Insurance has quickly become a hot topic for the POA industry. Claims are on the rise and as a result, combined with economic factors, rates for policies are costing more than ever. Along with the increase in claims and rates, there has been a decrease in coverage amounts and fewer available polices for POAs are on the marketplace. This has created a crunch in the budgets for many POAs with some even eschewing certain policies. Others are unaware of the polices POAs should carry to protect the Association. With these thoughts in mind, POAs should ensure their assets are protected by adopting these must have insurance policies.
Property, Including Equipment Breakdown
The first must have policy is property insurance. This policy would cover physical damage to real and personal property owned by the Association or property that the Association has a legal obligation to insure. The policy would also cover loss of business income (maintenance fees) or extra expenses required to return to pre-loss, normal operation.
Examples of events that would result in a claim include damage caused by fire, water damage, wind, hail, etc.
Key coverages and enhancements to policies POAs should consider include:
- Equipment Breakdown
- Replacement Cost
- Flood and Earth Movement
- Increased Cost of Construction / Ordinance or Law
- Mold Remediation
- Named Storm Deductible (instead of All Wind and Hail)
- Wind Driven Rain
General Liability
The next must have policy is general liability insurance. This policy is a legal liability policy covering claims of bodily injury or property damage by a third party arising from the insured’s premises, operations, products and completed operations. This policy would also include coverage for claims of personal and advertising injury (i.e., libel, slander, invasion of privacy, etc.)
Examples of events that would result in a claim include a slip and fall on POA property or property damage to a unit owner caused by failure to maintain a common element.
Key coverages and enhancements to policies POAs should consider include:
- Hired and Non-Owned Auto
- Employee Benefits Liability
- No Punitive Damages Exclusion
- No Assault and Battery Exclusion
- No Mold Exclusion
- Pollution Exclusion Exceptions for Hostile Fire, Pool Chemicals, Heating and Cooling Equipment, Paint, etc.
- Garagekeepers Legal Liability
Directors and Officers
We turn now to the much discussed directors and officers insurance (D&O). These policies and the policies discussed above have received increased scrutiny, especially for condominiums. With the increased number of claims, it has become imperative that POAs keep these policies up-to-date. The D&O policies protect “boardroom” liability providing coverage for claims resulting from managerial decisions that have adverse financial consequences (wrongful acts). These policies usually also include coverage for claims of employment practices liability.
Examples of events that would result in a claim include a wrongful foreclosure, breach of contract and wrongful termination.
Key coverages and enhancements to policies POAs should consider include:
- Defense “Outside” the Limit
- Defense Coverage for Breach of Contract
- Entity vs. Insured / Insured vs. Insured
- Employment Practices
- Claim Definition that Includes Non-Monetary Claims in Addition to Monetary
- Broad Definition of Insured
- Preferred Legal Counsel
Crime/Fidelity
A less discussed policy but one POAs should have coverage for is crime/fidelity. The policy should have fidelity coverage that provides protection of the POA funds from employee theft. The policy can be expanded to include coverage for forgery, alteration, disappearance, destruction, robbery, burglary, computer fraud, extortion and theft of another’s property (3rd party).
Examples of events that would result in a claim include embezzlement of POA funds by employee, board member or manager.
Key coverages and enhancements to policies POAs should consider include:
- Limits that Satisfy FHA – 3 Months Fees + Cash in Bank
- Property Manager Coverage (if needed)
- Employee Benefit Plan Coverage (if needed)
- Claim Expense Reimbursement (Forensic Accountant)
- 3rd Party Coverage (Employee Theft of Owner’s Property)
Worker’s Compensation
A policy for POAs that have employees is the worker’s compensation policy. This a “no-fault” policy providing statutory benefits, prescribed in state law, to employees (or the employee’s family) due to a job-related injury (including death) resulting from an accident or occupational disease.
The policy should also include Employer’s Liability coverage for protection against job-related injury claims not covered by workers’ compensation.
Examples of events that would result in a claim include occupational injury.
Key coverages and enhancements to policies POAs should consider include:
- Minimum Premium Policy if No Employees
- Dual Employment / Borrowed Servant
- Failure to Report Mid-Year Hire
- Increase Employer’s Liability Limit to Meet Umbrella Requirement
The insurance landscape is vast and complicated to understand. By having a relationship with a qualified broker who specializes in the POA industry, you can go a long way to protecting your POA and making sure you are selecting the right policy with the type and amount of coverage needed for the POA. An important takeaway to remember when speaking with a broker and selecting policies is, are they recommending what you need or just what you ask for? Once you determine this you can rest assured you are taking the steps needed for your association.
To learn more about insurance policies and the insurance process in POAs, join RMWBH for the latest in our series of 101 and 201 courses. Association Insurance 101 is November 8th and Association Insurance 201 is November 15th. Both of these webinars will be from 11:30 a.m. – 12:30 p.m. To register for each of these great presentations, please visit our education page today!
