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

 1) Bare Walls In – policies covering all real property from the exterior framing inward, excluding fixtures or other installations within the unit.

 2) All In – policies covering all fixtures, installations, or additions within the interior surfaces of the individual units.

 Obviously the best one for your unit owners would be the All In condo association insurance policy, which would limit the need for owners to purchase additional coverage. Condo associations buying Bare Walls In coverage leave a bit more loss exposure for their unit owners. Most condo associations will advise unit owners on which policy is covering the premises. But what about deductibles?

 Most condo association insurance policies have a deductible. As condo associations reassess their insurance limits and premiums and increase their deductible amounts, many unit owners are left exposed to large loss amounts. Why? Because condo associations can, and do, pass the deductible on to the unit owners.

 In the past, deductibles topped out at $5,000. With historic losses in the insurance industry, many policies became hard to obtain, had lower limits, had higher deductibles, or simply cost too much to continue at the current level of coverage. These days it’s not uncommon to see a condo association with a deductible of $25,000 or even $50,000. If the damage to the building is spread among 25 residents, the deductible is much easier to afford than if the damage is limited to one or two units.

 If your condo association has opted for higher deductibles, inform your unit owners in writing of their exposure. Unit owners can purchase their own property policies to cover any losses not handled by the condo association policy, thus reducing the amount they’re responsible for should disaster strike. Paying  $25,000 – $50,000 to cover the association’s deductible isn’t in everyone’s budget. Unit owners who currently have property policies should confirm with their personal agent that their policy would cover the deductible in the event of damage. 

Flickr photo credit: doyoubleedlikeme

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.