‘An Ounce of Prevention Is Worth a Pound of Cure’

What can insurance carriers expect in 2023 in terms of new codes and construction technologies in the wake of one of the most devastating natural disasters that the nation has ever experienced? Much stronger building and site development regulations in the next three-year cycle of code updates are certainly on the horizon.

The history of mother nature’s fury and society’s responses have been well documented. Devastation from the Category 5 Hurricane Andrew in 1992 with 175 mile per hour winds resulted in new Florida building codes, replacing an estimated 400 local codes on the books at that time.

When Hurricane Ian hit the Southwest Florida coastline in September 2022 with winds of more than 120 miles per hour, it flooded cities and devastated homes across Florida and coastal South Carolina. Data posted by the Florida Office of Regulation show that an overall 471,783 claims have already been filed from Hurricane Ian, with estimated losses of $4.5 billion. Hurricane Ian’s projected economic damage could be as high as $75 billion, and may end up among the five costliest storms to hit the U.S., after the economic damage is fully assessed.

New Codes, Practices

Going forward, new codes and construction practices will need to be implemented in the construction of new homes and buildings. Studies from agencies like FEMA have shown that the adoption of modern building codes averts over a billion dollars a year in structural damage in California and Florida alone. It makes sense for insurance professionals to learn more about these updated building codes and construction products and principles.After all, as the adage goes: “An ounce of prevention is worth a pound of cure.”

The impact of Hurricane Ian will result in further strengthening of building standards with respect to living levels and mean flood elevations. Federal flood maps, which are used for tracking and analysis, may underestimate flooding risk, but FEMA is required to review these flood elevation maps every five years to identify any changes or inaccuracies. These reviews are to account for accelerating climate change, intense rainfall events and sea level rise. It’s hoped that stricter standards will help insurance carriers by reducing the amount of damage from hurricanes and other natural disasters.

Homes anchored on concrete piers and designed with open garages protect elevated living spaces where storm surges do not rise to that level are examples of expected refinements in the current building codes. Building pad elevations will also rise. The challenge larger builders face is differential building pad elevations within a master planned community or large subdivision in which the build-out spans one or more building code cycle updates.

Presently, when building in South Florida, concrete block construction is also required, and these homes perform well in hurricane wind conditions. Concrete block construction will replace older wood framed structures. Even at inland locations in north Florida, which are more insulated from coastal hurricane winds, wood framed construction exists in older structures, but most new homes are proactively built with concrete block.

In the coastal city of Punta Gorda, Florida, over which the eye of Hurricane Ian passed directly, several homes and buildings were left intact with minimal damage to the building exteriors, to the surprise of many. After Hurricane Andrew, Florida enacted new statewide building code updates that included some of the toughest storm-specific regulations in the country. In 2004, Hurricane Charley devasted Punta Gorda, and the reconstruction of the destroyed homes and buildings included updated building code requirements introduced in 2007. The buildings that survived Hurricane Ian in Punta Gorda used those 2007 building codes.

The 1994 Southern California Northridge earthquake, registering 6.7 on the Richter Scale, resulted in 8,700 injuries, fifty-seven deaths and caused upwards of $93 billion in damages (2021 dollars). Following Northridge, new significant structural building code updates for the Los Angeles region were generated.

Champlain Tower Collapse

Not all building failures are a result of mother nature’s fury. The Champlain Tower collapse in Florida in 2021 is one example. The causes of its collapse have been attributed to beach erosion undermining structural support columns, questionable concrete design mixes during original construction, and/or extensive deferred maintenance by the HOA.

Given that the HOA was to implement an estimated $15 million-$16 million of recommended repairs, but sadly were never begun, deferred maintenance played a significant role in the collapse, in the author’s opinion.

Building Cycles

Buildings go through cycles. The pre-construction cycle is governed by economic and financial feasibility, design development and preparation of construction documents (i.e., architectural and engineering plans — civil, structural, mechanical, electrical and plumbing, among others). Creation of specification manuals, construction contracts for the general contractor and trade/specialty contractors, and preparation of the HOA CC&Rs (Conditions, Covenants and Restrictions) are also developed. The CC&Rs are governing documents for the common ownership and maintenance over time of common interest HOA communities. Material selections are made during this time for the tower core, public area amenities and build-out of specific design elements and features inside the residential units. And the marketing/sales process begins during this pre-construction cycle.

During construction is the cycle of creation where the rubber hits the road and includes mobilization of the site work — excavation, rough grading, removal of organic matter from bearing soil (which otherwise will rot and create voids and weakness in the bearing strata), below grade foundation construction and waterproofing assemblies — taking place prior to going vertical. Once a tower building goes vertical the construction schedule can span up to four years.

Post-construction is the cycle of ownership and maintenance and lasts for decades, if not centuries in the case of many national and international landmarks such as monuments, cathedrals, and government buildings. Preventative maintenance procedures and practices are necessary to ensure a building’s longevity.

