The Q&A category is where you get to ask the expert your California HOA Insurance questions.
If you have an insurance problem or concern, please reply to this post and maybe we’ll post your condo and HOA insurance related question with Elliot’s expert answer soon.
Why would an insurance agent need to see my condo associations CC&Rs?
An agent would need to see the CC&R’s at a minimum to be able to figure out if the association or the unit owner is responsible for the improvements within the unit.
My Farmers agent says he can get multiple bids why do I need to use an independent broker?
A Farmers agent by his contract with the company is only allowed to bid other companies when Farmers does not want to insure you. If you are already insured by Farmers, he cannot bid it outside of Farmers without violating his contract and fiduciary responsibility with Farmers. Independents do not have these types of limitations so that their companies know that they are going to be shopped on regular basis. This forces companies that are represented by independent agents to actively alter rates to reflect the current marketplace.
How much liability coverage does an association need to carry?
At a minimum the association needs 2,000,000 of liability coverage per CA civil code 1365.9. If an association does not maintain that level of liability coverage there is a possibility that individual owners could be named to the suits and responsible for the settlements of the association.
Why does the amount of insurance the association purchased not correspond to the market value of the unit?
The market value of a unit has two components, land value and construction hard costs to replace the structure. Insurance is never concerned with land value. We assume if the building burns to the ground the dirt is still going to be there. Even with the cost of replacing a structure there can be differences for a condo association. Is the association responsible for the interior betterments or is the unit owner. This can cause the amount of insurance needed to vary by 30-40%. An agent that gets this wrong can either leave you dangerously under insured or you could be overpaying by as much as 30% just from this one mistake. This is an example of what I call a “broken” insurance policy.
Why do we need building code and ordinance coverage?
Your regular building coverage only provides coverage for those items that are currently part of the building, if after a major loss you now need to add items that are not currently part of the building then this coverage would provide for cost of adding them to your building. An example of this would be a building that currently doesn’t have a fire sprinkler system, but if it was built today it would need to have one. This coverage would pay for the fire sprinkler system.
What does loss assessment coverage do?
Loss Assessment coverage pays a unit owners special assessment that arise from a covered loss. Two examples of this are 1. If the association has a $25,000 water deductible and it now needs to be covered after a loss. Loss assessment coverage would pay for your portion of that $25,000. It also provides coverage for an item that might have a very small limit. So if a building only has a $10,000 limit for building code and ordinance and now has a $250,000 of code upgrades after a major loss, this would provide coverage for the unit owners special assessment that is going to happen when the association needs to pay the $250,000.
Why do we need to include the property manager on our employee dishonesty coverage?
If the property manager’s bookkeeper decides to clean out your operating and reserve accounts, if you do not have the property manager included on the coverage you are going to find out that you won’t be able to recover the money. Many companies that offer an employee dishonesty endorsement do not cover the property manager, you need to look closely at your contract to make sure that you have the proper coverage.
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Lic# 0E67766
good evening
i wanted to ask what happens when a member of the HOA submits an insurance claim(for an exclusive common area) using the HOA insurance without HOA approval? The HOA has not seen any estimates. The owner faxed them directly to the insurance company. It seems as though this violating something??? thank you
sorry..1st email had my wrong email address
I don’t know what state you are in. but in CA it is legal. They have a right to submit a claim under the master policy. There are strategies to eliminate the effects of someone doing this. I”m happy to share them with my clients.
hi ~ my mom lives in a condo/townhouse (i know there is a big difference, but haven’t quite figured out which her unit is). the whole building is sinking (6 units total). her personal insurance doesn’t cover this, but I’m wondering if the HOA would have some sort of coverage (because this is a huge out of pocket expense ($100k++)to fix for the 4 owners whose units are sinking!). and if so, how do I approach getting them to help out (because the HOA said they won’t do anything when I first talked to them) thanks!
From the information that I have I can’t tell you if insurance will cover it. What is the cause of the sinking? Sinkholes are typically covered, subsidence is typically excluded. Is this a failed maintenance issue or an act of god. If it is maintenance it is going to be typically excluded, but if it is an act of god it can be covered. In order to know for sure you need to see the fine print of your contract and have all the facts. If I was living in the association and I was facing a potential $100,000 loss for all of the owners, I would be tendering it to the carrier to see if they will pay. This is what insurance is for.
The HOA where I live does not have a current HOA policy. Is this legal? What should I do to protect myself and the other owners in my condominium complex? We have a management ocmpany thatbasically just does the book keeping – so they are of no help.
If a claim is submitted through the HOA insurance policy, is the deductible paid by the HOA or the homeowner?
Depends on the CC&R’s and rules of the association. Everyone is governed differently.
The legality of it is better discussed by an attorney, but there are several problems they are creating.
1. If this is a condo association and not a homeowners association all owners that have mortgages are going to be in default, because you need to make sure that coverage is in place to be in compliance with your loan covenants. Otherwise every bank is going to place forced insurance against your building so you will now being paying for multiple policies.
2. I don’t know what state you are in but if you are in CA As an association you have no liability coverage so per 1365.9 of the CA civil code each individual owner is now responsible for any judgments and paying the defense of any suits that might arise.
3. Assuming the CC&Rs require the association to maintain insurance and that you are in CA, if a claim does occur, and there is no coverage it is almost a given the board is going to comply with the CC&Rs. Once again according to 1365.7 of the CA civil code if a board fails to maintain Directors and officers coverage then the board members are personally held liable for their actions and will be responsible for any defense or judgments arising out of their actions.
There are more issues but these are the three major issues that you are going to need to deal with.