Sinking Millennium Tower Leaves Property Insurance Questions

The Champlain Towers collapse in South Florida brought several issues to light regarding building safety. In the days following the collapse, people began to ask questions about the safety of these buildings and what insurance companies and government entities would or could do to help make sure that this doesn’t happen again.

Now, we’re beginning to hear about another building that’s having an issue holding itself up. More directly, the Millennium Tower in San Francisco has been sinking for the last several years.

The 58-story tower opened to fanfare in 2009. High-profile residents have included former San Francisco 49er Joe Montana, late venture capitalist Tom Perkins and Giants outfielder Hunter Pence. But by 2016, the building had sunk 16 inches into the soft soil and landfill of San Francisco’s dense financial district. It was also leaning, creating a 2-inch tilt at the base and a 6-inch lean at the top. Residents sued the developer and designers.

A confidential settlement reached last year with homeowners included $100 million to install 52 concrete, 140,000-pound piles to anchor the building to bedrock 250 feet below ground. Piles provide foundation support.

This condominium building includes 419 apartments, making it home to hundreds of people. Recent efforts to shore up the foundation have resulted in the building settling more. According to one report, officials have stated that the building is still safe to occupy.

What are the outstanding insurance implications of the building and the current efforts to keep it from sinking further?

From a property standpoint, there are several issues that could come up should the building become uninhabitable, or worse, one side sinks enough (or the ground shakes hard enough) to destabilize the building, causing it to collapse.

Where would that leave the residents of the building in the event that local authorities deem the building unsafe to live in and they have to move and the building has not actually suffered any damage, other than the settling that it’s already suffering?

If authorities decide that the building cannot be lived in, and the building is still standing, the residents will have no insurance solution to the additional expense in their lives, based on the current ISO Homeowners 6 – Unit-Owners Form or Homeowners 4 – Contents Broad Form. Both forms include coverage for loss of use of their residence and part of that coverage is Civil Authority Prohibits Use.

The problem with that coverage is that it requires, “…direct damage to neighboring premises by a Peril Insured Against…”. That means that before there is coverage if the county decides that the building is unsafe, another building would have to be damaged, or the building itself would have to have damage that was caused by a Peril Insured Against.

So there is potentially no property insurance solution for the residents of the tower. What’s the right risk management solution? That all depends on the level of risk that’s acceptable to the individual, but if I were advising a resident there, I would recommend a nice single family dwelling outside the city a little lower to the ground.