Insurance may not be enough for some Marco Polo condo owners
Honolulu Civil Beat
By Stewart Yerton
21 July 2017
For Vasana Chiu, the one-bedroom condominium with a lanai overlooking
Waikiki Beach and the azure Pacific Ocean beyond, was her dream place.
But the dream vanished last week when a fire destroyed her apartment on
the 27th floor of the Marco Polo condominium.
Now Chiu must pay a mortgage on a condo that she can’t live in or rent
out. Her insurance will provide a cushion, Chiu says, but it won’t be
“They have teams in there doing everything they can,” she said. But she
added, “I’m going to run out of insurance money before they finish.”
Chiu’s situation illustrates something condo owners often overlook: the
master insurance policy that is typically paid through condo fees
rarely makes people whole in the event of a major loss.
whose condo was severely damaged in the Marco Polo fire, says her
insurance policy will cover a year of lost rent — but rebuilding will
take much longer.
Cory Lum/Civil Beat
The Marco Polo fire has raised questions about building safety and the
need for sprinkler systems in older high-rise residential towers. It
also is serving as a wake-up call for condo owners seeking to manage
risk, said Sue Savio, president of Insurance Associates, an independent
insurance agency that specializes in insurance for condominium
associations and individual owners.
“Since the Marco Polo fire, I’ve been talking to a lot of people who
say, ‘What do I need?’” said Savio, who represents the Marco Polo condo
Her advice to individual owners: “Tell yourself, ‘What if I lived in a building that was completely destroyed? What do I need?’”
It’s a question that Chiu wishes she had asked before the fire.
“There’s so much you don’t know until this happens,” Chiu said.
The fire last week at the distinctive, wave-shaped condominium complex was devastating.
It killed three people and damaged 200 units of the 36-story, 568-unit
building on Kapiolani Boulevard at the edge of Waikiki. Approximately
80 of the units suffered damage from fire, heat and smoke, and more
than 30 units had heavy damage or were completely destroyed, said Capt.
David Jenkins, a spokesman for the Honolulu Fire Department.
Although the fire started on the 26th floor, Chiu’s floor bore the brunt of the damage, Jenkins said.
A Honolulu Fire
Department spokesman said the 27th floor of the Marco Polo condominium
sustained the most damage. Mike Webb/FloodPro
In many ways, Chiu is fortunate. A certified public accountant, she
lives with her elderly parents in Hawaii Kai and was using the Marco
Polo apartment as an investment. So she has a place to live.
But she also has a mortgage on the unit at the Marco Polo.
Chiu hasn’t been allowed to see her unit, but her property manager told
her the condo is now a fire-gutted shell without walls, open to the
ocean. Chiu has an individual insurance policy on the unit, which
covers lost rent for a year. But she expects repairs to take much
“If I didn’t have a mortgage, it wouldn’t be such a big deal because I
could wait it out,” said Chiu. “But I’m on the hook unless I default on
Condos are usually insured by a master policy, typically paid for
through association fees, Savio said. However the policy usually pays
only for restoring common areas and a unit to its original condition.
That means upgrades like marble countertops and fancy cabinets won’t be
replaced. In addition, the master policy won’t pay for loss of use for
owners who live in units or the loss of rent. Even if an association
requires owners to buy an additional policy, known as an HO-6, the
requirement might cover the bare minimum, Savio said.
“I tell people, pull out your policy, look at it, check it out, and ask
– ‘If I was in a building like that, do I have enough?’” she said.
Jef Saragena, an agent with State Farm Insurance Co. in Kakaako, agreed.
“Ask if there’s a fire that goes through your place, what would it take to replace your unit?’” Saragena said.
Fire and smoke pour out of the Marco Polo building. Anthony Quintano/Civil Beat
People often opt for the least expensive insurance, Saragena said, even
though the most expensive comprehensive HO-6 policy might cost only
about $250 annually, versus a barebones policy for $90.
He said a policy could include not only coverage for unit contents and
loss of use or loss of rents, but also liability coverage for accidents
that damaged neighboring units.
Chiu has increased the coverage on another unit she owns in Makiki.
In some cases, lenders may be willing to work with condo owners.
Bank of Hawaii, for instance, has the mortgage for 28 condo owners at the Marco Polo, which represents about 5 percent of units.
The bank is reaching out to residents to see if they need help, such as
payment deferrals, Stafford Kiguchi said in a statement. He added that
the bank will work with each homeowner individually to understand their
specific situation and needs.
The deferral program could extend up to a year, he said. Deferred
payments do not have a negative impact on a borrower’s credit rating,
Chiu said she hasn’t had time to discuss an alternative plan with her lender.
Outside the Marco Polo apartments after the fire that killed three people.
Anthony Quintano/Civil Beat
Attorneys said the fire is likely to spawn lawsuits to determine who
should pay for the damage. Jeff Shapiro, a fire protection engineer
based in Austin, Texas, who serves as an expert witness in legal
disputes involving fire codes, said the question of why the building
did not have sprinkler systems could arise in civil lawsuits, even
though state and county fire codes do not require sprinklers in older
The Honolulu Fire Code adopts the State Fire Code, which in turn is
based on a model code created by the National Fire Protection
Association, a 120-year-old organization that establishes a variety of
model fire laws used by various jurisdictions as a basis for their
laws. Although the model code adopted as the basis for Hawaii’s laws
requires sprinklers in old buildings such as the Marco Polo, state and
city officials chose to remove that requirement in the Hawaii and
Plaintiffs could use the building’s decision to disregard the national
standard to show the Marco Polo was not exercising reasonable care,
Mark Davis, a Honolulu trial lawyer known for high-profile personal
injury cases, agreed. He said a national standard can be used to show
reasonable care under common tort law, which may differ from what a
fire code requires.
“It’s a question of what a reasonable property owner should do under
the circumstances,” Davis said. “Was there a duty to retrofit those
buildings with sprinklers?
Mike Webb from
FloodPro enters a unit on the 12th floor of the Marco Polo that
sustained water and other damages. Cory Lum/Civil Beat
The Honolulu Fire Department is working with other agencies on a
comprehensive investigation of the fire, said Jenkins, the department
Among other things, Jenkins said, the department is looking at the
building’s fire alarm system, which he said could not be heard well in
some areas, and the building’s elevator system, which was working “in a
That meant firefighters had to haul some equipment up the building staircase using a human chain.
Meanwhile, cleanup crews are working to assess the extent of the damage, which affected floors far below where the fire blazed.
Jenkins said water damage may be worse in some cases than damage due to smoke or heat.
Jack Webb of the remediation firm FloodPro, said that the use of
asbestos in the 1970s-era building complicates the cleanup. Webb said
his firm was called in to help clean up a unit, but is limited in what
it can do because the firm is not certified to deal with asbestos.
While many questions remain, the need for condo owners to check their policies is clear, Savio said.
“Everybody who was not in the Marco Polo will learn from this
experience,” Savio said. “This is something people need to know about,
whether they want to know it or not.”