As a nonprofit entity, your condo, homeowner, community or apartment association must meet relevant state laws. What’s more, association board members who aren’t often familiar with the legalese of association practice may not understand the bylaws, covenants, or other legal documents that the association has adopted. Worse, if your board has no standing experience with writing, amending, or interpreting your bylaws, any move by the board could open your association up to legal entanglements.

Suppose your apartment association bylaws do not allow pets. However, several unit owners have aquarium fish, guinea pigs, or reptiles. How is your regulation being enforced? Is that enforcement opening your association up to debate or legal action? As for noise levels, do you address specifics in your bylaws as to what constitutes disruptive levels of noise? Do crying babies receive the same treatment under your bylaws as revving car engines? And are you sure your board members are able to make such determinations?

 That’s why directors and officers insurance coverage (D&O) is a must for any association board. While well-meaning board members may act in what they think is the best interest of their association members, their actions, or lack thereof, could expose your association to a number of potential losses.

 Take your bylaws to your condo or apartment association insurance broker. A broker specializing in association coverage will be able to determine if your bylaws are conforming to state statutes, and can discuss with you any potential loss areas that may be covered by a sound insurance program. Consider also having a risk assessment done on your board’s bylaws and practices. Make sure your association board’s attempts to serve aren’t leading you down a risky path.

Flickr photo credit: mbgrigby

Flickr photo credit: Radio Rover

[technorati code wdzjeyt7n4]  Are your work-at-home unit owners creating an insurance gap for your association? What seems like an innocuous issue could be a major deal breaker for your insurer. That’s because most policies state that units are for residential purposes only. Some go so far as to prohibit business operations of any kind in the units. Tell that to the freelance writer or the Internet auctioneer living on association property.

As home-based businesses grow in number, there will be more people working from home. As a result, insurance policies will be challenged should any claims arise as a direct result of the home-based business. You as condo association members must determine the extent to which you will address a telecommuting unit owner. In most cases, insurers expect condo associations to exercise good business judgment.

For instance, not all home-based businesses pose a risk to the condo association insurance coverage. Condo associations should ask the following: How big is the risk based on the unit owner’s business? Are clients visiting the property? Is there a nuisance factor, such as excess noise, traffic, deliveries, or late-night phone calls/faxes that may be heard in other units? Is the unit owner manufacturing items in the unit?

Many condo associations see restrictive covenants as hard-and-fast rules that must be applied in all cases. Not so. There are exceptions that any condo association would be hard pressed to argue against. Does this restriction include babysitting or pet-sitting? If so, this could negatively impact a number of unit owners and disrupt their residential experience. Condo association boards should stop to consider exactly what impact this telecommuting activity has on the community as a whole. Obviously you’re not going to want a manufacturing business grinding away at all hours from unit 4B. But a freelance writer to run a writing and editing business that doesn’t receive visitors is one activity that will not disturb the residential feel.

A sensible approach is needed when it comes to allowing or restricting telecommuting or home based business activities. Check with your condo association insurance carrier to get the policy wording on home-based businesses, and discuss with your broker the different situations in which home-based business could be conducted without voiding coverage.

Another thing to know is that personal homeowner or tenant policies may have restrictions related to home based business as well. Tenants who telecommute or have a home based business should talk with their insurance agent for any exclusions in their policy before there is a claim.  It’s better to be prepared than to be surprised by a lack of coverage.

Flickr photo credit: AchimH

Where are the Gaps?

 Your association’s property coverage came from a company in another state.

Your policy covering association vehicles – yet another company and carrier.

While these policies may very well cover all your needs, having them scattered among various providers could in fact be masking some serious coverage gaps.

 Suppose you have an apartment association insurance liability policy with Insurer A. That policy covers all your liabilities except for coverage for business risks associated with economic loss due to flaws in the insured’s work or product, an exclusion that may not be covered under a more specific policy because Insurer B may not know about Insurer A’s exclusion. 

And are you covered for pollution claims that are a result of a fire? Furthermore, does that same general liability policy cover acts of sexual harassment or assault? Most likely not, but does your broker or insurer know enough about you to recommend a separate professional liability policy?

If you obtain a construction policy from Insurer C, is that policy’s exclusion of bodily injury claims due to construction defects going to be covered on another policy?

 Consolidating all your policies under one common broker or insurance company can benefit you in a number of ways.

