1.         Civil Code Section 1353.9.

Under this provision, an association’s governing documents may not prohibit the use or installation of electric vehicle charging stations.  Any provision in the CC&Rs or the Rules which purports to prohibit such charging stations will be void.  Reasonable restrictions are permissible, which are defined as limitations that “do not significantly increase the cost of the station or significantly decrease its efficiency for specified performance.”  The term “electric vehicle charging station” means a station that is designed in compliance with all applicable building standards and delivers electricity from a source outside an electric vehicle into one or more such vehicles.

The association’s governing documents may require prior approval by the board or architectural committee.  The approval or denial shall be in writing and if not denied within 60 days the application will be deemed approved unless the delay is the result of a reasonable request for additional information.

The owner has a right to put the electric vehicle charging station in the common area or exclusive use common area.  The association must approve that installation if the owner agrees to the following conditions:  (i) to comply with the architectural standards for the installation of the station, (ii) engage a licensed contractor to install the station, (iii) within 14 days of approval, provide a certificate of insurance that names the association as an additional insured under the owner’s liability policy which shall be for not less than $1,000,000, and (iv) pay for the electricity usage.

The owner, and all future owners of the parking space where the charging station is located, are responsible for all damages caused by the station, for the cost of maintaining, repairing and replacing the station, the cost of electricity, and for disclosing to prospective buyers of his or her unit the existence of the station and of the duties related to such station.

An association that violates these restrictions is liable for a civil penalty in an amount not to exceed $1,000.  In any legal action to enforce the provisions the “prevailing plaintiff” shall be awarded reasonable attorneys’ fees.

2.         Civil Code Section 1360.2.

Effective January 1, 2012, owners will not be bound by any restriction in the governing documents which “prohibits the rental or leasing” of any unit, unless the restriction was in effect “prior to the date the owner acquired title to his or her separate interest.”  In effect, if such a provision exists in governing documents prior to January 1, 2012 it is binding on all owners in the development.  If such a restriction is adopted after January 1, 2012, it is only binding on those owners who purchase their units after the restriction is adopted.

It is not entirely clear how broadly courts will interpret the term “prohibit.”  However, the following popular restrictions could arguably be interpreted as a prohibition:  (i) no leasing permitted during first year of ownership, (ii) no owner may lease more than one of his or her units at a time (assuming that member owns multiple units), and (iii) no more than a certain number of units in the development can be leased at any one time (e.g., 20%).

3.         Civil Code Section 1363.05.

This section is known as the “Open Meeting Act.”  It has been amended in the following respects.

First, at the present time the board need not give any notice to the members of an upcoming executive session meeting.  Effective January 1, 2012, the owners must be given at least two days’ notice of any executive session meeting (except in emergency circumstances).  Parenthetically, the law has also been clarified.  The statute used to say the board could “adjourn” into executive session which some argued meant the board could only meet in executive session when a regular open meeting was “adjourned” to commence an executive session.  The law now provides that an executive session may be held “when the board adjourns to, or meets solely in, executive session.”

Also with reference to executive sessions, the new law will provide that owners be given upon request a copy of the agenda for any executive session meeting.

If an owner consents, notice of any meeting can be provided to him or her electronically.  To save costs and promote efficiency, management may want to obtain such consents from all owners as a routine matter so a master email mailing list can be generated and all notices can be sent by email rather than byU.S.mail.

Under the new law, board meetings may be conducted by teleconference.  The owners must be so notified and there must be one location designated where the homeowners can appear in order to observe the telephonic meeting.  At least one board member must be present at that location.

The new law expressly prohibits the board from conducting meetings through a series of emails, except in the case of an emergency.  Specifically, the statute states:  “The board of directors shall not conduct a meeting via a series of electronic transmissions [email].”  This generally means the board may not “discuss or deliberate upon any item of business that is within the authority of the board” if done by email.  There is one exception:  “Electronic transmissions may be used as a method of conducting an emergency meeting if all the members of the board . . . consent in writing to that action and if the written consent or consents are filed with the minutes of the meeting of the board.  Written consent to conduct an emergency meeting may be transmitting electronically.”

