Flickr photo credit: michel_langendijk
Forming your condo association is a system. You set up the board, the office, and you purchase general liability/property coverage and you are ready for business, right? Wrong.
What most condo association clients don’t recognize is that the general liability policy does not cover every risk.
In fact, general liability covers the bare minimum of risks that could befall a business.
So how do you know whether the condo association coverage you have is adequate? First, look at the declarations page of your policy. What kinds of coverages are listed? Note also how those coverages answer your specific needs. For instance, your general liability policy may cover damage or theft, but does it cover accident or injury caused by employee negligence? Does that policy cover wrongdoing of a board member or members that cause residents or employees monetary or physical loss? If your accounting clerk commits fraud, will it be covered? Read more…
Flickr photo credit: MBK (Marjie)
Standard Property insurance forms, unless properly endorsed, specifically exclude monetary losses that arise from the enforcement of building ordinances, building codes, or similar laws.
You may have carefully set a 100% Replacement Cost limit on your policy that is adequate to cover inflationary increases, but that “replacement” is to replace your building with “like kind and quality” of design and materials. Upon applying for a building permit to start repairs after a loss, you may be advised you’ll have to:
A. Tear down the undamaged portion of your building; and/or
B. Pay for the cost of that demolition to the undamaged portion; and/or
C. Replace the damaged portion (and the torn-down undamaged portion, if applicable) with construction that meets current codes, including (perhaps) such things as sprinkler and alarm systems, ADA-compliant entryways and facilities, earthquake- or windstorm-resistant construction features, etc.
None of the additional costs of such items are covered by standard, non-endorsed Property insurance forms – regardless of the Replacement Cost limit of insurance you purchased.
Insurance coverage for these items is available (for example, the Insurance Services Office, or “ISO” form that provides coverage is CP 04 05 “Ordinance or Law Coverage”). That form covers the above listed items, and a limit can be selected for each one, Coverage A, Coverage B, and Coverage C (sometimes coverages B and C share the same limit). Read more…
Photo courtesy of flickr - Last NYC Hero
Homeowner associations are under constant pressure to keep costs down. With the natural disasters that have occurred in the past year or so, the pressure is growing as insurance costs increase and are easily the largest expense in the budget.
Many Condominium and other community associations have considered self-insurance as an option. Self-insurance can reduce an associations’ premium by 20-40%. As good as that sounds, self-insurance should be fully investigated before jumping in.
What is self-insurance?
In a very loose interpretation, self-insurance is a typical property/casualty policy with an extremely high deductible in which the association is responsible for paying claims less than the deductible. State regulations to self insure Condominium, Cooperatives, Homeowners’, and Timeshare associations vary and must be carefully reviewed for your particular state and circumstance.
Those in favor of self-insurance feel that in their particular case the possiblility of a major catastrophe affecting all members of the plan is so remote and unlikely that the benefits outweigh the risks.
Those against self-insurance think that should a catastrophic event occur they would be financially unable to pay the claims in the instance of full replacement coverage.
If you think self-insurance is something to look into, contact an independent agent with access to multiple markets who specializes in insurance for community associations.
How much do you trust the staff you’ve hired to manage the front desk?
I mean we’ve all heard stories about the waiters and waitresses at our favorite restaurant swiping our credit card numbers on a little theft gizmo before running the charge through for the meal. I’ve actually been a victim of something similar. Although I love the restaurant dearly (it serves the best Mexican food) I only pay with cash. period.
Every month large sums of money moves through your books. Rents come in as income, and then there are expenses – utilities, maintenance, staff, supplies, insurance, taxes, advertising, legal fees, tenant damage, etc. Do you have safeguards in place to deter sticky fingers?
Do you have one person write checks and another person sign them? Who reconciles the bank statement each month? Direct theft is one form of employee dishonesty.
Another form would be when an employee uses tenant information – credit card numbers, social security numbers, birthdates, etc. to make fraudulent purchases for personal gain. This form of theft is more difficult to identify. And yet, you could be named as a party in the lawsuit. Read more…
One potentially confusing issue in condominium associations is who insures what. In the past, most condominium association policies would cover whatever the association owned. Other association policies extended coverage into the units – for example, the sheetrock walls and ceiling, the plumbing, and the electrical within each individual unit. Association policies would often be written broad enough to cover the floor, kitchen cabinets, appliances, and carpeting.
In recent years, with the rising cost of insurance claims and the ambiguous language in some association CC&R’s, insurance coverage has changed dramatically. Many condominium documents specifically detail what is to be covered – - for example: roof repair and replacement only. In this instance, the documents are explicitly pointing out that all other structure is not covered. Read more…
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