Condominium Association Insurance

The Directors and Officers of residential and commercial condominium associations are usually charged with the responsibility to secure insurance coverage in accordance with the associations Master Deed and By-Laws also know as the “founding documents”. Insurance requirements can be found in the Master Deed, By-Laws or both. Before preparing an insurance program, careful consideration must be given to the insurance requirements in the founding documents. Building coverage can range from no coverage at all to coverage for all of the building items regardless of ownership or any combination between the two. Because of this it is important that each Board of Directors (as it changes over the years) undertakes a comprehensive study of the insurance requirements and the coverages in place. At Anderson Insurance Agency, we will not recommend an insurance program until we have had the opportunity to review the association documents. We have been insuring condominium associations and reviewing these documents since 1974. Because of our added training in real estate matters (our officers are also licensed and experienced real estate brokers), we are uniquely prepared to offer the advice your condominium association needs.

Anderson Insurance Agency has been insuring Residential, Commercial and Office Condominium Associations for almost 40 years. We represent some of the most respected insurance companies in world. Feel free to call us for a list of references. Click here to request a quote or contact us.

Common coverages for condominium associations include:

A master policy to cover the building items spelled out in the founding documents and liability coverage for injury that might occur on the premises or at some other location where the association may conduct meetings. The property section of the program refers to the founding documents and covers ONLY the property referred to in the founding documents. Property coverage is customarily provided on a form called the special perils form. While this is the broadest coverage form available from the insurance industry, other policies are needed to complete the insurance program. The liability insurance section of the policy provides coverage for the association if someone is injured on the premises or at another temporary location used by the association. Most programs include the unit owner as an additional insured, but the endorsement only protects them as a member of the association and does not provide the coverages needed by the unit owner. The unit owner needs to secure their own coverage for their liability together with contents coverage and building coverage, depending on the wording in the founding documents.

Many founding documents call for a fidelity or employee dishonesty bond to protect the association for the loss of funds in the event the custodian of the Associations money, steals from the association. Coverage can be obtained on a separate bond or in some cases, it can be added as an endorsement (rider) to the master insurance policy.

If the property is in a flood zone (determined by National Flood Insurance Program), the association may be required to secure coverage against damage by flooding. Flood insurance is a policy that provides coverage against damage done by the rising or overflowing of bodies of water, rapid accumulation of rainwater, water which backs up from storm drains, and mudslide. These types of losses are seldom (if ever) covered by the traditional property insurance policy. Anderson Insurance Agency is one of the largest writers of flood insurance in the country and is often consulted by other agencies. Since premiums can fluctuate greatly based on unusual rating questions, you should place your flood insurance with Anderson Insurance Agency.

If the association hires employees or wants to cover their incidental risk from employees of subcontractors or casual labor, they should purchase workers compensation insurance.

The association may ask officers, directors or employees to use their own autos on association business (banking, meetings, hardware store run, post office, etc). In the event that an accident occurs while someone is using their auto for an association errand, the association may be included in a suit. The association can purchase an inexpensive form of auto insurance called non-owned auto insurance to cover this risk. Sometimes this insurance is required in the founding documents but often it is not. Absent or required, the association still has some risk to this type of loss and should secure this type of coverage.

The directors and officers are charged with the faithful execution of their office as spelled out in the founding documents. If they fail in that obligation, the members of the association can sue them. Many founding documents hold the officers and directors harmless, but there are limitations by law to the immunity provided by the association documents. For this reason, it is always best if the association provides a specific form of insurance called Directors and Officers Liability insurance. This coverage will provide the defense cost for the Directors and Officers and if the suit is successful, will make payments to the members.

Most associations have a large exposure to catastrophic liability losses. Fires that are caused by common wiring, gas pipes and collapses can result in severe and multiple injuries. The least expensive way to protect the association is to purchase higher limits of insurance with an umbrella liability policy.

You may have an exposure to pollution. This exposure can only be assessed after a careful review of your operations. In many cases, coverage will not be available for this risk. The only option may be to implement a program to minimize the risk as you cannot completely avoid the risk and run a business.

This outline is offered as a general description of the kinds of insurance that can be included in an insurance program. It is not intended to replace a comprehensive and personalized insurance recommendation, which can only be offered after a thorough analysis of particular individuals or businesses operations