4.         Civil Code Section 1368:

Section 1368 describes the information and documentation that must be provided to a prospective buyer when a unit is sold.  Under the new law, if requested by a prospective buyer, the association shall provide to a buyer at the seller’s direction “a copy of the minutes of the meetings, excluding meetings held in executive session, of the association’s board of directors, conducted over the previous 12 months.”  The association is required to provide information to the buyer on a special form that is reflected in Section 1368.2 of the Civil Code, including among other things “a written or electronic estimate of the fees that will be assessed for providing the requested documents.”  The documents required under Section 1368 may be provided electronically or posted on an association website (if agreed by the owner).  The association may collect a reasonable fee “based upon the association’s actual cost for the procurement, preparation, reproduction and delivery of the documents.”  No other fee is permissible.

* This information provided by Kulik, Gottesman, Mouton & Seigel, LLP

www.kgmslaw.com

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If you are insured by any “other” agent, Ask yourself these very important questions:

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This very disturbing occurrence is not due to any sinister plot but rather;
1) Most agents don’t specialize at insuring condo associations and don’t really know how to properly insure an association
2) Many agents do not take the time to truly understand D&O insurance because it is not a big moneymaker like property and general liability
3) Agents with big captives like State Farm & Allstate etc. can only write their own D&O products no matter how inadequate they are for the client’s needs
4) Some agents try to make things “easier and more convenient” for the board by placing all insurance with one carrier, not understanding the limitations of the contract just sold
5) Some associations may try to save a few pennies by choosing an endorsement over a stand-alone policy costing just a little more money

Now that you know how insufficient coverage gets written in the first place, let me go over some specific holes in coverage that exist in a typical D&O add-on or endorsement.

HOLE #1 – Matters of Insurance Are Excluded
This exclusion is on each and every one of the Directors and Officers endorsements I’ve read. It’s important because it means that if the board gets sued for having failed to purchase enough coverage or the right coverage for the association, the board is not protected and will need to provide its own defense and settlement. The reason that this exclusion exists on the endorsement is because a carrier does not want to end up covering property or liability claims that it just got done denying on the property or G/L portion of the policy.

Here’s an example of how this happens.   For instance, the sewer backs up into one of the units causing $30,000 in damage.  It turns out that the policy either didn’t offer the coverage or it was left off to make the premium cheaper, and now there is a $30,000 uncovered claim. The unit owner that has sustained the damage sues the association for having failed to purchase necessary coverage. The company that just denied the sewer claim will now deny the defense for the lawsuit because matters of insurance are excluded.

Another common issue that comes up is that the unit interiors have been insured incorrectly, and now coverage is denied because of it. As a result, the board gets sued for failing to procure the correct insurance; once again the insurance company will deny the claim because of matters of insurance. Believe me these types lawsuits happen more often than you think.  In my experience, I’ve found that unit interior coverage errors occur quite frequently, in large part because most insurance agents either don’t know how or simply don’t take the time to read the association’s CC&Rs.

HOLE #2 – Property Manager Excluded
Many of the Directors & Officers endorsements that are added-on will only cover those people that are part of the primary named insured.  A property management company is neither an employee nor a member of the board and therefore is not part of the primary name insured.  When the property management company gets added on as an additional insured they are only added to the general liability coverage which does not extend to the D&O coverage.  I know of one of these endorsements that will allow you to add the property manager to the contract, however, the additional premium they charge makes the endorsement more expensive than a superior stand-alone contract would be.

Now you may wonder why a property manager needs to be part of an association’s policy in the first place. Well there are two good reasons;
First- The actions of the property manager could possibly trigger a suit against the board.  For example, a member asks for all of the minutes for the past three years, and the property manager makes a mistake redacting the minutes and accidentally leaves in an owner’s name in one spot on the minutes.  The board and the property manager get sued for failing to comply with privacy laws.  The manager will get their defense from their E&O insurance but the board will be left providing their own defense because the property manager is not an insured under the endorsement, therefore there is no coverage
Second- It’s in your contract with your property manager. Most association management companies require that you name them to your insurance for all forms of liability coverage. D&O endorsements don’t enable you to properly comply with these contracts.  If you and the management company don’t catch this error then you could be in for a nasty surprise later. All it takes is for the board to get sued with the management company getting named as well. Then, guess who has to pay for the property manager’s defense? You and the association get the privilege of footing the bill.

