Trust Property Management

LOSS CONTROL TOOLS Trust Property Management

Trust Officers, Risk Managers and Property Managers, have a fiduciary duty to the beneficiaries and heirs of a trust to assure that the trust is protected from risk of loss, is insured for loss due to hazards and is protected from liability for any alleged negligent acts. They also have the duty to arrange proper maintenance and repair of the property. Maintenance and service are required for the heating, air conditioning, alarm systems, plumbing, electrical systems and the overall integrity of the trust property. This also extends to taking proactive steps to minimize trust property exposure to such natural disasters as forest or brush fires, windstorm, flood, earthquake, surface water damage and erosion.

Property Management Resources The management of residential and commercial trust property maintenance and loss prevention is a challenging task requiring the services of various professionals and knowledge of what preventive measures are appropriate. The following are general guidelines to assist you with this process.

Insurance Attempt to obtain as much as possible from one insurer, that is, try to secure all lines of coverage for; property, liability, auto, domestic worker’s compensation, fine arts, flood and earthquake, etc. with one company and with a common renewal date. This simplifies the renewal process and often results in a more competitive premium and a smoother claim process. Remember to always obtain replacement cost coverage based on a professional building replacement cost valuation, not based on tax assessment records or a real estate appraisal. If the trust property is historic or has unique architectural features, such as hand crafted moldings or one of a kind artesian features, this will markedly increase the replacement cost of the property. You should work closely with your insurance agent, property appraiser and the insurance carrier to assure that this is taken into account when evaluating the replacement cost. Additionally, fine art objects and objects of significant value need to be insured separately on a scheduled rider to the insurance policy, because most Berkley FinSecure provides property policies have limits on what is recoverable for items such as, jewelry, effective and efficient insurance money, firearms, firs, grave markers, precious metals, precious and semi-precious solutions and claims handling to the financial services industry stones, etc. and our empowered industry experts are dedicated to providing personal service you This material does not amend, or otherwise affect, the provisions or coverage of any insurance policy can rely on. Berkley FinSecure issued by any W. R. Berkley Corporation member insurance company. It is not a representation that is backed by the strength and coverage does or does not exist for any particular claim or loss under any such policy. Coverage protection of the W.R. Berkley depends on the facts and circumstances involved in the claim or loss, all applicable policy provisions, Corporation. and any applicable law. Availability of coverage referenced in this document can depend on underwriting qualifications and state regulations.

Residential Systems

Inspection, maintenance and repair of residential heating, air conditioning, electrical, plumbing, alarm and other mechanical systems seems an obvious duty, but is often overlooked. Heating and air conditioning systems require annual inspection and service. This can easily be arranged through a local professional heating and air conditioning company. A chimney maintenance company should be engaged to check and service any wood burning fireplace or stove flue after each heating season. This will help prevent dangerous chimney flue fires. Most water treatment systems require a minimum of annual maintenance, but water softener salt replacement can be needed at three month intervals or less, depending on water usage. There are numerous water treatment companies that will perform the needed services on a regular schedule. Electrical and plumbing systems are usually serviced only when obvious problems occur. Visual inspection of the trust property for defects will be discussed later. This can uncover ongoing and potential problems with these systems and also assure the proper operation of smoke, heat or carbon monoxide alarms.

Insect and Animal Damage Insect damage to structures is often very hard for a non-professional to detect. This is because the damage to wood structures usually occurs internally with little external indicators. The most common wood destructive insect is the termite, which by far, causes more structural damage than any other insect. There are other species that, while not as destructive as termites, still are listed as leading causes of wood damage. They are; carpenter ants, carpenter bees and powder post beetles. Unfortunately, often the first noticeable sign of damage comes from a weakness or failure of wooden floors or walls. By then it is usually too late to avoid total replacement of the damaged area. Squirrels, rodents and other nesting animals often seek habitats in attics, basements and within the walls of structures. They can cause extensive damage to insulation or walls and gnaw on electrical wiring creating a fire hazard. A professional pest control company can perform an annual inspection of all structures, including foundations, decks, crawl spaces, attics, basements and other areas that are commonly used by insects or nesting animals to gain entry. An annual inspection report, along with any necessary treatment and a warranty against future damages are usually part of standard pest control services.

