Flickr photo credit: turbojoe_(away)

If you’re watching your condo association insurance costs these days, you’ve seen the trend. Insurers are passing on higher and higher deductibles to associations – sometimes to the tune of $10,000. And associations are having difficulty adjusting to the higher costs. In fact, associations facing mounting deductibles are often looking for places to transfer that cost. That means some unit owners are now coughing up extra for the additional deductible amounts in the form of higher association fees.

It stands to reason that associations would choose to pass the additional cost on to the owners. Most associations now include insurance costs in association fees. Because much of the liability stems from owner activity, associations feel justified in including the deductible charges in association fees. But some associations are considering passing that cost on only to those owners who receive the insurance benefits paid for by the premiums. While that’s a more just way of handling the situation, it’s unlikely that a smaller group of owners would be able to take on the deductible. Also, the association may have to go through the expensive legal process of assigning negligence to the owners, which may not be successful.

The best solution is to spread the cost among all unit owners. Also, it’s good practice to help your owners understand your basic insurance coverage, what actions or inactions on their part affect rates, and how that affects their costs through higher association fees.

However, not all policies allow condo associations to pass deductibles on to their resident owners. Some grandfathered policies stipulate that condo associations are responsible for both premiums and deductibles. Check the policy language, and also go over your association’s Declarations to determine if passing such costs onto owners is possible. If not, talk with your insurer and see if changes can be made to your Declarations section in order to reduce the condo association’s financial liability.

Flickr photo credit: aprilzosia

Even if your condominium or apartment complex is located outside California, you’re still facing an earthquake risk. That’s because all 50 states to date have been hit with earthquakes, and 39 states have suffered losses, according to the California Earthquake Authority. More than 5,000 earthquakes hit every year, and losses can be devastating. The San Francisco earthquake in 1906 caused $235 million in damages (an amount equal to $5.1 billion today).

So who insures the risk in the condo association world? Are condo associations responsible, or do unit owners bear the burden of insuring against earthquake damage?

In some cases, condo association insurance for earthquake damage is no longer available. Thanks to historic losses that proved unequivocally that insurers were under-pricing earthquake losses, many carriers opted to exclude homeowners associations from their list of buyers. That puts the onus of coverage onto the unit owners, who may not be aware of the association’s lack of coverage. If your condo association is one that is prohibited from purchasing coverage, let your home owners know. Inform them of the insurer’s lack of coverage availability, but also let them know what their options for their units and personal belongings are. Owners are able to purchases up to $50,000 in earthquake loss insurance and an additional $25,000 in personal property coverage.

Consider, though the risks of not having coverage. If your association is able to purchase it and you decline, your board could be sued for “failure to adequately insure” the premises. Also, the costs of not insuring could be exponentially higher than the costs of coverage. And if your association drops coverage one year, then attempts to buy it in another year, it could be difficult to find thanks to availability of policies.

Check with your broker or your insurer to see if your association can purchase earthquake insurance. Whatever the outcome, communicate your coverage or lack of coverage with your unit owners and residents.

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.