If you are a property manager you need to be worried about this as well. Many E&O carriers make you warrant that you have been added to the D&O coverage of all your associations. BEWARE! Allstate and State Farm D&O endorsements will not cover you when a D&O suit happens. (Don’t take my word for it -Ask your agent to get a letter from their claims counsel on the matter and see if I am right) Remember, when you, the manager, do not comply with your warranty, you have triggered  an exclusion in your own E&O policy.

HOLE #3 – Exclusion of Non-Monetary Damages
Most of the endorsements do not provide coverage for non-monetary suits.  That means that if the board gets for something other than money there is no coverage.   An easy example is that you are being sued to get an injunction to enforce a rule, or to execute repairs and maintenance to the complex.

HOLE # 4- Full Prior Acts Coverage
State Farm, Allstate, and OneBeacon all write their coverage on an Occurrence Basis.  If the D&O coverage that they are replacing is written on a Claims Made Basis, if there is no tail coverage purchased of offered, you are walking away from years of coverage. If a prior board gets sued or the current board is sued for an event that occurred prior to the policy period that you have purchased you have no coverage.  The State Farm, Allstate or OneBeacon endorsements won’t pick up coverage because it didn’t occur during their policy period.  The previous policies will not provide coverage because there is no coverage on a Claims Made policy. Once the policy expires, your coverage is over unless you purchase a tail from your previous carrier.

Unfortunately Farmers writes on a Claims Made Basis and does not offer tail coverage for its expiring policies. The only way to properly protect the board is with a policy that provides Full Prior Acts Coverage; an occurrence contract can’t do that. Therefore, you need to purchase separate D&O policy with Full Prior Acts coverage to properly protect the board.

CLOSING THOUGHTS
Without a doubt, a Directors and Officers stand alone policy is far superior to the minimal amount of coverage provided by a package policies D&O endorsement.  However, you must be careful not to be misled by an agent who is unaware of the fine nuances of D&O. If you have an agent that doesn’t know condo insurance, he won’t understand why a seemingly small difference in coverage now can and will cause big trouble later when a claim happens.  If you are dealing with a captive agent such as Farmers, Allstate, State Farm etc., then he/she has no incentive to explain the defects that are in his contract because he only has one contract to sell, and sell he must.  That is why it is important to find an agent with the knowledge and experience who can help you sort out fact from fiction. As condo insurance experts, with a current roster of 178 associations, we can to guide you through all the complexities and help you obtain the correct coverage for your association. If you have any questions and would like a free no obligation insurance risk evaluation, please call us at (310) 945-3000.

Note: There is an email link embedded within this post, please visit this post to email it.

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The Elliot Katzovitz Insurance Agency understands you are under extreme pressure by your boards to cut costs and save every penny imaginable. We sympathize with your pain and thought you’d like to hear some good news for once. Rates are dropping for association insurance and more companies are now writing HOA insurance because they perceive this niche as recession proof. As a matter of fact, we have access to several carriers who are cutting their rates up to 43% so far  in 2009. In addition, we have developed unique strategies for structuring your clients insurance, which can save them up to 50% on their earthquake policy. These are tough times and your clients cannot afford to waste a single dollar, so make sure that you are getting the best value for your client’s insurance dollars.

