When a House Is a Home … and a Museum

While other insurance agents are out visiting manufacturing plants, shopping malls and office parks, Brian Phoebus is hanging out in historic homes, renovated museums, art galleries and performing arts theaters.

His haunts include Montpelier in Virginia, the lifelong home of James Madison; the African Meeting House in Boston; the Walnut Theater in Philadelphia, the oldest theater in the country; and famous venues on Manhattan’s Broadway.

If that’s not enough history, Phoebus’ own office is in a 100-year old building in the financial district of Baltimore.

“We live and breathe this. We love what we do and it is an interesting aspect of insurance,” Phoebus says.

The “this” is working with individuals, groups, businesses and insurers committed to preservation and restoration of historic homes and sites.

Phoebus is the director of National Trust Insurance Services (NTIS), which is a joint venture between the agency he works for, Maury Donnelly & Parr Insurance Agency in Baltimore, founded around 1875, and the National Trust for Historic Preservation (NTHPP) a national, privately funded non-profit organization with more than 250,000 members that works to preserve historic places and supports community revitalization projects.

As the NTHP’s insurance partner, NTIS works with members and affiliated organizations of the NTHP. NTIS also provides services to other historic property membership groups including the League of Historic American Theaters and Historic Hotels of America on an informal basis. NTIS has more than 2,000 clients in 48 states.

“We act as a resource for stewards of historic properties and non-profits and try to help them become a little bit more savvy and educated as it relates to their needs, their exposures, and the gaps and deficiencies that sometimes exist in standard insurance policies,” Phoebus told Insurance Journal.

Program History

NTIS was created in October 2003. Prior to that, the National Trust had relationships with individual insurers, rather than with an insurance agency, and each insurer met a specific insurance need. However, according to Phoebus, members began asking for a more comprehensive approach.

Phoebus used to work for Chubb Insurance, which had a personal lines program for historic homes. After Chubb ended the program and he moved on. Phoebus then successfully pitched the National Trust on the idea of a broad program that would include companies like Chubb and Fireman’s Fund and additional standard and surplus lines carriers. His program would address all of the property and liability concerns of the owners of historic homes, hotels, theaters, museums and cultural institutions along with those working to renovate and revitalize these properties and their neighborhoods.

Among the NTHP’s key affiliates are private non-profits known as Main Street groups that have formed in towns across the country. These local groups strive to bring more economic activity to their business districts.

“From a non-insurance point of view, they’re trying to get the businesses out of the malls and strip malls and get them back onto Main Street,” according to Phoebus.

There are more than 40 Main Street coordinating programs sponsored by states from California and Indiana to Maine and North Carolina, and by cities including Boston, Orlando and Portland. Each has a governing board of business and property owners, residents, city officials, financial institutions, schools, religious institutions, civic groups, preservationists, media and others. An average-sized Main Street program has 40 to 60 active volunteers; smaller downtown districts may have fewer, according to NTHP. Many of the activists own and live in the historic properties in their Main Street districts.

“[W]hat we realized early on in this program is that there’s an incredible pride of ownership that goes along with these groups. They usually work there, live there, or volunteer there because they love these buildings,” Phoebus says.

The owners tend to pay close attention to the upkeep and renovations needed on their properties, an attitude that Phoebus believes makes them above average insurance risks.

NTIS clients include historical societies and preservation organizations, or “house museums” as Phoebus calls them. “They run the gamut from small historic sites or house museums where if you weren’t from that community most likely you wouldn’t know that it existed, to the largest, most nationally recognized sites in American history.”

NTIS also advises theaters, hotels, churches and synagogues, many featuring magnificent architectural detail and some of which have been converted to apartments or condominiums.

Market Challenges

These special properties, some of which showcase irreplaceable items of art and history, should themselves be considered pieces of fine art, in Phoebus’ view. That’s a view that scares many underwriters. According to Phoebus, most underwriters are afraid of structures built before a certain year using materials that can’t now be found at Home Depot.

“They just say, ‘We’re not going to insure buildings built prior to a certain date’ and the reason is because of the architectural detail that is typically in buildings built prior that. They’re scared of having to get involved with these at the time of damage,” Phoebus contends.

The main difficulty in insuring these homes and buildings is arriving at a valuation that everybody can live with, according to Brian Klepchick, commercial lines program director for the Northeast region for Fireman’s Fund, one of NTIS’ key partners.

“There is a whole different type of appraisal that needs to be done in order to make sure that everybody understands what it would cost to reconstruct with the same architectural features, the workmanship, and materials that were there in order to get it back to its historical splendor and maintain that significance,” says Klepchick.

Older buildings can mean more complexity. Not all underwriters would go through the effort to differentiate a 100-year-old building that’s had its air conditioning, roof and wiring upgraded versus one that has not been so carefully restored.

Phoebus agrees that obtaining a true valuation is a challenge. But just as challenging can be getting the insured to accept the valuation since it’s often the case that the replacement cost of a structure with historical significance and architectural detail exceeds the market value. Replacement cost can range from $250 to $3,000 a square foot.

“Generally speaking, the materials that are found in historic structures are more costly to repair and to replace. And there’s a level of expertise in the craftsmanship,” Phoebus says.

Filling Insurance Gaps

Phoebus tries to help these historic home and business owners fill gaps they may not even be aware of. In addition to carrying insufficient limits to cover replacement costs, these insureds are often unprotected for loss of business income — because many policy forms do not contemplate the seasonal nature of small businesses.

Coded changes — where owners are told they must upgrade their structures to meet new building codes, ADA [Americans with Disabilities Act] accessibility requirements, or green energy certification — are increasingly an issue.

“Historic structures are often trying to blend the preservationist and conservationist movements together so that they can maintain that history and the splendor of their architecture,” says Klepchick.

These modifications can be costly and, according to Klepchick, owners of historic structures often have trouble obtaining the ordinance and law coverage they need, unless they go through a special program like NTIS.

Mixed occupancy risks, which are common in Main Street districts, pose another challenge. There may be apartments or condos upstairs and a shoe store or law firm on the ground level. There are only a few insurers that will insure mixed-use buildings, according to Phoebus. He says it is not uncommon for him to turn to two or three carriers to place the coverages that an owner of an historic property needs.