Archives for April, 2017

Insurance Triple Play: Three Recommendations For Companies recently talked to Michael J. Faul Jr. a shareholder in the Warren, New Jersey, law firm of Herold Law, P.A.

Mr. Faul concentrates his practice in the areas of complex commercial litigation, insurance coverage disputes, minority shareholder disputes, corporate fraud, and environmental litigation.

Here are the three things Mr. Faul recommends that companies should focus on regarding insurance:

Recommendation No. 1 – FOCUS

Focus on maximizing reclaimed amounts that are recovered under many lines of insurance, including D&O, E&O, public officials and employment liability, fiduciary liability, commercial, property and casualty, fire, theft and premises liability.

Redommendation No. 2 – SEEK

Seek counsel on all phases of complex insurance claims. Insurance coverage is a highly specialized area of the law and only experienced insurance counsel can navigate and expedite the recovery of insurance proceeds. Often, companies unduly rely on their brokers only to find out later on that the broker may be responsible for the lack of coverage or delay in recovering insurance proceeds.

Recommendation No. 3 – LEARN

Learn if corporations, officers, directors or individuals that are subject to government investigations have insurance coverage to defray the costs associated with the defense of such costly investigations.  Financial institutions, health care and financial sectors, financial service companies, insurance companies, security and commodity brokers and dealers, retail apparel companies, construction, waste management and a variety of other industry wide companies which may be regulated by federal, state and local agencies including state attorney general’s offices can be the subject of such investigations.


Source: NJBiz

Facing Rising Sea Levels And Greater Insurance Risk, Southern Florida Braces For Relocations, New Flood Design Standards

The moon over South Florida looked like a swollen grapefruit in November, its reflection rippling off pools of ocean water that bubbled up through storm drains, crept over seawalls, and swallowed Miami streets.

It was a “supermoon,” about 17,000 miles closer to Earth than usual, according to NASA, arriving just in time to supercharge the seasonal high waters known as king tides. The water made an island out of the lifeguards’ shack on Matheson Hammock Park, swept “No Wake” signs from marina harbors onto city streets, and marooned a live octopus in a parking garage along Biscayne Bay.

On days like these, it’s obvious that much of the region now home to about 7 million people began as a network of swampy canals meandering from the Everglades to the ocean. Sometimes nature conspires to remind the city of this fact, as it did in November 2016.

Lately those reminders have become more frequent. The rate of sea-level rise has tripled over the last decade, according to a recent study from the University of Miami, bringing with it more frequent coastal flooding. The U.S. Army Corps of Engineers projects that Miami-Dade County will see about 15 inches of sea-level rise by 2045. And because South Florida sits on porous limestone bedrock, saltwater is not just encroaching on coastal communities, but gurgling up from below.

Right now it’s a nuisance, but over the lifetime of a mortgage, flooding in South Florida could threaten tens of billions of dollars of real estate and upend development in the country’s 10th largest metropolitan area. Architects, planners, and developers are just beginning to overhaul the urban landscape, laying the groundwork for a sweeping transformation of building codes, municipal infrastructure, and design norms that could save the city from rising seas.

The crucial question is: Who will change that built environment? Will it be architects and city officials, safeguarding South Florida against the effects of climate change as the world’s living laboratory for so-called climate resiliency? Or is nature coming to reclaim Miami as a swampland?

Higher Ground

South Florida’s development boom is so lucrative it seems inevitable that it will continue. Before the city was founded in 1896, however, it wasn’t clear that the mouth of the Miami River would ever be anything more than a mosquito-infested trading post—until the industrialist Henry Flagler dragged his railroad south from Palm Beach along the highest ground he could find: a coral ridge between 12 and 25 feet above sea level. The tracks reached Biscayne Bay on April 22, 1896. Three months later Miami was incorporated.

Today, Miami is a bustling, sprawling urban landscape that has been remade to suit cars, but some planners say that the same limestone ridge Flagler used could anchor climate-friendly development.

The Urban Land Institute is drafting a plan for the Arch Creek Basin, a mostly low-lying area straddling 2,800 acres and four municipalities, as well as unincorporated Dade County, around one stretch of the railroad. Primarily poor people of color, the residents of Arch Creek face a severe threat from sea-level rise—one that could eventually force them to abandon the area. The development would be flood-resistant and transit-oriented, dense with mixed-use buildings and affordable housing, but also with a health clinic, backup generators, and other resources that could come in handy during disasters.