In addition, we pledge:

To act as YOUR RISK MANAGER making sure all your clients are insured properly
To REVIEW ALL YOUR CLIENTS POLICIES for compliance with CC&Rs, Davis-Stirling Act, gaps and coverage mistakes
To DELIVER MULTIPLE PROPOSALS to be sure your client gets the best insurance at a price they can afford
To provide EASY-TO-UNDERSTAND PROPOSALS with your insurance coverage clearly outlined
To provide FREE GUIDANCE & ADVICE any time you have an insurance question
To educate you on LITTLE KNOWN STRATEGIES to help your HOA contain costs
To provide COMPLETED INSURANCE DISCLOSURES so you don’t have to
To PROVIDE CLEAR CONCISE INFORMATION FOR UNIT OWNERS so they can properly insure their units without gaps or overlapping coverage
To DO WHAT’S BEST FOR YOUR CLIENT – even if it means sending you to another agent
To TREAT YOU LIKE A V.I.P.

ALL IT TAKES IS ONE 5 MINUTE PHONE CALL
TO SEE HOW MUCH YOUR ASSOCIATIONS CAN SAVE (310) 945-3000
OR IF YOU PREFER YOU CAN EMAIL OR FAX THE QUICK QUOTE FORM
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If your current agent is not an expert in association insurance then he may never have read your association’s CC&Rs.  Even if he did, he may not have understood what they dictated for coverage.  There are no standard rules when it comes to associations and what is required.  The only way to do it properly is to read the insurance clause of the associations CC&Rs and understand how they need to be applied as well as the coverage that they dictate the association purchase.  If your association’s insurance does not properly reflect the coverage that is needed to comply with your CC&Rs, you will find out when the claim happens that you most likely have coverage gaps.  This will create losses that could have and should have been covered.

Here is an example of what I am talking about:

An association’s CC&Rs dictate that the association is responsible for insuring the interiors of the units. The agent writes a policy that excludes the interiors of the units. A pipe breaks causing water leakage in a unit. The master policy denied coverage because the policy excluded the unit interiors. The unit owner then submitted the claim to his carrier and they denied it also because they said they had no responsibility to pay the claim under the association’s CC&Rs. This ended up being a claim that the association got sued over and was forced to pay out of its own pockets.  You don’t want this to be you.

2.    Does your policy comply with the Davis Stirling Act?

Most agents are completely unaware that the State of California has laws that govern the amount of coverage that an association must carry. If an association is not in compliance with the Davis-Stirling Act, you could be exposing all of the owners and the individual board members to potentially being sued individually in addition to the association being sued.

3.    Missing Coverage

Not all contracts are the same.  There are some coverages that are necessary for all associations. There are also coverages that are only necessary for certain associations and not for others. Many of these coverages will probably be meaningless to boards until they have a loss that is not covered because it is missing from their policy. It is many of these coverages that will affect the price of an insurance policy. When an association shops policies it is amazing how many of these coverages are dropped off the contract in order to create a better price. As the saying goes, “you get what you pay for.”  Here are some examples of types of coverage that will be left off contracts and can come back to haunt associations later:

•    Back up of Sewers and Drains – Say, for example, that unit 301 snakes its drains and the clog simply relocates down to unit 101’s plumbing and starts backing up there.  The owner of 101 comes back from his three week vacation to find a foot of sewage throughout his unit.  If the coverage is excluded or extremely limited, you are going to be in big trouble.  This is the 2nd most common form of loss that associations have.
•    Liquor Liability – If your association allows parties that serve alcohol in the common areas of your association, you need this coverage.  This protects you if one of the guests leaves drunk and gets in an accident and a third party sues the association for having allowed him to leave drunk.
•    Boiler and Machinery – This provides coverage for off premises electrical failures as well as the breakdown of association equipment such as elevators.
•    Property manager failing to be added to the Directors and Officers coverage. Please see the “7 Stupidest Claims” article for an example of why this is important.
•    Building Code and Ordinance Coverage – This provides payment for items that are not currently part of the building, but would need to be added in order to rebuild after a claim.  A common example is the need to install a fire sprinkler system in your building.  If you don’t have this coverage you will be paying for it out of your pocket.

These are just a few of the many types of coverage that could be missing from your contract when you are bidding on a policy.

