Risk Management at Mission Rock Residential

Cheryl Pugliese, Associate Director, Risk Management at Mission Rock Residential

When I accepted a position in a multi-family property management firm, I had no concerns I would have a learning curve. I had a long career in real estate, which included most asset types, including apartment development-I knew what I was doing! What I wasn’t prepared for was the difference in the types of claims that presented themselves and the frequency of them! Getting into the weeds on breeds involved in dog bite incidents was one of the first surprises. Who knew how many names for the same breed and variations of it could exist?Breed restrictions are not allowed on approved emotional support animals (ESA) or Service Dogs; however, aggressive activity can and must be addressed through localcounsel.Pets must also be registered on the lease; residents are not charged additional rent for ESAs or service animals, which is why there is a fair amount of fraud in the industry on getting or falsifying an ESA approval. 

Fair housing complaints come from a myriad of agencies across the country. Warranty of habitability, discrimination, and disparate impact is all minefields that must be considered with every resident and prospect interaction.Insurance coverage for these risks is not always available in practical terms to make it a tool other than reaching contractual compliance. A risk manager must stay abreast of each state’s list of protected classes that change seemingly with the wind. 

Being aware of affordable versus conventional units is another industry-specific knowledge necessity. For example, if your company requires residents to providetenant liability insurance, this requirementcannot be extended to the affordable class. When there is a resident-caused loss, the lack of insurance along with their financial status can make the cost recovery challenging or even impossible to collect.Some owners will choose to pay for the coverage themselves the close this gap.

Insurers are very aware of these challenges, and it can be difficult to get coverage at a reasonable price.  Because most properties in this asset class are frame construction, property insurance is especially expensive and can even be elusive. Markets available and limited capacity continues to shrink, as does coverage, and yet premiums have skyrocketed over the last several years. 

The multi-family propertyalso comes with a lot of emotionally taxing events, such as domestic abuse, suicide, animal abuse, drugs, mental health issues, and in recent years considerable criminal activity.  This can have a personal impact, especially as training to cope with repeated input is rarely offered to our professional community. The multi-family risk manager can assist the onsite teams in these circumstances by offering both emotional and practical support.

"A risk manager must stay abreast of each state’s list of protected classes that change seemingly with the wind"

These activities may pose a physical threat to the onsite teams, and significant and varied measures may need to be put in place to protect their safety. These threats are more prevalent in multi-family, not only due to the nature of the product but because team members and their families may also live at the property they manage. This is not something you deal with as a risk manager for a class of office or industrial assets. 

Fatalities onsite and an unfortunate reality in the industry. The business side of the response includes cleaning any environmental conditions using appropriate vendors and getting any potential claims paid from the deceased’s policy-not an easy feat. It requires getting into uncomfortable details like a method to commit suicide since insurance may cover the claim if the cause of death was a gunshot, applying for the ‘explosion’ peril.Property managers must deal with survivors for unit clearing out or transferring roommatesand recovering remediation costs and outstanding rent.   Theonsite teammay need counseling due to the nature of the deathor their relationship with the deceased resident (or both).This process can have many additional factors and must be treated with great respect and sensitivity to all involved.

Litigation is frequent and heart-wrenching when your teams have done everything right, but you still end up with a six-figure settlement because a jury/jurisdictionmay be sympathetic to a plaintiff and award them a higher value in a trial. Exaggeratedexpectations for landlords and managementareoften baked into the allegations and outcomes. 

Let me be clear; we honor and respect our residents. We want them to be happy and live their best lives in our communities. I am so proud every time I see a resident has baked a cake for a leasing agent who has been kind to him/her or bought them flowers because that says it all. You won't find a more patient and giving group of individuals than our onsite teams. They have hard jobs and do them with care and compassion. 

Managers’ passion for their community is uniquely shown in the planning of regular and creativeresident events-themed parties, meals (sometimes cooked at home by the team), charitable giving collections, contests, crafts, andthe list goes on. Risk Management is able to support these activities by providing a contract to use and an insurance review when a third party is engaged to come onsite as part of the event.

There is not a day I do not learn something new about this business or get surprised by an incident report, but that is why I have a deep passion for this profession of risk management. Boredom just isn't possible if you are paying attention.