Exterior Maintenance Water infiltration is the second leading cause of residential property damage.

A leaking roof system is the most frequent source of interior water damage to property. Look for raised, cupped or missing shingles. A good pair of binoculars can be a great help in doing a close inspection of a pitched roof. The typical asphalt shingle roof has a 20 to 30 year life expectancy, depending on the quality of shingle used and the geographical area where the property is located. Flat roofing systems are typically constructed of built up layers of roofing felt and hot asphalt material or a synthetic rubber membrane. They have a life expectancy of about 10 years. They are very susceptible to failure caused by pooling water from clogged drains or cracking of the surface from sun exposure. If you can get access to the flat roof safely, look for evidence of sagging and areas that look like they have been holding pools of water. Also look to see if there is debris buildup on roof drains and any obvious cracks or peel back in the roofing surface. If safe access is not possible, inspection by a professional roofing contractor is recommended. For a detailed discussion of roofing systems and maintenance, see our Loss Control Topic, “Roof Systems”. Failing window integrity is another leading cause of interior water damage. You should inspect windows from the inside and outside for any evidence of cracked or peeling caulk, peeling paint, cracked or missing window pane putty or rotting window sills. Water stains on interior surfaces is sure evidence of exterior problems. Even small cracks or openings in or around windows can allow water to penetrate walls resulting in wood rot, insulation failure and mold contamination. A reputable painting contractor can often correct minor window defects. In the case of major problems, window replacement is usually the only viable option. Exterior walls and gutter systems also need to be closely inspected for defects. Masonry exterior walls are commonly made of brick or stucco. On buildings constructed after 1975, the typical brick exterior is made of brick veneer. Brick veneer is brick and mortar laid in front of an interior frame made of wooden studs and exterior grade plywood. Before 1970, brick walls had bricks laid directly against a concrete block wall and in even earlier constructed buildings, there are several layers of brick that compose the outside walls and may even have depths of up to two feet. Over time, the mortar between bricks can deteriorate and allow water penetration. Brick mortar failure is particularly damaging to brick veneer walls, where water penetration can reach the wood interior wall. You should look for evidence of missing or cracked mortar joints, bulging brick or loose bricks. Foundation settlement can also cause serious cracking of brick walls. If evidence of deterioration exists, you should contact a professional mason to assess the damage. Stucco walls are usually constructed by applying metal lathe ( expanded metal with a honeycomb construction) to a plywood exterior wall and then trowling a concrete mortar material to the lathe. This type of wall is particularly vulnerable to water penetration into cracks in the stucco. During your inspection, look for evidence of cracking, chunks of missing stucco or pieces of mortar on the ground around the structure. Any such defects should also have the immediate attention of a professional mason.

Rain gutters and downspouts have to be clean and securely attached in order to function properly. A clogged rain gutter or spout will usually result in water backup into attic spaces and overflow into foundation areas. Look for bent or loose gutters or spouts as well as any evidence of plant growth on gutters. Alge stains around the exterior of the structure are usually associated with gutter and downspout failure. There are usually many rain gutter services listed on local websites or professional roofers can also assist.

Erosion/Landslide Over time, property topography can change due to erosion, plant loss or adjacent construction. This can lead to poor surface water runoff allowing excessive hydraulic pressure on foundation systems. Pooling water or saturated soil are sure signs of improper water runoff. Soil erosion can be a very slow process that continues unnoticed until it reaches a critical state. In severe cases, hillside structures can sustain catastrophic damage from soil erosion or saturation. A professional landscaping company can detect problems of this nature and also report any damage to driveways or walkways during routine lawn, shrub and tree maintenance. It is important that adequate drought resistant vegetation, whether grass or ground cover, be properly maintained at all times. The higher the slope gradient and length, the more cover protection is needed. Retaining walls can be used to control soil runoff in steeply sloping property. Look for areas devoid of vegetation or where soil appears to have been moved by water pressure. Tilted shrubbery or leaning retaining walls are a sure sign of heavy water damage. The source of the excessive water runoff must be detected. It can originate at a great distance from the trust property. Professional help can be obtained by contacting an erosion and storm water specialist through the Soil and Water Conservation Society listed below.