 • Your broker or insurance company agent understands your current coverage, as well as any coverage exclusions.
• All of your risks are addressed and there’s less chance of a costly gap in coverage occurring. 
• Bringing several policies under one carrier can save money with multi-policy discounts.
• Getting an association insurance package from one source means coverage is more complete and any gaps are more easily identified.

 To understand the benefits of bundling your coverage, call Emerson Poort at 877-201-3113 or email him by clicking here . An expert in condo and apartment association coverage, Emerson can help you identify gaps in your current coverage and consolidate your coverage to prevent loss exposure and potentially save you money.

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?

In short, probably not. Most general liability policies cover claims involving damage or injury caused by the insured during normal performance of the business. If you have purchased a condo association insurance policy, you have coverage for the buildings, commonly owned property, and liability covering the association. Any additional coverage is an added-on coverage option, and will be listed either on your addendum pages or sold as a stand-alone policy or policies.

So what should you have? Typical risks associated with condo association operations include:

- Property claims
- Liability claims
- Board member actions
- Employee actions
- Retirement issues
- Workers compensation
- Cyber liability
- Contractor liability for any remodels
- Floods, earthquakes, equipment breakdowns

While the general liability policy typically will cover property and liability claims, the rest of the risks are excluded, depending on your policy. However, associations are able to purchase supplemental coverage to lessen the exposures that these risks produce. Directors and officers coverage can diminish board-related risks, employee practices liability can address acts of your employees, and other policies can help to reduce your association’s risks for a reasonable price.

If you need a free review of your current coverage, call Emerson Poort at 877-201-3113 or click here to send an email. Emerson specializes in condo association coverage and can help put together a comprehensive package that fits your association’s needs.

Understanding your policy and gaps in your current coverage is the first step to preventing unnecessary, costly losses. Read through your policy today and call Emerson with any questions.

Flickr photo credit: beancounter

Ten Business Insurance Renewal Reminders – “Let Us Know”

To insure a Home Owner or Condo Association is to worry – if you’re worried about whether or not something may need to be covered, let us know.

1.  Read your policies, paying attention to the limits, conditions, and exclusions. If you have questions or concerns, let us know.

2.  Liability limits can be increased – if you’re concerned, let us know.

3.  Commercial General Liability (even with an Umbrella) doesn’t cover all types of claims. If you’d like to discuss Employment Practices Liability, Directors & Officers Liability, Fiduciary (ERISA) Liability, Professional Liability, International Liability, Cyber-Liability or other types of protection, let us know.

4.  Selecting adequate Property insurance limits is your responsibility – if you underinsure, there can be coinsurance penalties and/or you’ll come up short after a serious loss. Replacement Cost requirements have nothing to do with Market Value or Book Value – what would your building(s) and contents cost to replace, brand new, if destroyed?

5.  Studies show that even with adequate limits on buildings and contents, businesses that don’t have enough “Business Income Insurance” fail within three years almost 50% of the time. If you’re concerned, let us know.

6.  We need to be told when or before there are changes to your business operations, locations, products handled or services delivered.

7.  With few exceptions, Workers Compensation is required by law for all businesses. If you don’t have it insured somewhere, let us know.

8.  Property insurance policies don’t cover all perils. If you’re concerned (for example) about Flood, Earthquake, or Equipment Breakdown, let us know.

9.  Do you have any (or enough) Crime insurance? If you’re not sure, let us know.

10. Do any of your business contracts contain insurance requirements? If so, let us know.

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.

All forms of theft are damaging – not only to the Apartment owner but to the reputation of the property and the ability to keep maximum occupancy. So, what’s the remedy?  Aside from the obvious of doing everything yourself, which assumes you’re an honest person, is to have certain policies in place.

1.  Bond your employees.   Fidelity bonds protect you (the policyholder) for losses incurred as a result of theft or dishonesty by the bonded employee.

2.  If your business is a corporation, LLC, etc. you should have Directors and Officers (D&O) liability insurance in place.  This coverage will protect the organization from legal/litigation costs resulting from mistakes (yes, that’s a broad term) for which they are liable.

3.  Is it a standard part of your application process for prospective tenants to provide proof of tenant/renter’s insurance?  What about the maintenance person or exterminator who likes bright shiny objects?  Proof of tenant/renter’s insurance should be standard for all approved applications.

When you protect your business, you’re protecting others from losses that can and will occur.  Legal fees and shattered reputations can ruin a business.  Be proactive and have policies (employer and insurance) in place to deter dishonesty and prevent holes in your office.