At a charette in November, designers Gustavo Sanchez-Hugalde, Max Zabala and University of Miami professor Sonia Chao presented their idea for a flood-resistant transportation hub at Northeast 125th Street. It would be transit-oriented development, dense with mixed-use buildings and affordable housing, but also with a health clinic, back-up generators and other resources that could come in handy during a disaster.

“Think of these as not just transit but resilience stations,” said Chao.

In the long run, South Florida’s scarcity of higher ground could also make its elevated areas more valuable as waters rise. That could exacerbate gentrification in minority neighborhoods with relatively high elevations like Liberty City and Little Havana.

“It’s a matter of time until investors will head for the higher land,” said James Murley, chief resilience officer for Miami-Dade County.

But climate change isn’t forcing people out of their homes just yet. Asked if climate change is a driving force for gentrification in Miami, Murley is skeptical, but others are starting to look toward the future.

“Right now we’re experiencing more of the classic gentrification that comes with a growing real estate economy,” Murley said.

While the mainland mulls long-term plans to adapt to rising seas, the coastal barrier island of Miami Beach is busy building.

Planning For High Water

Over the next five years, the municipality of Miami Beach will spend $400 to $500 million on flood defenses, installing 80 new pumps, raising roads, and strengthening seawalls across the city. So far the city has funded about $200 million of that project by more than doubling stormwater fees.

A law passed last year requires the owners of buildings larger than 7,000 square feet to pay a fee if they don’t get certified as at least LEED Gold. The builders of properties that don’t get LEED certified at all get slapped with a fee equal to 5 percent of their construction costs. That could help raise money for future infrastructure investments.

Miami Beach also requires new buildings to be at least one foot above the base flood elevation of six feet above sea level. As an additional incentive for developers, the city won’t count the raised elevation of a flood-proofed site toward the project’s height limit or floor-to-area ratio.

Miami Beach environment and sustainability director Elizabeth Wheaton said the new requirements wouldn’t stunt development.

“Developers want to build here,” Wheaton said. “They’re going to do what’s required.”

The first building completed under the new elevation requirements is Jean Nouvel’s Monad Terrace, a 59-unit luxury residential tower on the waterfront in South Beach. Nouvel built Monad Terrace’s ground floor more than 11 feet above sea level, elevating all of the building’s interior spaces and its entrance high enough to ward off flooding.

Building high is an increasingly popular choice for private residences, too. The local architect Rene Gonzalez, known for his high-end modernist houses, is building four new homes in the area that are modeled on mangroves—propped up with stilts and columns for an additional layer of privacy that also affords the owner some long-term insurance against flooding. Gonzalez designed his own home on Belle Isle the same way.

“It’s a responsibility that every architect should take on,” said Gonzalez. “Building a house up is not a luxury. It’s a necessity in our current environmental climate.”

For now, however, most of that work is clustered in tony Miami Beach. In Miami-Dade County at large, where nearly half of all residents live in poverty, there are fewer options.

Because saltwater rises up through South Florida’s porous limestone bedrock, it’s not just coastal communities that are at risk. Many of the most threatened areas lie miles inland, in suburban and often low-income areas of Miami-Dade and Broward County that can’t afford to elevate all their homes and streets.

“It’s unavoidable that there will be relocations,” said Anthony Abbate, an architect based in Fort Lauderdale in Broward County, just to the north of Miami-Dade. “It’s a difficult conversation but I think we’re on the verge of having it. This has to be a conversation with the people, with the public.”

Miami-Dade is in the middle of a vulnerability analysis for major infrastructure, from its airport to its water system, identifying “adaptation action areas” where city planners might best focus their efforts.

“There’s a lot of work that needs to be done and it needs to be done in short order,” said Abbate.

Some of that work is already underway. The newest addition to the county’s hospital system will pioneer a flood-friendly approach in the recently incorporated town of Doral, just west of Miami International Airport. Designed by Perkins + Will, Jackson West hospital will devote most of its 27 acres to green space and a retention pond to store runoff not just from the built-up part of the site that will house the hospital, but from the developments surrounding the site. Construction is set to begin later this year and the hospital could open in 2020.

Risk And Reward

Perhaps before it faces up to the force of nature, however, South Florida may have to reckon with its runaway real estate market. Wayne Pathman, a land-use attorney and chair of Miami’s Sea Level Rise Committee, said the face of Miami’s climate crisis might not be a natural disaster, but a collapse of the insurance market.

