to find out if their builder's risk policy can be used to provide the short-term property coverage.
Also, if the lease requires the landlord to be a insured on the building insurance now would be a good time to review this issue. Also, now would be a good time to check out if any prospective restaurant carrier has an issue with a historical building. Also, a historical buliding may be subject to certain building codes. In particular, a requirement that it be demolished if a certain percentage is destroyed. Therfore, it is recommended to check with the municipal building dept. Also, some carriers, for historical buildings, may offer functional replacement cost, in lieu of, replacement cost. Good luck!