A historic home on Michigan’s famed Mackinac Island caught fire on May 30, leaving more than $1 million in damages to the 120-year-old cottage. No one was injured in the blaze, which was reportedly caused by a chimney failure that occurred about two hours after a fireplace was lit on the home’s first floor. Fire officials described the roof and third floor as a “complete loss” but said the remainder of the home was spared.
Fire crews on the island were assisted by two fire departments from the mainland and reportedly sprayed around 500,000 gallons of water on the home, named the Brigadoon Cottage. While firefighters doused the home, others cleared out paintings and other “priceless family heirlooms,” WLUC reported.
“It is horrible to see anytime a historical home or landmark catches fire or is damaged,” said Kate Wright, Associate Vice President, Regional Practice Group Leader, Personal Insurance, Burns & Wilcox, Indianapolis, Indiana. “It can be devastating, especially when it is something that the community recognizes.”
The owners of the Brigadoon Cottage have said they plan to rebuild. While the full costs they may face are unknown, repairing any historic home — especially one on an island with limited accessibility and a ban on most motor vehicles — can be exceptionally expensive. Standard Homeowners Insurance policies may not be sufficient, said Sarah Chandonnet, Underwriting Manager, Personal, Burns & Wilcox, Farmington Hills/Detroit, Michigan.
“To me, this is a perfect example of why you need the correct insurance policy to cover these types of risks,” she said. “Any home that is older, historic, or has unique finishes really needs the correct insurance policy in place so that if something like this does happen, they are properly covered.”
Special insurance endorsements typically needed for historic homes
Renovations on historic properties often take longer and cost more than non-historic homes.1 This makes having the right Homeowners Insurance coverage important in the event of a covered loss, Chandonnet said. During the pandemic, interest in historic homes has increased in some areas, along with growth in do-it-yourself home renovations.2,3 Homeowners Insurance can help pay for damage to the home or its contents due to fire, severe weather, and other hazards, and also includes liability coverage for third-party injuries or property damage.
Owners of historic homes usually need specific endorsements on their Homeowners Insurance to address the specific characteristics of the property, such as unique materials that will be more expensive or difficult to replace, rather than estimating replacement costs based on modern finishes. If a home’s 200-year-old mantel were damaged in a fire, for instance, the owners would likely seek to have it restored or replaced with something comparable from that time period, she said.
“The policy will have certain endorsements so that if a loss did occur, the finishes would be up to par from when they were originally restored or when the home was originally built,” Chandonnet explained. “The home will need to be restored a certain way and by the right company.”
In May, a fire destroyed a pre-Civil War era home in Odessa, Delaware, and caused at least $200,000 in damages — a figure that officials said was difficult to determine because of the home’s historic nature.4 In January, the oldest home in the town of Russell, located northwest of Winnipeg, was destroyed in a fire reportedly caused by arson.5
A guaranteed replacement cost endorsement on a Homeowners Insurance policy can help ensure that a historic home will be covered for its full rebuilding cost. This includes the cost of flying in materials from out of state or paying for a longer duration of living expenses because of these delays. “It is so important that there is an endorsement in the policy saying they will restore the home to the original value because that is what makes it unique; that is what makes it their home,” Chandonnet said.
As the owner of a historic home, you have to insure it to the true replacement cost of the home. … If there is crown molding or fixtures that are solid brass, for example, that can be far more expensive to rebuild.
Another option is an extended replacement cost endorsement, which guarantees that the insurer will pay a certain percentage above the policy’s limit for covered expenses after a loss, Wright pointed out. In either case, such endorsements are essential considerations when it comes to insuring historic homes, as their replacement costs are generally “far greater” than their market value if the home was listed for sale, she said.
“As the owner of a historic home, you have to insure it to the true replacement cost of the home,” Wright said. “That means truly replacing or restoring those materials. If there is crown molding or fixtures that are solid brass, for example, that can be far more expensive to rebuild.”
Homeowners who are engaged in home renovations or the restoration of a historic home may also need Builder’s Risk Insurance. This type of policy covers the property that is being built and can help with expenses such as physical damage or property replacement.
“The homeowner should have a separate Builder’s Risk Insurance policy while it is under construction, and their contractor should have a separate Commercial General Liability Insurance policy in addition to that,” Chandonnet said, noting that how these intersect will vary by carrier and the specific situation
Car-free or not, island locations bring higher costs to transport supplies
Mackinac Island is home to at least 500 year-round residents and is just one of 35,000 islands in the Great Lakes, many of which are populated.6,7 This includes Canada’s Pelee Island in Lake Erie, which is home to almost 300 permanent residents.8,9 While the logistics of transporting building materials can be a challenge for home renovators on any island, Mackinac Island presents unique obstacles because it does not allow motor vehicles.10 Supplies are typically delivered to docks, loaded onto horse-drawn wagons, and brought to building sites. Concrete must be hand-mixed on-site because cement trucks are not allowed, Wright said.
“This means huge time delays in terms of the building process, plus the cost involved in all of that. The ferries can only bring so much material at a time,” she said.
In a 2019 Wall Street Journal article, one Mackinac Island home builder said the process was more expensive and time-consuming than anticipated, and that it requires one to be “humble and patient.”