We know that mother nature also has cycles, and the study of building science is in part the study of these cycles. Building science has improved building durability and enhanced comfort for occupants. It is commonly known in physics that every action embodies a reaction. Energy, wind, sun and moisture are natural elemental interplays of actions and reactions in the context of physics, chemistry and biology — all of which impact buildings. Building science as a discipline plays out over the life cycle of a building or structure and contributes to the development of new construction materials, methods and practices. These innovations in turn become adopted in the uniform building code updates, typically on a three-year cycle.

Legislative Responses

In the event of a major catastrophe such as the Surfside Champlain Tower collapse, building code updates may be insufficient to solve the problem, and a legislative response is required. For instance, Senate Bill 4-D (2022) Building Safety in Florida requires building inspections and recertifications on a regular cycle of years, “requiring condominium associations and cooperative associations to have milestone inspections performed on certain buildings at specified times; authorizing local enforcement agencies to prescribe timelines and penalties relating to milestone inspections. It also requires funding replacement reserves for building of a certain height and location relative to the coastline.

Similarly, following a partial building failure in Berkeley, California, in 2015, due to a balcony collapse, the California State Legislature enacted the “Balcony Bill,” SB 326, requiring regular and routine structural inspections over time, specifically for exterior building elements above a specific floor height.

Protocols, Funding

These legislative responses were necessary but are not sufficient. Required preventative maintenance protocols and regularly budgeted funding to implement the necessary maintenance are needed.

A relevant example is the advent of residential green building practices. LEED for Homes, Build It Green, Cal-Green, Earth Craft, Green Globes, and Passive Haus, are examples and each is a noble initiative to increase resource efficiency and sustainability in housing production. These evolving “green” building codes drive contractors to construct more energy efficient homes through improvements in the building envelope, improving indoor air quality and reducing water consumption requirements, but changing occupant behavior is also important. Just because a home has a dual flush toilet does not mean the occupant will push the right button. Opening and closing windows, the use of light and heat and excessive plug loads in green built homes can waste energy, regardless of the highly energy efficient building envelope.

In classical economics, there is a concept called “The Tragedy of the Commons,” in which commonly owned assets are cared for by no one, as everyone is seeking a “free-ride” from others who are expected to be responsible for clean air, clean water, traffic free highways, and shared area building maintenance. The tragedy is a “lack of pricing mechanisms” or “feedback loops” to properly allocate the assets’ use, and thus overuse occurs. In the case of the Champlain Tower, the price of avoiding building maintenance became a horrific tragedy.

Specific to high-rise residential condominium towers, general contractors close out their contracts with developers by providing a building “O&M” manual — a final specification book with operational details of the various building systems and materials. These manuals include technical information that may not be easily understood by the homeowner association’s board of directors.

A more user-friendly version that outlines maintenance tasks, schedules and frequencies is useful to facilitate understanding and implementation of the maintenance program. The practice of providing HOA maintenance manuals is common in California and other western states, which have had 25 years’ experience of construction defect litigation and pro-active legislative reform measures codified in their state laws. Florida and other eastern states can learn from normal California practices on this topic.

Strong language in the CC&Rs, which require HOA boards of directors to implement maintenance and inspection protocols, is also crucial to ensure critical maintenance and inspections are being conducted. A funding mechanism to cover the costs of maintenance and inspection protocols should also be required and documented. This is part of the HOA monthly dues paid by the homeowners.

Again, we look to California for a well-developed model to follow. The California State Department (or Bureau) of Real Estate is the oversight agency publishing regulatory standards and budgets for developers setting up HOA communities, including three levels of disclosure reports — pink, yellow, and white — designed to inform buyers about the specific project risks, risks in the vicinity of the project and estimated HOA dues which cover all the pertinent costs for operating and maintaining the building project.

More information and a list of relevant publications is available at www.dre.ca.gov. Two particularly useful documents are the “Operating Cost Manual for Homeowners Associations,” and “Reserve Study Guidelines for Homeowners Association Budgets.” The first is a 60-page guidebook for creating a well-thought-out HOA Operating Budget, initially published in 1975 and now in its 14th edition. The second is a 43-page reference guide outlining the steps for properly setting up HOA Reserves, conducting a physical analysis and developing a funding analysis. Each contains examples and worksheets to follow.

Concluding Thoughts

Paralleling the impact of mother nature’s natural disasters, building codes will be strengthened and homes will become ever more durable. Echoed in a research article by John Burns Real Estate Consulting, “The average repair/remodel spending per homeowners due to Hurricanes/Tornados from the 2017-19 storm season declined significantly over three time periods: 1970-1989, 1990-1999, and 2000 or later.” In effect, “Stronger building codes for newer homes mitigate the impact of wind and rain damage.”

There are many builder trade groups across the nation meeting with legislators (not just Florida) speaking with a somewhat common voice to review and support or oppose various legislative initiatives. For example, there are currently discussions to reduce the Florida statute of limitations from 10 years to seven years for construction defects. This may help builders, risk managers and insurance companies. Other reforms addressing Hurricane Ian may also be presented, discussed and become law.