“Flood insurance is going to be the tip of the spear,” Pathman said. “Unlike hurricanes, which are a single event that may not happen for years at a time, sea-level rise is a constant. Once it’s here, it’s here, and it’s never going to get better.”

Pathman said some of his clients with property in Miami Beach and North Beach are already seeing a 500 percent increase in their flood insurance premiums. For now, that’s manageable, he said, because they were probably underpriced in the first place.

“When that jumps as high as $50,000 over the next 10 years, which it will, that’s alarming,” Pathman said.

Areas that today flood two or three times each year could see water in the streets every week, and banks may stop offering mortgages there. That could have ripple effects across the region, Pathman said, jeopardizing tourism dollars and property-tax revenue that Miami-Dade and Broward counties will need to fund new climate-resilient infrastructure.

“Those are our only two industries here in South Florida,” Pathman said. “If we don’t start dealing with the insurance risk, all the ideas we come up with for future infrastructure will be cost-prohibitive because we won’t have any money.”

Reinaldo Borges, an architect who sits on the sea-level rise committee with Pathman, said the luxury houses and museums already built to deal with higher seas show climate-resilient design can provide a return on investment.

“If you design correctly,” Borges said, “you shouldn’t be worried about insurance risk.”

Borges has a checklist for clients who are looking to invest in the future of Miami real estate—not just flip property for a profit. It includes elevating building mechanical systems, installing hurricane-proof windows, and planning for severe floods.

“For a building like that, all you have to do before a storm is bring your pool chairs inside,” Borges said.

Climate-proofing one building may be a straightforward design problem. Saving a metro region of 7 million is something else.

Borges came to Miami when he was six years old, brought from Cuba by parents who sought a better life for their children. Today he has two daughters, ages 23 and 29, and he has the same hope for them.

“When you’ve got political leadership in denial, these are challenges I’m concerned about,” said Borges. “This is a world-class city, but people are starting to ask if this is the place they really want to invest.” 


Source: The Architect’s Newspaper

Bills That Property Owners And Insurers Should Watch This Legislative Session

Several proposed acts working their way through the Florida House and Senate will impact property owners and professionals working in the real estate industry.

The measures fight abuse of the legal and insurance system and protect property owners. Here’s a rundown of the most important bills and where they stood one month before the legislature is scheduled to adjourn:

House Bill 483 and Companion Senate Bill 398 To Cap Fees Charged By Community Associations For Estoppel Certificates

Florida law now allows condominium and homeowners associations to charge a “reasonable” fee to prepare an estoppel certificate, which is essentially a payoff letter. Some association management companies have turned this administrative task into a lucrative revenue stream, charging as much as $1,000 for what amounts to 10 to 15 minutes of clerical work.

The related bills would cap these estoppel fees. The House bill that was approved by the Careers & Competition Subcommittee on March 21 reads in part, “… association or its authorized agent may charge a reasonable fee for the preparation and delivery of the estoppel certificate, which may not exceed $250 if, on the date the certificate is issued, no delinquent amounts are owed to the association for the applicable unit.”

The House bill went to the judiciary committee while the Senate bill was scheduled for a third reading by the full chamber.

Senate Bill 704 and Related House Bill 463 To Reduce Sales Tax On Business Rents From Current 6 Percent Applied To All Sales

Business rents create a financial burden on any business that leases space. Municipalities and local governments may levy additional taxes. Consequently, businesses in many counties are paying up to an 8-percent sales tax rate on their business rent.

Lowering the rent tax will provide Florida businesses with the capital to expand, hire more employees, improve benefits and raise salaries. The Senate measure reads in part, “Separately itemized charges for ad valorem taxes paid to the lessor or the licensor, or to any other person if itemized and not taxed, are not subject to tax under this section.”

The Senate bill was in the appropriations subcommittee on finance and tax in late March, and the House bill was referred to the appropriations, and ways and means committees.

Senate Joint Resolution 76 and Accompanying House Resolution 21 To Extend Permanent Property Tax Cap On Second Homes and Commercial Property

A constitutional amendment created a 10 percent cap on the annual increase of property taxes for all nonhomestead properties. This cap helps make sure that businesses don’t get hit with property tax bill increases they can’t cover. It also keeps the cost of owning a second home from skyrocketing, and ensures that renters don’t see huge increases in their monthly rent as lessors scramble to cover their higher expenses.