“There is a challenge to getting materials to the island and to the home without cars or trucks,” Chandonnet added, noting that property owners must keep this in mind when purchasing insurance. “This is obviously a unique risk and one where you need an insurance professional who is an expert in the area of private client homes and historic homes. In this case, it is not just a historic home, but one that needs a specific endorsement to ensure it is properly covered.”
The cost of construction is currently rising across the board, Chandonnet said, pointing to the soaring cost of lumber and other supplies.11,12 This may have an effect on rebuilding timelines and final costs, as well as insurance rates. “Getting materials is difficult as it is because of COVID,” she said. “Restoration right now is difficult, but restoration for historic homes is really a completely different ballpark. You have to be sure that you are adequately covered; it is so, so important.”
Weather must also be factored in, Wright said, explaining that snowmobiles may be needed in winter to move materials across the lake. “That is a significant factor that can drive up the total cost of replacing or restoring the home,” she said. When it comes to emergency response expenses, which can be covered by Homeowners Insurance, a home’s location on a remote island will likely be taken into consideration when pricing the policy.
Another renovation cost to consider relates to updating a home to meet local regulations, Wright explained. A separate Homeowners Insurance endorsement may be needed to cover these expenses. “Homeowners do not always think about the cost of complying with local building codes and zoning ordinances,” she said. “If the home was built a century ago, the requirements and zoning laws have likely changed since then. The owners may need to update electrical systems, plumbing systems, open up hallways and take on other upgrades that can be very expensive.”
Risk mitigation, protecting collections also key for high-value homeowners
In 2019, fires caused $14.8 billion in property damage in the U.S., and Ontario, Canada alone saw $968.9 million (CAN) in fire-related losses.13,14 Like any homeowner, those who own historic or high-value homes should review fire prevention best practices and consider a fully monitored fire and burglar alarm. This is “one of the best things” a homeowner can do to prevent a fire loss, Wright said.
Unfortunately, fires and other things do happen. If a homeowner was not adequately covered, it could cause a major issue, and they potentially would not be able to restore the home. Then they would be paying out of pocket.
Routine maintenance is also critical, particularly with historic homes. “Maintaining your home is so important,” Chandonnet said. “Be aware of the status of your utilities, inspections that may be needed, and any different types of maintenance that certain historical homes may call for.”
In addition, newer water detection systems can help homeowners avoid serious water damage losses, Wright said.
Although no one was injured in the recent Mackinac Island home fire, liability for third-party injuries and property damage should also be considered. Many high-value homeowners opt to purchase Excess Liability Insurance, Chandonnet said. “If someone had been injured, an Excess Liability Insurance policy would be crucial in that situation,” she said. “The higher the liability limit, the better off the client is.”
Historic homes that contain collections of antiques or other items may need a Personal Articles Floater. This should be discussed with a knowledgeable insurance broker who is familiar with historic homes. “You need to make sure your broker understands the quality and finishes of the home so that they are advocating for you,” Chandonnet said. “It is not just your standard policy. It is up to your insurance broker to know the risk and advise you.”
If a loss occurs and the correct Homeowners Insurance coverage is not in place, the owners of a historic home could be forced to pay for repairs out of pocket or ultimately need to abandon the project. “Unfortunately, fires and other things do happen,” Chandonnet said. “If a homeowner was not adequately covered, it could cause a major issue, and they potentially would not be able to restore the home. Then they would be paying out of pocket.”
Given the significantly increased cost of rebuilding a historic home compared to a standard home, it could be “extremely costly” if it is not insured to the full, true replacement cost, Wright said. “It could be financially devastating to those who have to pay that out of pocket.”
1Glink, Ilyce. “Buying a historic home? 6 owners share the pros and cons.” CBS News, August 30, 2016. 2Bond, Michaelle. “Historic homes draw wider interest as buyers adapt to the pandemic in a market with limited choices.” The Philadelphia Inquirer, February 3, 2021. 3Baker, Kermit; Wedeen, Sophia. “Recent Upturn in DIY Remodeling Projects Unlikely to Continue Long-Term.” Joint Center for Housing Studies of Harvard University, October 13, 2020. 4Staff Writer. “Pre-Civil War Era Home In Odessa Destroyed By Fire Saturday.” 1st State Update, May 9, 2021. 5Bernhardt, Darren. “Historic 133-year-old home burns in Russell, man calls police on himself.” CBC, January 7, 2021. 6Mackinac Island School District. “We Live on Mackinac Island.” 7Meltzer, Matthew. "The 9 coolest islands in the Great Lakes." Matador Network, July 17, 2018. 8Dunphy, Maureen. “Pelee Island – Lake Erie.” Great Lakes Island Escapes. 9The Corporation of the Township of Pelee. “FAQ.” 10Keates, Nancy. “Building on Mackinac Island, Where Horses Rule the Roads.” The Wall Street Journal, September 12, 2019. 11Brooks, Christopher J. “Surging lumber prices put buying a home out of reach for many Americans.” CBS News, June 7, 2021. 12Rhein, Nora; Detroit Today. “Home Remodeling Is Surging and the Cost of Materials Is Higher Than Ever.” NPR, WDET, May 5, 2021. 13National Fire Protection Association. “Fire loss in the United States.” September 2020. 14Ontario Ministry of the Solicitor General. “Ontario Fire Incident Summary.”