Full-time Florida residents and snowbirds aren’t the only ones having trouble obtaining insurance on their condominiums. Rudy Giuliani, the former New York Mayor and longtime attorney for Donald Trump, has told a bankruptcy judge that he can’t afford to pay premiums on his Palm Beach condo.
That’s not good enough for some creditors who say Giuliani, facing a $148 million defamation judgment against him, should take immediate steps to protect the property until it can be sold. Creditors filed a motion last week, asking the judge for the U.S. Bankruptcy Court in Southern New York to force Giuliani to sell the condo and insure it in the meantime.
“The Debtor has chosen to avail himself of the protections of the Bankruptcy Code to obtain a breathing spell from his creditors, but in return he must exercise due care in protecting his assets and avoiding loss, since these are the assets that he, as a debtor in possession, is holding in trust for his creditors,” reads the motion by the Official Committee of Unsecured Creditors.
“…The Committee respectfully requests that this Court compel the Debtor to take all necessary steps to sell the Florida Condo and obtain homeowners insurance in order to preserve and protect estate resources and abide by his duty to maximize the value of the estate for the benefit of his creditors,” the motion continues.
A hearing date of April 4 has been proposed to consider the motion.
The condo at South Lake Drive is valued at $3.5 million, according to Giuliani’s asset listing in bankruptcy court, although the local tax assessor says it’s more like $3 million, according to news reports. The creditors argue that the condo, less than mile from the Atlantic Ocean, is one of Giuliani’s most valuable assets. The Internal Revenue Service also had filed a lien on the property, seeking almost $550,000 in unpaid income taxes. The former Trump adviser has indicated he’s agreed to pay the taxes he owes, news outlets have reported.
Giuliani filed for Chapter 11 bankruptcy protection in December after he was hit with the $148 million verdict for defaming two Georgia election workers that he claimed had committed fraud during the counting of 2020 presidential election ballots. Now, he has said he has few assets available and cannot pay property insurance premiums on the Palm Beach spread.
The court filings did not indicate the level of premiums Giuliani could be facing on the property, or which insurers may have written the condo in previous years. It would be difficult to estimate what premiums might be, without knowing square footage, contents and coverage limits, but they’re probably near the high end for luxury properties, said Matt Mercier, national director for community associations for CBIZ, an insurance advisory firm.
Giuliani is far from alone in struggling with soaring insurance costs in the distressed Florida condo insurance market. Some insurance brokers and condo association representatives this year implored the Florida Legislature to allow the state-created Citizens Property Insurance Corp. to write condominiums that include short-term rental units. Many insurers have cut back drastically on HO-6 policy limits while premiums have more than quadrupled for some associations.
Allstate Insurance’s Florida unit, Castle Key Indemnity, recently raised condo rates almost 54% on average, in a use-and-file filing that regulators are still contemplating. At least one new carrier, part of HCI Group, has been approved to enter the condo market this year.
The Citizens-coverage-for-second-homes bill did not pass in the Florida legislative session that closed March 9. But under another measure, if signed by the governor, surplus lines insurers can soon make takeout offers on Citizens’ policies that cover second homes in Florida. It’s also possible that Giuliani could reduce his condo premiums if his association participates in a new wind-mitigation pilot program expected to be signed into law in the next few weeks.
By law, Giuliani’s creditors may be unable to force him to sell his primary residence in New York, although that space also needs insurance coverage, creditors said. But the committee of creditors has argued that his Florida condo is used less than 30% of the time, making it a non-primary residence and fair game to be sold (but insured in the meantime).
Giuliani may have little choice in coming weeks. The U.S. bankruptcy code and guidelines require that the debtor “maintain appropriate insurance coverage” equal to the fair-market value of the condo. Otherwise, the court must convert the property or dismiss the Chapter 11 filing, the creditors argued in their motion.
“As property of the estate, the value of the Florida Condo ultimately will be distributed to the Debtor’s creditors,” the filing notes. “As a result, it is merely a matter of when, not if, the Debtor will have to sell the Florida Condo in order to distribute the proceeds thereof to creditors in satisfaction of their claims.”
Besides taxes, Giuliani owes millions to his attorneys, accountants, plaintiffs in lawsuits against him, including voting machine companies that he allegedly defamed, and others, court documents show. He also owes about $16,000 in condo association fees, the filings show.
Photo: Giuliani’s condo building in Palm Beach (Google Streetview)
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