The cap is set to expire on Jan. 1, 2019. The resolutions put the constitutional amendment back in front of voters for renewal during the 2018 general election. The Senate bill is in the appropriations committee. The House bill passed and was sent to the Senate.

Senate Bill 1038 and House Bill 1421 To Reform How Homeowners Assign Insurance Benefits To Contractors or Other Companies Repairing Property

Under current law, a homeowner can authorize a company to work directly with the insurance company and collect the homeowner’s insurance benefits.

Abuse of that agreement with respect to water and roofing claims have led to a significant increase in both the frequency and severity of insurance claims, particularly in South Florida. A number of insurance companies are requesting significant rate increases.

The measures would take steps to reduce fraud and abuse. It sets forth a long list of requirements for assignment of benefits, including that the assignment agreement contains a written, itemized, per-unit cost estimate of the work to be performed by the assignee or transferee and shifts the burden in any proceeding or suit to the party seeking benefits, rights or proceeds from the insurer to demonstrate that the insurer was not prejudiced.

The Senate bill is in the banking and insurance committee and the House measure is in the commerce committee.

House/Senate Bill 285 To Mandate Septic Tank Inspections As Part Of Real Estate Sales In Impacted Areas

The requirement would apply to areas the Department of Environmental Protection has designated as impaired waterways. That would cover about one-third of Florida, including residences around Big Lagoon, the Everglades, Lake Okeechobee, and the St. Lucie, St. Johns and Calosahatchee rivers. The rationale is that home buyers and sellers pay for termite and roof inspections, so ensuring a septic system is functioning properly and not polluting nearby water bodies makes sense.

Two property-related subcommittees in the House approved the bill and sent it to the commerce committee. The Senate has yet to take up the measure.


Source: DBR

Will Giant Drones Seriously Disrupt The Shipping Industry?

Unmanned aerial vehicles, or drones, are now used for all sorts of things, from taking out terrorists to delivering take-out.

Now a tiny start-up in California’s Bay Area is working on what it hopes will be the next big thing: large autonomous drones capable of moving freight across the Pacific Ocean more cheaply than conventional piloted cargo planes and faster than cargo ships.

Natilus Inc., of Richmond, Calif., is building a 30-foot prototype drone that could take to the air for the first time later this year. If all goes as planned, the firm will develop an 80-foot drone that will begin flying routes from Los Angeles to Hawaii in 2019. A 140-foot drone with a 200,000-pound cargo capacity could be flying routes to China starting in 2020.

Made of carbon fiber composites and powered by jet engines, the drones would take off from the water, eliminating the need for landing gear and long landing strips. It would land on water several miles from port before taxiing to the dock, where cranes would unload the cargo. The amphibious drones would cruise at an altitude of about 20,000 feet and would fly slower than piloted cargo planes.

“Commercial pilot airplanes don’t want to fly slower because it would take forever to get there and pilot fatigue becomes an issue,” Natilus CEO Aleksey Matyushev told NBC MACH in an email. “For drones, that is not the case.”

And with no crew to pay — and since reduced speed means reduced fuel costs — shipping via the drones would cost about half as much as shipping by piloted cargo planes, the company says. Shipping 200,000 pounds of freight from Los Angles to Shanghai via drone, for example, would take about 30 hours at a cost of about $130,000, the company says. Delivery of the same cargo by a Boeing 747 takes about 11 hours and costs about $260,000. (Moving the same cargo to Shanghai by ship would cost about $61,000 but would take three weeks.)

Natilus hopes to build hundreds of the drones and sell them to FedEx, UPS, and other companies, Fast Company reported. But with just three full-time employees, the firm might outsource some construction efforts. Matyushev said in the email that Natilus had been “talking with a couple of larger aerospace companies (to remain unnamed) to help us put the larger vehicle together.”

Matyushev sounds confident. But are cargo drones like the ones he envisions really going to disrupt transoceanic shipping?

Dr. John Michael Robbins, an assistant professor at Embry-Riddle Aeronautical University in Daytona Beach, Florida, called cargo drones “extremely feasible” in an email to NBC News MACH, adding “it will take some time” for them to be proven safe and efficient.

“The aircraft not only have to be built and tested in order to pass the rigorous process of certification, but society has to accept the technology in order for it to truly become commercially viable,” said Robbins. “The Federal Aviation Administration is still working on creating regulations regarding the commercialization of unmanned aircraft.”

But, Matyushev said, “The FAA has been nothing but supportive of the project.”


Source: NBC News