REAL ESTATE INDUSTRY SESSIONIND017

Speakers:

• Gregg Woodman, Risk Manager, iStar Inc.

• Lori Agee, AVP, Risk Management, Duke Realty Corporation

• Alice Edwards, Managing Director, PricewaterhouseCoopers LLP

Learning ObjectivesAt the end of this session, you will:

• Receive and share insight into others’ best practices• Roundtable discussion• Audience participation is required

• Stay abreast of the latest industry topics using lessons learned

• Real life examples

• Network with your real estate risk management peers• We want to know who you are

Real Estate Risk Managers Roundtable

• Created in Atlanta and includes 13 companies

• Meet quarterly to discuss a variety of topics– Discuss risk management concerns/best practices– Use of guest speakers/outside vendors. Examples include:

– Zurich Real Estate Group – FM Global to discuss facility loss prevention– Session with outside counsel to discuss indemnification, AI status, construction– Consultant discussing broker RFP’s– Roundtable session with Marsh

• Sharing of information via email

Construction Issues• Design Team Contract Issues

• Who holds the contracts• What does their professional/E&O look like

• True GC with subs or Construction Manager?• Will they use Traditional or a CCIP? • What about OCIP, GL Wrap, or Owners Interest?

• Subcontractors• Credit quality • Subcontractor default • Bonding requirements?

• Insured Status, Limitations of Liability & Indemnification• Define the insured status in the contracts• Who is accepting the 2013 ISO AI endorsements?• Make sure there are no conflicts, push back on limitations • Special treatment given to design professionals under CC 2782.8

Tenant Lease Issues• Standardized contracts

• Single Tenant vs Multi-Tenant• Retail Leases

• Who is responsible for insuring building/tenant improvements?

• Maintenance standards • Who maintains what? (Owner, tenant, 3rd party)

• Waivers of subrogation and indemnification

Certificate Tracking Issues• Who will track the certificates

• Risk management, third party property manager or outsourced vendor?• Do you ask to audit the certs tracked by property manager

• What is being tracked• Certs for property manager, tenants, vendors

• Retail tenants

• Construction Certs

• Certificate tracking platforms

• How long do you keep them???

DIC Flood /Quake

• Previous multi-peril events have demonstrated complexity:• Definitions of perils vary widely between policies• Deductibles and sub limits may apply to individual perils• State law varies

• DIC Flood and Quake may pay only for the specific peril• Ensure the definitions match• Run some scenarios to stress test the program• Consider multi-peril occurrences: which policy will pay?

Pollution Exposures & Claims

• Review Environmental Reports during Due Diligence period• Any known conditions or recommendations• Medium of contamination (ex: Soil, groundwater or vapor contaminants)

• Construction risks to consider• Understand the project and the surrounding exposures – NYC, subway, water

sources

• Potential claims caused by tenants and property manager• Soil vapors from drycleaners• Toxic materials/waste left by tenant when they vacate• Mold caused by water leak and AC being shut off • Mold caused by tenant process and the creation of a humid environment

• How to handle known & unknown conditions• Site pollution legal liability and/or contractors’ pollution

• Brownfield development and pollution liability insurance

Evaluation & Selection of Nominated Adjusters

• Nominated adjusters work for insurers but the insured can have input into their selection

• Important to have all insurers agree

• Ask for short list of adjusters the insurers will approve

• Interview the adjusters

• What will happen if the individual moves to another firm?

• Agree to written claims handling procedures

• Have adjuster’s firm and name written into policy

Disaster Recovery Vendors• Recommend an MSA to handle catastrophic disaster response• RFP process to determine capabilities

• Suggest cross-functional internal teams focused on operations

• Benefits to using national vs. local contractors:• Ensure adequate disaster response during catastrophic events• Vendors familiar with insurer documentation/invoicing requirements• Access and ability to secure resources (equipment and manpower)

• Tips:• Limit length of RFP written responses • Understand vendor coverage territory & how it aligns with your properties (4 hour

response time is NOT acceptable)• Asbestos testing / OSHA requirements• Use negotiating leverage to get priority response / beware of paid priority response

programs • Use a combination of approved local remediation contractors and national vendors.

Establish a threshold for when use of the national vendor is required• Ensure contract reflects any rate agreement vendor has with your insurers. If not,

have insurers review rates before signing the contract

Unmanned Aircraft Systems (UAS) or Drones

• Potential uses in real estate and construction:• Site surveying/construction progress, business development/marketing • Structural inspection and/or identification of building damage or building

maintenance problems (ex: roof hail damage)• Thermal imaging • Monitoring of environmental conditions • Disaster management

• Risk Considerations• Liability/physical damage• Privacy• Cyber or war risk

Unmanned Aircraft Systems (UAS) or Drones

• The FAA and state agencies are developing regulations and standardized protocols at an accelerated pace

• FAA Usage criteria:• Operators must provide evidence of a private pilot license• Evidence of FAA issued section 333 authorization form required • Unmanned aircraft must be registered with the FAA• Operated in line with general safety guidelines• Must remain within a visual line-of-sight of the operator at all times• Not to travel within FAA airspace• Maximum altitude of 400 feet above ground level• Daylight operations

• Recommended Insurance coverage• CGL (note exclusions) and/or aircraft liability

Cyber Insurance• Risk for RE firms varies based on product type/operations• Board concerns surrounding cyber• Cyber Incident Response Procedure and disaster response

vendors • Who is buying cyber liability coverage? • Crime program enhancements:

• Social engineering coverage• Fraud vs. theft trigger

Additional Topics• What happens if a claim occurs at a location that is for sale,

or under contract?• Who is using any type of RMIS Database?• Active Shooter • Enterprise Risk Management – which companies have a

formal process? • Pollution legal liability insurers• ???

Questions? • Contact Information

– Gregg Woodman, iStar Inc., Risk Manager, gwoodman@istarfinancial.com

– Lori Agee, Duke Realty Corporation, AVP, Risk Management, Lori.Agee@dukerealty.com

– Alice Edwards, Managing Director, PricewaterhouseCoopers LLP, alice.edwards@us.pwc.com