Georgia’s standing as a great state to do business is losing its luster. To blame are jackpot jury verdicts that have resulted in skyrocketing insurance premiums for housing providers, fewer insurers willing to provide coverage, and higher deductibles with policy exclusions and inadequate coverage.
Worse, as these costs rise and risk intensifies, the more likely it is that housing providers, professional management companies and capital investment will leave Georgia to do business in neighboring states with more favorable legal climates.
According to insurance brokers in the multifamily housing market, there is a growing number of zip codes in Georgia that insurance carriers simply will not service. This blacklisting, often driven by data on criminal activity, is leaving entire intown communities typically within underserved areas in a state of crisis.
Affordable housing providers are especially burdened by Georgia’s lack of tort reform, experiencing extreme insurance cost increases and difficulty securing adequate coverage. Providers of naturally occurring or subsidized affordable housing often operate more properties in areas where insurance carriers have begun refusing to provide coverage. In a recent survey, Atlanta Apartment Association members that operate affordable housing reported general liability insurance coverage denials at a higher rate than market rate housing providers.
While maintaining coverage at existing properties has become increasingly challenging, securing investment for new housing in areas of need is out of reach. Without adequate premises liability insurance coverage available, financing new affordable or market rate housing becomes impossible in areas that need new supply the most.
The only way to stem this rising tide is through tort reform at the state legislature. And the time for reform is now.
Meaningful tort reform in Georgia would better define and limit premises liability and outrageous jury awards, which in turn will keep insurers from getting scared straight out of Georgia. Premises liability insurance – which members of the Georgia Apartment Association report has jumped by an average of 200% in the past five years – will be more widely available and affordable.
Today, insurance costs represent an outsized portion of multifamily operating expenses in Georgia. As a result, these insurance premiums make up an outsized portion of recent rent increases across the state – making the goal of creating and preserving affordable housing in our communities further out of reach for many.
Without tort reform, housing providers – and residents – will continue to suffer. Reputable owners will walk away from acquisitions, third-party management companies will drop clients in
Georgia, properties will go without professional management, and properties will be sold to owners who may be less likely to invest in the property or broader community.
One recent court case illustrates how these unregulated verdicts can result in the eradication of quality professionally managed housing in areas that need it most.
At an Atlanta area property, a drug dealer who was not a resident or a guest told a client who was also not a resident or guest to meet them in the parking area outside of the apartment community. The drug sale ended in an altercation and shooting. The plaintiff did not have to prove that the owner or management could have anticipated the crime to hold the property owner liable for a multimillion-dollar verdict. The verdict far surpassed the apartment community’s liability insurance coverage of up to $5 million and the owner foreclosed the property, pulled out of the market, and over the last year the property has fallen into disrepair.
More is at stake than just the multifamily housing industry. In recent years, Georgia’s business climate has shined, with multiple rankings putting our state either first or in the top five in the nation for doing business. But now other, less favorable rankings are clouding our business climate. Recently, Georgia was ranked No. 1 by the American Tort Reform Association for a second straight year as a “judicial hellhole”.
Their website, JudicialHellHoles.org, which is used by insurance underwriters when making coverage and premium decisions, states: “Premises liability cases have generated some of the most eye-popping nuclear verdicts in Georgia, particularly lawsuits blaming businesses for the criminal conduct of others on or near the property. Despite the abuses in this area, the Georgia General Assembly has failed to address the problem.”
Again, the solution to this crisis is to prioritize tort reform. Discussions around this issue and the need for reform have been going on under the gold dome for nearly 20 years. Too much time (and too many nuclear verdicts) has passed without legislative action or relief. Investment and insurance providers that are leaving Georgia at alarming rates, will continue to make these decisions based on the actual risk of doing business in our State. Half measures will do nothing to reverse the trend. That is why it is critical for the Georgia legislature and Governor Kemp to make reform a top priority now.
Jim Fowler is President of the Atlanta Apartment Association, which represents over 1,200 member companies consisting of 375 companies that own or manage 435,000+ apartment homes, and more than 900 businesses that provide products and services to the industry.
