EXECUTIVE SUMMARY
Recent communications from Freddie Mac and Fannie Mae have reinforced the importance of maintaining specific protections within Commercial General Liability (CGL) insurance policies. While the agencies characterize these as clarifications rather than changes, the practical impact may require immediate attention and action from property owners and asset managers. Most notably, they are calling attention to a trend among insurers to introduce exclusions or sublimits on high-severity risks such as assault and battery, molestation and sexual abuse, animal attacks, and firearms—all of which must remain fully covered under your policy to remain compliant.
WHY THIS MATTERS
For borrowers with loans backed by the Agencies, non-compliance with insurance requirements can trigger loan default provisions, impact loan servicing, and cause delays or disruptions in refinancing or recapitalization events. These coverage requirements are not new, but recent enforcement activity has increased, especially as carriers seek to limit exposure in today’s complex liability environment.
KEY INSURANCE COVERAGE CLARIFICATIONS
The following categories must remain fully covered in your Commercial General Liability policy with no sublimits, carveouts, or exclusions:
· Assault & Battery
· Molestation or Sexual Abuse
· Animal Attacks
· Firearm-Related Incidents
In the current market, many standard liability policies exclude or severely sublimit these exposures—particularly in multifamily, student housing, and senior living portfolios—either through endorsements at renewal or changes in underwriting appetite.
IMPLICATIONS FOR PROPERTY OWNERS AND MANAGERS
Howard Insurance encourages all clients to treat this clarification as a call to action, particularly as you plan for upcoming renewals. These provisions are not optional and must be proactively addressed well in advance of your renewal or compliance deadlines.
ACTION STEPS
1. Conduct a Thorough Policy Review Confirm that your current CGL policy does not include sublimits or exclusions for the categories noted above.
2. Engage Your Insurance Advisor Early Given hard market conditions and underwriting constraints, it may take longer than usual to source compliant terms.
3. Document & Communicate with Lenders If changes to your policy are needed, coordinate with your lender or servicer to confirm timing and documentation requirements.
4. Prepare for Market Pushback In some cases, insurers may require higher premiums or alternative carriers to meet the Agencies' coverage expectations. Our team can help you navigate these conversations.
OUR PERSPECTIVE
This trend reflects a broader tightening in the commercial liability market, where insurers are increasingly risk-selective, and exclusions are becoming more common—even for historically standard protections. Lenders are responding by sharpening compliance oversight.
Howard Insurance is working closely with underwriters, lenders, and counsel to advocate for clients and ensure cost-effective compliance. For portfolios subject to agency loan covenants, we recommend renewal planning begin 90–120 days in advance.