4.    Replacement Cost

One of the other common errors is evaluating the correct cost of rebuilding your building.  There are two problems that could potentially occur.  Your property could be under valued.  If you do not have enough coverage, your insurance company may reduce the amount it pays you by the percentage that you are underinsured plus a penalty.  If the property is over-insured you are going to be stuck paying for coverage that you don’t need to.

There are only two ways to beat this problem. One is to use an agreed value contract instead of a stated value contract. This shifts the burden of valuation onto the insurance company and away from you.  Two is to have a very accurate Marshall & Swift replacement cost worksheet done for you annually and based on recent construction data. This way you have something to justify your valuation to the insurance company when the claim occurs.

5. Use an independent broker that specializes in condominium association insurance

You want a professional that is able to evaluate your needs and find you the right policy based upon those needs.  State Farm, Farmers and Allstate agents are restricted in what they are able to sell you.  They must sell their companies’ products if they have one, even if it isn’t the right policy for your needs. They have to do this because they are the company’s representative, not yours.  You need to have an insurance professional to represent you.  This is no different than hiring your attorney or CPA.  Insurance is complicated.  You need to have a trustworthy professional that will honestly compare the alternatives. Someone that will provide you with all of the alternatives and explain what the differences between the contracts are, as well as letting you know if those differences are of importance to your associations.

Our agency prides itself on being at the height of professionalism. We would be happy to review your current policy and help you understand what you have as well as what you need to properly protect your association.

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There are essentially three options for management of a community association: volunteer or self-management, association-employed manager, and professional management company. Deciding which form of management to pursue is one of the single most important decisions a board of directors will make on behalf of their community. The decision is often determined based upon the size of the community, level of professional services desired by the board and community, and the costs associated with the services. Even in a small association, the responsibilities in serving the members and maintaining basic service levels and administrative and financial records make hiring of professionals almost a necessity. Ultimately, this decision can affect the scope and quality of services provided to residents, the condition of the community’s physical assets and amenities, curb appeal, and the overall financial health of the association.
Deciding to Seek Bids

The first step in determining what company to hire is the solicitation of formal bids or requests for proposals. This process is important for the first company hired by the association board or when a board wants to make certain they are paying a competitive price for the management company already on retainer.
Length of Management Contracts

Bidding professional management services can be a time consuming process and should not be necessary every year. Management transitions, even in the best of circumstances, unavoidably disrupt association operations. Therefore, the size of your community, the scope of services you are soliciting, and the number of special projects planned by the association should be factors in deciding the frequency of bidding. Multi-year contracts can provide an association with cost benefits, continuity in services, and, with an appropriate termination clause, flexibility to make changes when necessary.
Content in the Bid/Request For Proposals (RFP)

The RFP should include a letter requesting bids, a contact person and address to send the bid, a deadline for response, information on a bidder’s conference (if scheduled), a property tour (if appropriate) and the contact person for any questions on the request. Finally, it is helpful to include a time table for bidder interviews and for a final decision by the board in signing the contract.

Additionally, the RFP should include basic information about the community such as the number of homes, type of homes, amenities, age of the community, special features, the number of board members, the number of committees, a brief summary of any special projects in process, the association’s fiscal year, a current budget, etc. The RFP should also specify a uniform proposal format that will make it easy for the board to accurately compare submissions.

The RFP should include minimum qualifications for bidders such as demonstrated experience with the management of communities of similar type and size, fidelity bond insurance requirements, professional designations for the company and staff, technology capabilities and resources, etc.

Finally, the RFP should include a statement of work (SOW). The SOW should outline the services requested by the community and outline the expectations of the management company such as property maintenance demands, administrative services such as the number of meetings to be attended, financial services including collection duties, and other general support. Defining the expectations of the management company will help the board measure performance and accurately evaluate cost proposals.
Creating a List of Bidders

While the telephone book can be a useful resource in developing a list of potential bidders, there are other targeted sources. Community Associations Institute (CAI) is nationally-recognized as an excellent source for developing a bidders’ list. Board members may find a telephone survey of other association board members will yield a useful referral in selecting a management company. Also, the association’s legal counsel or auditor may provide insight in locating reliable, qualified management firms. Finally, a search of the Internet may also help provide background information on potential bidders.
Evaluating Proposals and Companies

Develop a list of questions for those providing bidder references that will address the services and qualities you are looking for from a new management company. Visit the properties managed by the bidders and visit their corporate offices. You can tell a lot about a management company by meeting their staff and asking questions about how their systems work.