Brush Fire/Forest Fire Precautions Forest fires and brush fires have caused billions of dollars in property damage in recent years. This has been a major cause of concern in states where dry conditions and heavy winds drive small fires into infernos that engulf miles of dry brush and timber. Exposure to brush fires and forest fires has increased as residential development has moved into previously uninhabited areas. There are some precautions that can be taken to minimize exposure to this hazard: • Select landscape plants and trees that are less likely to spread a fire, such as hardwood trees, instead of the more flammable pines, evergreens, eucalyptus or fir trees, • Create a 30 foot flammable free safety zone around the structure. • Remove all debris and rubbish from around and under the structure, this includes newspapers or other paper items stored for recycling.

• Remove all dead branches from trees. • Prune any branches or shrubs within 30 feet of any chimney or stovepipe outlet. • Strictly follow local burning regulations and never leave a fire unattended until it is completely out. • Store gasoline, oil and other flammable liquids in approved safety cans and well away from the main structure. • Do not stack firewood closer than 30 feet from the structure. • Identify any possible water sources in the area, including ponds, streams, swimming pools or hydrants. • Have enough garden hose to reach around any structure on the property. • Have a pre-determined ten minute evacuation plan that everyone understands and includes a meeting place, assigned duties, such as securing pets and important items and what route will be taken. When the evacuation notice goes out, move immediately! For more detailed information, please see the websites listed below for Firewise Communities and Orange County Fire Rescue.

Windstorm Whether coastal hurricane, inland tornado or just severe thunderstorms, wind damage is the cause of numerous catastrophic property damage incidents in the United states every year. There are ways to better protect property from the ravages of windstorm: • Gable trusses at the ends of a pitched roof should be braced from the inside with horizontal beams attached to the trusses • Roof shingles should be inspected for non-adhesion and secured down with a quick dry adhesive if loose • When replacing asphalt shingle roofs, use high impact and wind resistant shingles rated as Class 4 by United Laboratories • Hurricane straps should be installed between roof trusses and wall connections • Metal storm shutters can be installed in all window openings • Impact resistant windows can be installed as well as impact resistant glass doors • Install head and foot slide bolts on all doors • Retro-fit garage doors with windstorm bracing • Remove or trim back large trees that pose an impact danger if felled by wind.

For more detailed windstorm preparedness, please see the NOAA website listed below

Visual Inspections A full interior and exterior visual inspection of all trust property should be performed on an annual basis to look for any potential problems and assure that proper maintenance of systems has been performed. This can be done by a professional home inspection company or a general contractor who is familiar with building integrity problems and systems. You should always request formal written reports from everyone servicing the property and retain them in your files for future reference. With the proper inspection and periodic maintenance of trust property, you can be assured that your stewardship will be in complete fulfillment of your fiduciary duty.

Source Materials Orange County Florida Fire Rescue www.orangecountyfla.net Firewise Communities/USA www.firewise.org National Oceanic and Atmospheric Administration (NOAA) www.noaa.gov United Laboratories www.UL.com United States Department of Agriculture www.usda.gov The Soil and Water Conservation Society www.swcs.org Harvard Law School Cyber Law Series www.cyber.law.harvard.edu American Bar Association law Information www.abala.org New York State Bar Association www.nysba.org

These discussions are not intended to represent a comprehensive review of all of the possible fiduciary duties of a trust officer, risk manager or property manager but are offered for general information purposes. It is strongly suggested that you seek competent legal advice.