A column by the president of the Marco Polo owners association in 2013 spelled out how a fire earlier that year made it difficult for the building to obtain insurance.

Helene “Sam” Shenkus explained that a fire in early 2013 destroyed an apartment on the 8th floor of the building, with additional smoke and water damage to other apartments and common areas. The loss was put at $1.1 million.

After covering the loss, the building’s insurer declined to renew the policy.

“…Over 20 companies declined to provide a quote,” Shenkus wrote. “It was a struggle to find carriers willing to take on the risk. Finally, a layered coverage solution was created in which several companies take on the risk….The carriers willing to insure Marco Polo increased premiums and raised the deductible from $5,000 to $25,000 per occurrence. So not only have premiums doubled, the deductible went up.”

And that was with a million dollar loss. Last week’s fire will be many times as costly, with a reported 200 units suffering some damage, and perhaps 50 heavily damaged or destroyed.

Will the building be able to obtain new insurance coverage going forward? And, if so, at what cost? And what happens if insurance can’t be purchased? Is that a possibility?

These are issues facing all owners in the building, who must insure the contents of their units, as well as the Association of Apartment owners, which has to obtain coverage for the building itself.

And Shenkus then addressed a question: “What if your apartment was gutted by fire?”

She noted that although the association’s insurance would rebuild, it could takes months or, perhaps, a year or longer. During that time, although not able to live in the apartment, the owner(s) would still have to pay monthly maintenance fees as well as mortgage payments.

Then, when ready to move back in, another realization. “Now you realize you have no furniture, bed to sleep on, pots to cook with, or dishes with which to eat,” Shenkus wrote.

Soon after the newsletter was distributed, Marco Polo required all owners to obtain at least a basic insurance policy, referred to as an HO-6, that covers damage that the association’s master policy would otherwise exclude.

According to the Hawaii Condo Law blog:

For instance, if there is a fire, the master policy will not cover the personal property in the apartments. Second, the master policy does not cover apartment owners for liability claims inside the apartments. If your guest slips and falls in your bathroom and sues you, the master policy will not cover you or your guest. Third, most condominium master policies do not cover improvements or upgrades inside the apartment. The most that these master policies will cover is the cost to restore the apartment to the original condition even if you made changes to your apartment (presumably with Association approval). Fourth, some condominium master policies do not cover anything other than the common elements and the walls, floor and ceilings.

These current and future insurance issues are creating lots of uncertainty and fear. At least one realtor has speculated that apartments in the Marco Polo could lose most or all of their value. I don’t know whether that’s at all realistic, but that’s the problem. Uncertainty appears to be a major risk for all Marco Polo owners, and for owners of units in other unsprinklered buildings.

Here’s a news report on yesterday’s fire at the Marco Polo Condominium for those who may not have seen the wall-to-wall news coverage. I’ve seen news stories about the fire in places across the country and even internationally.

It’s terrible to lose lives in such a fire, but it could certainly have been much worse. What if that fire had broken out at night when many more residents would have been home? That’s a scary thought.

My sister’s trust still owns her apartment on the 13th floor of the building. It’s been listed for sale for a few months, and there’s no doubt this fire is going to make selling anything very difficult for quite a while.

I’m also served a couple of terms as president of a high-rise condo just up the street from the Marco Polo, so I’ve got a sense of how much work it’s going to take to get that building back to some semblance of normalcy.

First there’s the immediate need to get in and secure the fire damaged units, and start to address the smoke and water damage, then assess physical damage to the building and to individual apartments.

Construction services are already in high demand with all the new construction going on, and that’s likely to drive up prices for what’s going to be needed to address fire damage.

There will be huge insurance issues. The condominium association is responsible for insuring the structure, while contents of apartments must be insured by the owners. With insurance costs soaring, some buildings have sought out lower-cost policies. I don’t know what the situation at the Marco Polo is, but a fire this big is bound to test the limits of that insurance coverage.

There are likely to be battles between insurers over just where the building’s policies end and individual owners policies must take over.

And it’s always possible that insurance won’t cover all of the costs to restore the building’s interior and exterior, get rid of smoke and water damage, and repair electrical and other systems damaged by the fire. If there are excess costs, they will have to be charged back to all the owners in the form of a special assessment, but that will take time to sort out.

According to a website maintained by the Honolulu Board of Realtors, there were eight units currently for sale, and an addition four already in escrow. I’m guessing that those sales are going to be stalled out for the foreseeable future as the costs and uncertainties left in the wake of the fire are sorted out.