Whether it’s a slip and fall in the community or an upset owner who did not get his architectural request approved, there are numerous situations that can lead to the filing of legal action against an association. And if such association is not adequately insured, a legal action could literally bankrupt a community.
So how do you know if you are adequately insured? It starts with having a good relationship with the association’s insurance agent and being comfortable with calling the agent and asking questions about your association’s coverage. But it’s hard to get answers if you don’t know what questions you should be asking. To help you with this conversation and with ensuring the association is adequately insured, below is a list of coverages associations should typically have:
Property Coverage
- Coverage on common elements (this is required by CCIOA for communities created after July 1, 1992);
- Coverage for property maintained by the Association whether the Association owns such property or not;
- Coverage no less then full insurable replacement cost of the improvement (this is required by CCIOA for communities created after July 1, 1992). “Full insurable replacement cost” means the cost to reconstruct the property as it was prior to damage, including all improvements thereon;
- In condominium communities: units are insured at a minimum to the finished interior surfaces of walls, floors, and ceilings (this is required by CCIOA for communities created after July 1, 1992);
- Association insures all property and components required in the association’s declaration and obtains any required endorsements;
- Association policy provides primary coverage in the event an owner’s policy covers the same component (this is required by CCIOA for communities created after July 1, 1992);
- Waiver of subrogation is included (i.e. prohibits insurance company from suing individual owners to collect amounts paid out) (this is required by CCIOA for communities created after July 1, 1992);
- Inflation guard endorsement (increases amount of insurance coverage by a specified percentage every year);
- Demolition cost endorsement (provides coverage for cost incurred when demolition is required);
- Building ordinance endorsement (provides coverage for additional costs of construction when additional upgrades are required by local code);
- Debris removal endorsement (covers additional expense of removing debris);
- Boiler explosion endorsement (recommended if community has boilers);
- Accounts receivable endorsement (lost income from the inability to collect assessments after incident);
- Business income endorsement (covers extra expense incurred as a result of suspension of operations during restoration).
Commercial General Liability (“CGL”)
- Coverage for claims and liabilities arising out of ownership, existence, or use of common elements (this is required by CCIOA for communities created after July 1, 1992);
- Board members, owners, and managers are named as additional insureds on the policy for claims in connection with ownership, existence, use, or management of common elements (owners are required to be named on the policy by CCIOA for communities created after July 1, 1992);
- Policy covers claims of one or more insured parties against other insured parties (this is required by CCIOA for communities created after July 1, 1992);
- Directors, officers, managers, and owners are insured persons under the policy (owners are required to be insured persons by CCIOA in communities created after July 1, 1992);
- Association policy provides primary coverage in the event an owner’s policy covers the same claim (this is required by CCIOA for communities created after July 1, 1992);
- Coverage for slander, libel, and related claims;
- Worker’s compensation endorsement;
- Commercial auto (provides coverage if a board member has an accident while on association business and injures someone; also provides protection for claims alleging association’s negligent use of vehicle caused injury to a third party);
- Web extended liability coverage endorsement (coverage for claims arising out of website use);
- Endorsement or coverage for claims based on discrimination;
- Coverage required by declaration is obtained.
Directors’ and Officers’ Coverage (“D&O”)
- Directors, officers, committee members, volunteers, and managers are named as additional insured’s under the policy;
- Policy covers non-monetary claims (i.e. claims where, for example, an owner wants a court to compel the Association to allow her to construct an improvement that was denied);
- Punitive and exemplary damages are covered as part of policy;
- Coverage for claims based on discrimination;
- Coverage required by declaration is obtained .
Fidelity Coverage (protection from theft of association funds by employees)
- Do you have fidelity coverage? (fidelity insurance is required by CCIOA for communities created after July 1, 1992, if such communities have more than 30 units and a unit owner or employee of association controls or disburses funds);
- Are you covered in the minimum amount of the aggregate of two months’ current assessments plus reserves? (this is required by CCIOA for communities created after July 1, 1992);
- Coverage required by declaration is obtained.