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Subject: More on Managing Association Insurance Proceeds
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RichA3
(Arizona)

Posts:41


10/17/2018 2:57 PM  
Contributors to this site helped me before on how to manage insurance proceeds. The near unanimous feeling was that the association needs to handle disbursement of these funds directly & to not turn that responsibility or that money over to the individual condo owner who experienced the loss. As it is a claim on the COA master hazard insurance policy on all units, the COA needs to stay in the driver's seat. That has worked well for us since an early last July wind storm took a roof off of one of our owner's unit.
Now we have good issue to address. Although all is not yet said & done, it appears we will have more insurance money in our association bank account than we need to pay to complete all repairs to that unit...up to several thousand dollars more.
Should that extra money just be turned over as a bonus to the unit owner or that extra money treated as a budget surplus & put right back in our condo reserves? I think we the association should hang on to this anticipated windfall.
RichardP13
(California)

Posts:3531


10/17/2018 3:54 PM  
The money should go to the reserve account under a constituency/emergency line item and make sure it is a money market account so as not to incur withdrawal charges when needed.

Been there, Done that
AugustinD


Posts:1591


10/17/2018 5:01 PM  
The roofs are a common element for which the HOA (and not the individual home owner) is responsible, correct? If so, why would you think of turning over the surplus to the individual home owner? Did the home owner suffer some loss, that has not as yet been paid for by the insurance proceeds, as a result of losing the roof?
SueW6
(Michigan)

Posts:491


10/18/2018 6:37 AM  
How much "surplus settlement" monies are you talking about?

Why was the actual repair cost so off?

IMO - the extra money could be used to do something for the entire community where everyone could benefit OR put into an emergency fund.

RichA3
(Arizona)

Posts:41


10/18/2018 7:19 AM  
Thanks for the good feedback. In answer to your questions:

Our association got the 'extra' insurance money this way...
Insurance company adjuster estimated repair costs at around $43k...but only gave us $18 initially saying the rest would be recoverable if we submitted paid invoices to them showing that the needed repair work was done. Of that $18k we had to pay out $7k directly to a roofing contractor selected by our master policy insurance company,for a permanent roof replacement. Subsequently our unit owner got a bid from a contractor for the remaining repairs, repairs to the interior...it was for around $29k. This contractor wanted half that amount up front to get repair materials & to get the work started. (I understand that half up front is a pretty standard practice).
Of course we did not have the $14.5k to pay that contractor to get going. On behalf of the association I then asked our insurer to provide the additional funds to get started. I submitted the contractor's bid for $29K. To my surprise the insurer not only paid for the monies needed to cover the $14.5k but all of the money they had on hold that was the recoverable amount i.e. $43k-18k or $25k. So we have now on hand $25k+$11k or $36k. If in fact it takes $29k to complete the repairs to our satisfaction (us & the owner), we may have $7k left. Hope this makes sense...sure makes $ & cents to our association. (:-)
RoyalpitA


Posts:0


10/18/2018 7:24 AM  
The excess $ should be returned to the insurance company.

RichardP13
(California)

Posts:3531


10/18/2018 8:52 AM  
Posted By RoyalpitA on 10/18/2018 7:24 AM
The excess $ should be returned to the insurance company.




AS always, BRILLIANT!
.
.
.
.
.
NOT!

Been there, Done that
AugustinD


Posts:1591


10/18/2018 8:57 AM  
Richard, as a fiduciary matter, I think maybe the HOA should at least check in with the insurer on the point.
SteveM9
(Massachusetts)

Posts:3231


10/18/2018 7:07 PM  
Posted By RoyalpitA on 10/18/2018 7:24 AM
The excess $ should be returned to the insurance company.


Well, its not too far from the truth. Insurance is to make you whole, not rich. The insurance company may want evidence that the work was completed, and if they discover that you pocketed much more, they may take legal action to get it back. Re-read your policy.
SueW6
(Michigan)

Posts:491


10/19/2018 6:05 AM  
"To my surprise the insurer not only paid for the monies needed to cover the $14.5k but all of the money they had on hold that was the recoverable amount i.e. $43k-18k or $25k"

Oops! That should have been reported back to the insurance company as soon as you received the check. Most likely this will be caught at their own audit.

Give hem a call and ask for a review of the entire transaction. Be prepared to refund the overpayment.
RichA3
(Arizona)

Posts:41


10/19/2018 7:15 AM  
Any 'xtra' insurance funds will be held safely in our association's reserves.
It was made abundantly clear we I asked for additional funds from our insurer that we still had $11k from the previous $18k they had sent us. In spite of that they sent $25k and said that our claim was now closed & settled.
I am taking them at their word. Case closed!!
SteveM9
(Massachusetts)

Posts:3231


10/20/2018 6:58 AM  

I am taking them at their word. Case closed!!


Well, words dont matter, the policy does. Dont be surprised if someone audits claims a year from now and figures out you were overpaid. As insurance is a regulated industry, the state would become involved if not repaid and criminal charges would follow.
RichA3
(Arizona)

Posts:41


10/20/2018 10:09 AM  
Yes, words certainly don't matter unless they are in writing.
My Dad always said don't trouble trouble until trouble troubles you! As it has turned out there will be no extra insurance funds to fuss about. Restoration work has been completed & invoices submitted. To make our owner whole will take slightly over what funds our insurance co. has already provided. And as you know the insurance well is dry & the claim is closed. Owner has already ponied up the deductible ($1000) and now will have to pay a little more to wrap this up.
It has been a wonderful what if discussion though. Thanks to everyone.
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