The purchase and annual renewal of the Master HOA Insurance policy for most associations is probably the quickest and least understood decision an HOA (Homeowner Association) board makes each year.

Since most of us know nothing about HOA insurance, other than we pay for it and rarely use it, we can only hope our insurance broker is advising us correctly, but how can we be sure?

  1. Buy Your Policy from an HOA Insurance ExpertThe first thing to understand is that your HOA Master Insurance Policy should be written by an agent that has expertise in HOA insurance.You probably take your car to a mechanic that specializes in your type of vehicle, and you select a doctor who specializes in your personal medical condition. HOA Master Insurance Policy coverage should be viewed the same way — go to the expert that specializes in the issues that arise in homeowner associations, particularly condominiums and townhomes.

    IMPORTANT: Your insurance broker must review the CC&R for your association to understand the scope of the association’s responsibility. If the broker does not ask for the association’s governing documents, they are the wrong person to write the Master policy.

  2. Annual Face To Face ReviewYou pay a lot of money for your HOA Master Insurance policy.Ask your broker to come to a board meeting, or better yet, the Annual Membership Meeting, to give a presentation on your association’s Master policy, and the types of issues the broker has seen over the past year, and what advice he/she has for your community.
  3. How to Find an HOA Insurance ExpertFull disclosure, I have been an active member of Community Association Institute (CAI) since 2004. I attend a lot of their classes, seminars, and conferences, including the College of Community Association lawyers (CCAL) annual conference. A couple of years ago I started attending the Community Insurance and Risk management Specialist (CIRMS) workshops, held in conjunction with the law seminar. I was impressed, and stunned by the complexity of the HOA insurance issues.Knowing what I know now, I recommend that managers and boards seek out CIRMS certified insurance brokers, or at the very least, ask your broker what type of ongoing education they get (each year) to keep them up to date on issues that dominate the HOA industry.
  4. Keep Yourself UpdatedCAI offers a variety of webinars.I attended, Claims Denied: Why Do Clients Pay for Insurance, which awakened my understanding of the importance of having the right insurance broker advising the HOA board.

    Epsten Grinnell & Howell, APC, a San Diego HOA law firm recently wrote in their newsletter, Insurance Renewals & Notices of Facts Which May Lead to a Claim “We are seeing with more frequency associations either carelessly completing insurance renewal applications, or allowing an uninformed insurance agent or broker to complete the application form for new or renewed insurance, without making sufficient inquires of the board and management about actual or potential claims. This is particularly important in the context of directors and officers liability insurance.” (Reprinted with permission)

Real Life Story:

Let me leave you with one unfortunate outcome of making poor Master Insurance policy decisions.

Lincoln Cummings of Cummings & Associates related a story about board members who unlawfully approved a reduction of insurance coverage, to save money, before a catastrophic fire caused $1 million more damage than the reduced policy covered, which resulted in a $100,000 personal judgement, on appeal, against each board member.

Moral of the Story:

Protect yourself, and protect your association, by hiring a qualified insurance broker who can advise your community based on the needs, trends, and threats that exist for your distinctive community, and then follow their advice.

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