I had the opportunity to sit down with a prospect who was getting ready to purchase his first apartment building, a nice six-unit building in Rocky River, OH. The prospect has owned several duplexes and single-family homes, but this was a big dive compared to those. The prospect insured his other rentals with another agent but wanted to review the quote for the six-unit building with me.

Before the meeting, I did my due diligence. I reviewed the county auditor’s website to obtain information, checked out the building on Google Earth to obtain the square footage, including the garage, then calculated a replacement/rebuild cost for the buildings using E2Value.

When we met, he presented the quote from the current agent for the apartment (with the premiums redacted) and I immediately noticed that the garage was not listed as a building at the location. I confirmed with the owner that there was indeed a garage, and he shared the fact that he collected additional rents from tenants, who used the garage. I collected some additional information from the prospect and shared my concerns about the garage.

A couple of days later the prospect called me back and insisted that the garage was covered because they were covered on his locations that were being insured on an ISO DP-3 form (edition date 04/05). I agreed with him that the garages are covered under the DP-3, but the six-unit building was being quoted using an ISO CP00 10 (edition date 06/07).

The DP-3 states “Insurance applies to the Described Location, Coverages for which a Limit of Liability is shown and Perils Insured Against for which a Premium is stated. Coverage B-Other Structures – We cover other structures on the Described Location, set apart from the dwelling by clear space. This included structures connected to the dwelling by only a fence, utility line or similar connection.”

The ISO CP00 10 states: “We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.”

It then goes on to describe Covered Property as “Building, meaning the building or structure described in the Declarations, including completed additions, fixtures, including outdoor fixtures permanently installed Machinery and Equipment.”

Nowhere does the Building and Personal Property coverage form provide coverage for buildings that are not listed in the Declarations page as in the quote being shown to the prospect. The garage would not be covered for a potential property loss. In addition, since the building was not listed, if there was a loss to the garage and the prospect’s tenants could not park in the garage, the loss of rental income would not be covered either. A potential double whammy!

Please contact your Trusted Choice Independent Agent at Richey-Barrett Insurance to discuss or review any of your insurance needs.