Lack of detailed insurance requirements – here you have damage.
Jul 23, 2017
Conditions Precedent for Executing a TAMA 38 Deal and Understanding Their Importance on the Way to a Successful Transaction
Without a doubt, this is a fundamental matter, and much has been written about it repeatedly. However, the issue of insurance in TAMA 38 projects often receives insufficient attention, and I have frequently observed significant gaps in critical areas.
One example among many is the damage caused to numerous buildings and their contents in TAMA 38 projects due to a sudden and unexpected storm in central Israel in May 2014.
Is there coverage?Insurance coverage for natural damage during the summer may seem straightforward, as it is a “physical and unforeseen event,” according to the policy definition.
However, in May? The policy must include ALL RISK coverage for the existing structure; otherwise, the natural damage clause does not apply at all.
Lessons are not always learnedIn many cases, due to lack of knowledge, a desire to save money, or the tendency of some insurance companies to avoid providing full coverage for the existing structure, people settle for a “property under work” extension, which does not cover natural damage at all. And the emphasis here is precisely on the desire to save money.
This is exactly what happened with a developer who insured one of my projects at that time, while for the second project (which began about a month later), the developer, pressured by the contractor, agreed that the contractor would insure it through another insurance agent, saving a few thousand shekels.
Unexpected Summer Storm – May 2014In May 2014, due to the intensity of the sudden storm, both buildings were significantly damaged: the roof waterproofing had already been removed, and aluminum windows and frames were in the process of replacement—the damages were severe.
Our policy, which included uncompromising coverage and cost slightly more, paid a very substantial amount, whereas the second policy (incidentally, with the same insurance company) provided no solution at all.
Conditions precedent to the execution of a TAMA 38 transaction and understanding their importance on the path to a successful transaction - without a doubt a fundamental issue, and a lot of ink has been spilled on this issue and the issue has been discussed many times. However, the issue of insurance in TAMA 38 projects is often not given sufficient thought, and quite a few times I have witnessed a significant lack of fundamental issues.
One example of many is the damage caused to many buildings and their contents in TAMA 38 projects, following a storm that occurred suddenly and unexpectedly in the center, in May 2014.
Is there coverage?
Insurance coverage for natural damage in the summer is seemingly clear, as this is a "physical and unforeseen" event, as defined by the policy.
But what?
The policy must include ALL RISK coverage for the existing structure, otherwise the coverage section for natural damage is not included at all.
Lessons are not always learned.
In our places, often out of lack of knowledge and a desire to save, and also because of the tendency of quite a few insurance companies to avoid providing full insurance coverage for the existing structure, they settle for expanding "property on which they work," which does not include any coverage for natural damage. And the emphasis here is precisely on the desire to save.
This is exactly what happened to the entrepreneur who insured one project with me during that period, while the second project (which began about a month later) - the entrepreneur, pressured by the contractor, agreed to insure the contractor with another insurance agent, saving several thousand shekels.
An Unexpected Summer Storm - May 2014
In May 2014, as a result of the sudden force of the storm that passed through our area, both buildings were significantly damaged, as the seals had already been removed from the roofs, and the aluminum windows and doors were just in the process of being replaced - and the damage was severe.
Our policy, which included uncompromising coverage and cost a little more, paid a very substantial amount, while the second policy (incidentally, with the same insurance company) did not provide any solution.
Conclusions
Often times in counteroffers (which are relatively cheap to the offers submitted by us), the coverage offered may save a little money - but may be detrimental.
Therefore, when talking about conditions precedent to the execution of a TAMA transaction and their importance, the subtleties of insurance matters should be given at least the same level of importance.
Best regards,
Itzick Simon
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