For determining the effectiveness of the current management company, a survey of the property residents will provide a useful gauge of the management of the association. Also, a management audit performed by the board and manager or a third-party consultant can provide necessary analysis.
The Management Contract

Most management companies have standard management contracts explaining their services, the fees for those services, and the terms of the contract. Typical provisions clearly define the contracting parties, the lines of authority, the manager’s responsibilities, insurance requirements, length of the contract, a termination clause, an indemnification provision, and a compensation or fee schedule.

Using Legal Counsel to Assist with the Bid Process
Very often, an association’s board of directors will solicit the assistance of legal counsel for all or part of the bid process. While not necessary, legal counsel can be very helpful in reviewing the contract.

The owners who volunteer to serve as members of the board of directors often become overwhelmed with the duties and responsibilities this service requires for the other owners. A professional management company can assist in executing those duties timely, fairly, and legally.

Source: Community Management Corporation

This posting reprinted from Association Times

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As anyone that specializes in associations can tell you, condominium and homeowners associations have many unique issues. The same is true for the insurance they require. These associations are not like any other commercial entity in many ways. It takes an expert in this type of insurance to properly evaluate what is needed and what is missing from an association’s policy. These are the most common problems that occur in HOA insurance, and why these errors are a potential problem for your association.

1. Wrong Coverage for Unit Interiors Who is responsible for covering the unit interiors is dictated by the association’s CC&Rs. In some instances, the CC&Rs will dictate full coverage for unit interiors on the master policy, and in others it will tell you to exclude them. In even other instances, the CC&Rs will dictate that the association must restore the units to the original condition they were in at the time they were built.

If your master policy is not written to match the CC&Rs requirements, then the association can potentially be over-insured or dangerously under-insured, and it can possibly create situations where coverage is purchased and then denied at the time of loss.

If the association’s CC&Rs dictate that the association’s policy provides coverage for the unit interiors, yet the agent fails to sell a policy that includes the necessary coverage, and if there is a loss that includes the interior of the unit, the association will be required to pay that portion of the loss out of its own pocket. The master policy will decline coverage for the claim because it was excluded on their policy. The unit-owner policy will also decline coverage because owners will look to the CC&Rs, which state that coverage is to be provided by the association, and therefore the owner is not responsible for paying the claim. Why expose yourself to these problems when a proper review of your CC&Rs by an expert in association insurance could help you avoid this problem?

On the other end of the spectrum, if the association’s policy provides for full coverage of the unit interiors when they should be excluded, you can end up with one of two possible problematic outcomes. The first outcome is that the association’s policy will cover the loss when it should be denying it. This will lead to higher premiums and possible cancellation from your current insurer when your policy renews. The alternative is that the association’s adjuster will review the CC&Rs and deny the claim, insisting the association has no insurable interest in the interiors. In this situation, the unit-owner’s policy should pick up coverage. However, some unit-owner contracts state that they will refuse to pay a claim if there is coverage stated under the master policy’s contract. The result could be that you have purchased the coverage twice and neither insurance company will pay the claim.

2. No Building Code and Ordinance Coverage Safety codes are constantly improving all the time in order to better protect the lives of individuals in the event of a disaster. These features are not part of a building, but after a major loss, the association will be responsible for putting them in. In addition, this coverage also pays for the demolition of undamaged portions of the building that need to be altered in order to comply with code when the building is being rebuilt.

An example of this is the installation of fire sprinklers as part of reconstruction. If they were not there originally, this coverage would pay to put them in after a covered loss. The demolition portion would pay for the demolition of the undamaged portion of the building so that sprinklers can be installed in the whole building. The property portion of this coverage would provide for the actual cost of the sprinklers.

