Section 503

Liability Insurance

503.01

Generally

Requirements

You must ensure:

  • when the Commercial General Liability and professional liability policy covers multiple locations, general aggregate limits apply per location; and
  • each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and BorrowerBorrowerPerson who is the obligor per the Note. is covered, without exclusions, throughout the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. term by liability insurance for
    • bodily injury,
    • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). damage, and
    • personal injury.
503.02

Commercial General Liability Insurance

Requirements

You must ensure the general liability insurance coverage is at least

  • $1 million per occurrence/$2 million general aggregate limit, plus
  • excess/umbrella insurance as follows:

If the number of aggregate units covered by the policy is...

The minimum excess/umbrella insurance coverage is...

Up to 250

$1 million

251 - 500

$2 million

501 - 1,000

$3 million

1,001 - 2,000

$5 million
2,001 - 5,000 $10 million
5,001 - 10,000 $15 million
More than 10,000 $20 million

The following maximum deductibles or self-insured retention, or combined deductible and self-insured retention, apply to

  • general liability,
  • umbrella/excess liability, and
  • professional liability.

Maximum Deductibles for All Other Perils

For...

The maximum deductible amount per occurrence based on the Total Insurable Value is...
Specific Limit Insurance Policy
Specific Limit Policies $50,000
Blanket Deductibles
Blanket Policies $250,000
Expanded Deductibles1

Policies other than NFIP less than $10 million

$100,000

Policies other than NFIP $10 million or more

$150,000

1 Expanded deductibles must meet all of the following:

 

  • the Borrower evidences liquid assets equal to at least 4x the deductible amount;
  • the Mortgage Loan
    • has a Pass rating,
    • is not currently delinquent, and
    • has not been delinquent within the last 12 months;
  • the Property Condition Rating is a 2 or better; and
  • you annually review the Mortgage Loan’s eligibility.

You must ensure the aggregate coverage meets or exceeds the required minimum limits using any combination of

  • primary liability insurance, and
  • excess/umbrella insurance coverage. 

Guidance

You should ensure that any liability policy does not contain exclusions for normal coverage that are normal and customary in the standard liability form, such as

  • assault and battery,
  • animal attacks, and
  • firearms, etc.

The maximum deductible amount, per occurrence, is the combined deductible for both the

  • underlying general or professional liability, and
  • excess/umbrella liability.
503.03

Professional Liability Insurance

Requirements

If a Seniors Housing PropertySeniors Housing PropertyMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. provides any level of healthcare, you must ensure the:

  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has professional liability insurance covering
    • professional errors and omissions,
    • medical malpractice, and
    • all types of abuse; and
  • coverage is at least
    • $1 million per claim or per occurrence/$2 million general aggregate limit, plus
    • excess/umbrella insurance as follows:

If the number of licensed beds is...

The minimum excess/umbrella insurance coverage is...

1 - 100

$2 million

101 - 500

$5 million

501 - 1,000

$10 million

Over 1,000

$20 million

You must ensure:

  • for a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with Assisted LivingAssisted LivingSeniors Housing Property offering services limited to non-medical personal care, including ADL assistance, which are typically licensed and regulated by a state or local governmental authority.  beds, Independent LivingIndependent LivingSeniors Housing providing limited programs of assistance for domestic activities (e.g. meals, housekeeping, activities, transportation, etc.), and typically resembles market rate units. beds are not counted when determining the minimum coverage limit;
  • when general liability insurance and professional liability insurance coverages are combined under an excess/umbrella insurance policy, the coverage meets the higher minimum limit of the 2 underlying coverages; and
  • the maximum deductible for professional liability insurance does not exceed the applicable maximum amount per Part II, Chapter 5: Property and Liability Insurance, Section 503.02: Commercial General Liability Insurance.

Guidance

If coverage is switched from a Claims-Made Policy to an Occurrence-Based Policy, consider adding retroactive or tail coverage to ensure past exposures remain protected.

503.04

Workers’ Compensation Insurance

Requirements

You must ensure:

  • the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has workers’ compensation and employer’s liability insurance (including terrorism coverage), if required where the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is located; and
  • coverage meets the statutory limits.
503.05

Directors’ and Officers’ Liability Insurance

Requirements

You must ensure for each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). owned by a Cooperative OrganizationCooperative OrganizationCorporation or legal entity where each shareholder or equity owner is granted the right to occupy a unit in a multifamily residential property under a proprietary lease or occupancy agreement. , that each BorrowerBorrowerPerson who is the obligor per the Note. maintains directors' and officer's liability insurance with:

  • coverage equal to at least $1 million per claim or per occurrence; and
  • a deductible less than or equal to $50,000.