LUTSEN – A string of fires at commercial properties across Cook County during the past five years has resorts operating on the North Shore paying higher insurance costs, one industry expert says.
“These losses have definitely had an impact on the overall insurance market in Cook County,” says Bob Kubes, a co-owner of Musty-Barnhart Agency Inc, which has an office in Lutsen and is headquartered in Red Wing, Minn.
Kubes, who works with many of the resorts on the North Shore when it comes to selling insurance, says the string of fires at commercial properties between 2020 and 2024 affected more than just premium costs for the businesses.
“It’s not just in pricing,” Kubes said. “This has resulted in much tougher underwriting guidelines, coverage offerings, and carrier appetite. It’s not just higher premiums that are costing businesses more money. Carriers are restricting coverage, adding tougher coverage exclusions, and raising deductibles. All of these changes are having an adverse effect on local businesses.”
The highest profile fire on the North Shore in recent years, or perhaps ever, is the February 2024 fire at Lutsen Resort. The cause of the fire and a years-long investigation continue to generate headlines across Minnesota. A podcast focusing on the fire at Lutsen Resort will be released soon. The name of the podcast is The Fire: A North Shore Story.
And while the Lutsen Resort fire is the most publicly discussed, it’s far from the only one to impact the insurance premiums for local businesses that own commercial property in Cook County. A June 2023 fire at Papa Charlie’s at Lutsen Mountains ski resort is on the list, as is an October 2024 fire at a commercial laundry in Grand Marais. In May 2022, a fire at Gunflint Lodge destroyed a building known as “Justine’s cabin,” having housed the resort’s previous owner, the late Justine Kerfoot. Sydney’s, a pizza and ice cream place, burned in April 2023. And in April 2020, a large fire burned several commercial properties in downtown Grand Marais, including The Crooked Spoon restaurant.
Of all these fires, the only active investigation is at Lutsen Resort. All of the other fires did not result in any recommendations of charges from the state fire marshal or the Minnesota Department of Commerce Fraud Bureau, both of which are actively investigating the fire at Lutsen Resort.
Kubes said the number of commercial fires in Cook County during the past five years, coupled with other factors, has greatly increased what some businesses are paying for insurance premiums.
“We have seen premiums double,” Kubes said. “Keep in mind that this has been an on going issue over the last five or so years. In a lot of instances accounts with little or no losses have still seen price increases of more than 20 percent.”
The fires alone are not the sole reason insurance premiums are going up for local businesses, Kubes points out.
“The property insurance market is experiencing some major premium increases across the board,” Kubes said. “Businesses that are heavily property related, habitational in nature, high valued frame construction, and located in unprotected areas are experiencing unprecedented price increases.”
Unfortunately, Cook County checks all those boxes, Kubes added.
In addition, in an area that is prone to wildfires, particularly as spruce budworm continues to wreak havoc on local trees, trends are shifting toward high risk, and therefore costs for insurance. The risk of fire, coupled with other factors such as overall claims experience, cost of materials skyrocketing, and poor market conditions are resulting in higher loss ratios, Kubes said. The end result, he said, is that it all gets passed along in the form of higher premiums for those risks that pose the highest propensity for loss.
This reporter spoke with numerous local business owners, including resort managers and others who handle finances at some of the largest resorts on the North Shore, about the cost of insurance premiums following the string of local fires. From the Tofte area to Grand Marais, all of them commented specifically on increasing costs for insurance, most notably after the fire at Lutsen Resort.
Despite a challenging time for some businesses given the increased cost to insure their properties, Kubes says he is optimistic about the situation improving.
“As doom and gloom as it all seems, we are definitely seeing some very promising changes in the marketplace,” he said. “All in all, I think the outlook for Cook County, albeit still a bit challenging, will improve.
Kubes said that as frustrating as the premiums can be, he reminds clients that’s not what they are buying.
“(They’re buying) coverage,” he said. “And yes, good coverage does cost more in premiums. But in the long run it’s what you get in return (that matters), because that’s what you are buying.”
To learn more about the podcast focused on the fire at Lutsen Resort, subscribe to “The Fire: A North Shore Story” wherever you get your podcasts.