3. No Boiler and Machinery Coverage This covers far more than a hot-water boiler if your building has one. It also provides coverage for mechanical breakdown of items such as your elevator, sump pumps and pool equipment, as well as off-premises electrical problems.

A common loss that is covered and can happen to any association is to have the transformer on the pole outside your building blow. This will cause an arcing due to unstable electrical regulation of the electrical system, which can destroy a whole building’s electrical system. Due to the fact that the cause of the loss was off premises, the only way to get coverage is from boiler and machinery coverage.

4. Inaccurate Building Values If the building is not covered for an amount that will adequately replace the building in the event of a total loss, there can be major problems, even if the building is not completely destroyed. By not insuring for the amount the building is valued at, you can trigger a policy’s co-insurance clause. Co-insurance states that if the insured has not properly valued the replacement cost of the building, the insurance company can reduce a claim settlement to reflect the proportional amount that you insured, and then reduce it further by whatever the penalty is in the contract. An example of how this works is if the actual replacement cost of the building is $1,000 and you only insure it for $800, you have now only insured to 80 percent of the building’s value. You now have a $300 loss. They will say that you under-insured by 20 percent, so if there is a 150 percent co-insurance penalty, you will be penalized 30 percent on your claim settlement. They will pay you only $210. Now subtract your deductible and that will be the check that you receive.

On the other side, if the building is overvalued, you may be paying money for coverage that is not necessary, which will end up wasting the association’s money.

How is a lay board supposed to come up with a proper valuation for the cost of rebuilding? Our solution to this problem is to provide the board with a Marshall and Swift replacement cost worksheet so that you can feel comfortable with value used to protect your assets.

5. No D&O Coverage for the Association Manager It is common to see that the manager has been left off the D&O coverage. On most policies, this is not fixed by a typical additional insured endorsement as it is with general liability coverage. They normally charge extra premium and ask additional questions about the manager to allow for the coverage. This is important coverage because an error of communication can create a situation where this type of suit can happen.

An example of this is when the board has put rules in place where late pays will not be tolerated. If you have been late two months in a row, they will begin legal proceedings against the owner. If, for example, the first month the owner pays late by a few days and the next month he is accidentally left on the list of delinquent owners, the board will file suit against the owner. The owner will counter-sue for defamation of character. Without the association manager being named to the D&O coverage, there will be no insurance coverage for the claim.

6. Employee Dishonesty Coverage Excludes Association Manager Depending on the insurance contract, the manager may be excluded from the association’s fidelity coverage. If you have one of these inferior contracts, you will find that the association is exposed and liable if an employee of the management company embezzles funds from your accounts.

7. Inappropriate Liability Limits California law requires that you have $2 million of liability coverage if the association is less than 100 units, and $3 million in coverage if it is 100 units or more. If you have less than that amount of coverage, each individual unit owner becomes susceptible to personal liability for lawsuits by the association.

These are just seven of the errors that are commonly made on association policies. There are others as well.

These errors tend to occur for two reasons:

1) The agent isn’t an expert in association insurance. If the agent is not dealing with association insurance on a daily basis, he will not be aware of many of these issues. These are fine nuances that are not common to other types of insurance. The person that handles your auto and business insurance is not the person that you want handling your association insurance. Make sure you have an expert.

2) An agent is in a competitive bid situation and believes the only item that the board is concerned about is price. You will find that he will get you the cheapest price by removing one or more of these items to gut the coverage he is selling you. Is that the price-reducing strategy you really want? It’s no different than buying a stripped down version of a car versus the fully loaded version. The difference, though, is that the items that get left off the punch list can cost you dearly when you really need it.

These possible problems are why you need an expert in association insurance to review your policy and bid your insurance. You need one agent you trust, not three that you don’t. By using an agency, you will be able to obtain multiple bids using the same standard of coverage. It will also allow you to have an expert in this type of insurance make sure that these and other potentially costly oversights do not exist in your policy.

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3. D&O Insurance Problems Put HOA Board Members’ Personal Assets at Risk