Jude Winterhalter

Founder at Jackson Square Insurance Associates



Let's talk about mixed-use properties and the replacement costs of a rental unit.

In a previous article, we sat down with our go-to insurance professional, Jude Winterhalter, to get an overview of the unique insurance needs of multifamily property owners and spoke about wrongful eviction (personal injury) coverage. We continue the conversation in this installment.

Let's talk about "mixed-use" properties, with commercial and residential above.

Yes, San Francisco is especially filled with these mix use buildings – typically a storefront in the bottom – retail, office, restaurant, and residential above.


From a risk perspective, does the carrier look at the type of business implanted on the mixed-use property? I'm assuming so, and therein lies the value of being an independent agent versus being captive.

I would say that you definitely have a shifting market for insurance when it comes to these mixed-use buildings. Many of my markets even a few years ago would insure them and now they don’t and I know of captive agents who are facing the same difficulties. I think the only positive for an independent agent like myself is at least we have multiple markets to try and assign risk.


Because of a fire hazard?

Yes because of fire … but I also think that the carriers are also factoring in data that they didn’t before – everyone uses a crime score now and they will decline because of an elevated crime score so that is a new underwriting tool that is changing the market.


That's interesting. Crime has been somewhat of a tangential, downstream concern for rental property owners, and we've always said if there is something nefarious going on in and around rental properties, landlords do not have to wait for the police or the District Attorney's office to prosecute the crime - the standard for eviction is a "preponderance of the evidence," not "guilt beyond a reasonable doubt." Different standards in criminal and civil court. But now, it seems that crime is directly impacting the bottom line of landlords because they have to pay for what is perceived to be a high likelihood of criminal activity.

It is an unfortunate reality of our times, but yes, crime does factor in the overall risk assessment of a property.


I understand that in a mixed-use property, carriers will look at the lease of the commercial tenant and isolate it. What specifically are they looking for?

The fundamental question is what exposure they have and who is responsible for what. If there is something calamitous that happens - for example, a restaurant has a grease fire that spills into neighboring residential units and damages them. The carrier will go through the restaurant's lease with a fine tooth comb to ensure that in such an event, the liability is on the tenant’s insurance. The stronger the lease of the building owner the more likely the carrier will look favorably on the risk.


Another question mark top of mind has been the "replacement cost” of a building

Yes besides “ wrongful eviction “ this is the biggest issue I see with policyholders, especially in San Francisco. The total replacement value obviously depends on a bunch of construction factors but I still see policies that come to me at $200/$250 a square foot as a replacement value. This should be much higher. Everyone should take a look at what their buildings are insured for on a replacement basis.


You've been helpful. I want to delve into insuring "illegal units," or as Daniel prefers to call them, "unwarranted units," but we'll reserve that conversation for a later. We like to present information in an easily digestible fashion and that is a whole nother realm we can revisit.

Thanks so much for reaching out and glad to assist property owners.