Scott McGinness from Gregory & Appel Insurance considers how properties should look for timeshare resort insurance expertise at this time.
There are no two ways about it: the timeshare industry is unique. Anyone who has spent any time working within timeshare knows that there’s nothing else like it. The specialized ownership structures, flexibility of use, seasonal amenities, customer services, etc. all contribute to the unique complexities of timeshare.
And, at the center of it all is the balancing act of managing maintenance fees and reserve funds that ensures the timeshare will thrive for years to come.
However, the sad reality is that no matter how effectively you’ve managed these various elements, all critical for the function of a healthy property, if you aren’t adequately insured, you are one unforeseen crisis away from potential ruin.
Timeshare resort insurance expertise is essential for the long-term survival of your property.
Proper coverage can protect your property from damage resulting from disasters such as tornados, hurricanes, floods, etc. And it can help ensure continuity of business until a proper recovery is possible. Business Interruption Coverage, for example, helps with the recovery of lost revenue in the face of peril.
Most policies are considered “All Risk,” which is a helpful way for policies to cover just about any situation not outlined in the “Exclusions” portion of the policy. The “All Risk” approach casts a wide net across many types of risks and exposures that have impacted the timeshare industry throughout its short history.
But what happens when the timeshare industry faces a new type of crisis? One that brings with it a new level of unprecedented business interruption. These are the challenges the timeshare industry and insurance carriers across the country now face together.
The Current Situation
As with everything related to the C-19 pandemic, the current state of insurance and coverage is fluid and ever-changing. There are a few obstacles that must first be addressed. The first and foremost challenge lies with the definition of a “covered peril”. This is required to trigger coverage under most Business Interruption Coverages.
In addition, there is a critical detail that distinguishes a virus from other disasters such as tornados and hurricanes, which is the resulting physical damage to the building. Without physical damage, there is no coverage trigger for Business Interruption.
The solution path for recovering from a natural disaster is easily identifiable: damaged property must be repaired or replaced. This same methodology simply cannot be applied to loss of revenue when no physical damage to the property is evident.
Being forced to close a property due to physical damage is understood, but what happens when the shut-down is Government-mandated? Fear of contamination is not covered under Business Interruption policies.
When policies are designed to assist with lost revenue due to physical damage, how do losses resulting from global pandemics and other unforeseen crises apply? This question is the current crisis facing both timeshare and their insurance carriers.
Panic and Pushback
Regardless of the situation, anyone learning that their insurance policy may not cover their losses is sure to experience anxiety and panic. Adding the additional stress of a global pandemic only adds fuel to that fire.
Some states are pushing to force insurance carriers to path these claims. And, as one would expect, lawyers across the country are following suit.
With billions in Business Interruption claims in flux, forcing payment is not the answer. It would likely result in many claims going unpaid as insurance companies across the country would be out of business.
Help and Hope
Amid the current state of fear and stress, there is hope. Across the board, the insurance industry is working to provide relief.
- There is a joint discussion underway between the Federal Government and the Insurance industries to understand the situation better and develop a reasonable response.
- Clients are advised to document their losses and submit a claim. In the event that downstream relief becomes available, it is essential that the Claim is on the record.
- Using the Terrorism Risk Insurance Act as a model, formal calls for a Pandemic Risk Insurance Act are underway. While terrorism and pandemics are undeniably different situations, the Act seeks to provide much-needed assistance by expanding the coverage triggers for Business Interruption.
While the above initiatives are underway, some more immediate remedies are in the works. One such strategy insurance companies are using to provide relief is to adjust premiums to reflect the reduction in use and exposure resulting from the pandemic.
For example, if driving is a big part of your job and quarantine conditions have reduced car use, then your insurance premiums could potentially be adjusted as well.
Some insurance companies have delayed policy cancellations when pandemic-related hardships have resulted in non-payment. It is this level of compassion and cooperation that will help see both the timeshare and insurance industries through this global crisis.
It would be advisable to ask for concessions from your own insurance agent and carrier as needed. They can’t understand your unique situation, but they are listening and may be able to respond to your individual needs.
The Near Future for Timeshare Resort Insurance
The state of the hospitality industry is in flux and will remain so until the C-19 pandemic is behind us. At this point, “Pandemic Insurance” is unavailable or at least unaffordable to most most resort properties.
Workers Compensation claims are also under scrutiny, as it is virtually impossible at this point to establish if a worker was infected at home or on the job. The definition of “essential” workers is also under review in order to provide coverage to those at the greatest risk.
Some businesses are finding ways to use their facilities to assist with the pandemic. Schools, for example, have been using their empty rooms to provide daycare services for the children of essential workers, while some innovative breweries are using their equipment to produce hand sanitizer.
Even in these cases, businesses must coordinate these repositioning efforts with their insurance carriers. With respect to the unique nature of timeshare and its insurance, so too are the particulars of other businesses and ensuring they are adequately covered.
The current global pandemic spares no one. Lives are at risk, and the economy rests on a fragile house of cards. At its heart, a reputable insurance company is most concerned about its clients and protecting their assets, and by working together, we can overcome any challenge.
Look for ongoing updates as the pandemic situation develops, and the insurance industry mobilizes to respond in its wake.
About Gregory & Appel Insurance
For over a century, Gregory & Appel has attracted top advisors to guide people and businesses through the complexities of insurance and employee benefits, providing innovative, client-focused solutions. As a locally based firm with an international scope, we take pride in providing personal attention and seamless customer service.
- Over 140 employees
- 100% Family & Employee Owned
- Named #1 Best Place to Work in Indiana 2017
- Founded in 1884
Gregory & Appel Insurance is the oldest and largest independently owned agency in Indiana. They are also the largest writer of ski resorts in the Midwest.
About Scott McGinness, CIC, CRM, CSRM
Scott McGinness is a Vice President of Gregory & Appel Insurance in Indianapolis, IN, and is a Certified Insurance Counselor and Certified Risk Manager.
For over 25 years Scott has specialized in insurance and risk management for resort properties, property management companies, time share exchange companies and HOAs throughout the US and Mexico. He helps his clients identify potential sources of risk and addresses them with insurance and non-insurance solutions. The results are fewer and smaller claims, lower premiums and long term partnerships that benefit his HOA and property manager clients.
Scott serves on the Risk Management Committee for Butler University in Indianapolis, IN, and is a member of the Insurance & Risk Management Advisory Board within their College of Business. He also serves on the Board on Advisors for the Our Lady of Grace Monastery, St. Paul Hermitage and the Benedict Inn.