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Condo Co-Op Help Line: Soil Erosion or Not? How to Protect Your Property from Undermining

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Mann Report Management - May 2018

By: Carol Sigmond

With the most recent development boom and the inexplicable omission of the New York City Department of Buildings (DOB) to ensure the safety of adjacent buildings from undermining by developers, it now falls to property owners to understand how to protect themselves and that includes cooperative and condominium boards. The effect of the conduct, or more precisely the omission to act by the DOB, has effectively shifted losses from developers to adjacent property owners in contravention of the law. Over time, this will increase insurance costs for property owners, particularly those who own older properties.

A review of the relevant law is a good place to start in considering how to protect your building. In New York, a developer who undermines an adjacent foundation or damages a building by undermining or otherwise damaging the foundation will be held strictly liable. Yenem Corp. v. 281 Broadway Holdings, American Security Insurance Company v. Church of God of St. Albans. Insurance is important in protecting your building. General liability insurance policies in New York may exclude damage caused by excavation or soil erosion. The latter is a common exclusion and many carriers exclude coverage for foundations from construction contractor coverage. This cannot be determined from the information on file at the DOB, you need to see the policy. If an adjacent property owner notifies you of the intent to perform excavation, notify your own carrier and ask for coverage for that activity. Some carriers will provide additional coverage for a modest fee.

Whenever a neighbor seeks to excavate at or near your foundation, you should have an access agreement under New York State’s Real Property Actions and Proceedings Law §881 with provisions for indemnity and appropriate insurance. You also need access rights for your design professionals to observe work that implicates your property. But we are dealing with the case where the agreement is absent or does not address an undermine, such as where the developer is not candid about the plans in the negotiations for the agreement.

If there is an undermine of your property, you should immediately notify your own insurance carrier and that of the adjacent property owner of any damage or undermining of your property. (If you do not have this information, demand the property owner notify the carrier of your claim and provide acknowledgment.) Also notify the carrier for the contractor, which should be available on the DOB website.

Many first party carriers will deny the claim based on soil erosion. To overcome this denial of coverage, you must establish actual damage in order to have your first party carrier pay for the restoration of the foundation. This requires a careful investigation by structural and geotechnical engineers and may require access to the offending developer’s property. The engineers will have to determine the extent, nature, and cause of the undermine. They will also document damage to the foundation such as chopping or drilling that may have occurred. Evidence of the undermining of the foundation and damage to your property may include new leaks in the cellar or other lower levels at or near the area of the undermine. Armed with that evidence, you should be able to obtain first-party coverage. Some first party carriers will refuse to pay for the investigation, but you should be able to obtain a recovery for these expenses from the third party carrier for the offending developer under strict liability.

This column presents a general discussion. This column is not intended to provide legal advice. You should consult your attorney for specific legal advice.

This article was originally published by Mann Report: Management. You can access the article on their website.