Reserve fund and insurance coverage.

My condo complex is located in San Diego. We have always been over 100% funded in our reserves until recently. Our complex was 100 yards from the area that was severely burned in the fire-storm of 2003. In 2005 the BOD chose to increase our insurance coverage based on advice from both our current management company and our insurance company, and just plain fear of what we knew our neighbors were going thru by being under insured.
This last year it became obvious that our 80K policy was more than we can afford and our management company, then, had been taking money from the reserve fund to pay the quarterly fee. The BOD was not aware of this.
Due to several other issues with that management company the BOD chose to change management companies, but had already renewed the policy for this year.
Can you tell me if you have specific categories covered with reserve funds, roofs, common area’s, exterior, ect., all that the HOA is legally responsibly for, do these same items need to be covered in an insurance policy?
Thanks
JoyceR

JoyceR,

To answer your question, "Can you tell me if you have specific categories covered with reserve funds, roofs, common area's, exterior, etc..." I can say definitively that insurance coverage is not one of them. Management's taking money from the reserve fund with or without approval from the BOD to fund insurance is OUTRAGEOUS!!!

Reserves are to be funded in a manner determined by the BOD based upon a study of an independent engineering firm's analysis of the elements that will need to be replaced.

Reserves are to cover the replacement of the element in it's entirety at the end of the lifespan of the element. The engineering firm should provide an industry standard lifespan. Forget what the builder/developer says. In between year one of the element's construction and the end of the lifespan of the element, money should be set aside in a maintenance, deferred maintenance, or working capital account for the general repair/upkeep of the element.

Elements that are typically to be replaced by the reserve account in a condo complex is everything from the unit sheathing out including roofs, decks, wood, shingles, siding, concrete walkways, roadway pavement overlay, retaining walls, gutters, leaders, etc. If there are common spaces elements will include meghanical equipment, roof gutters, leaders, roofs, decks, swimming pool apron furniture, pool concrete apron, pool pump, fencing, retaining walls, etc.

On a different and unrelated topic to reserves, my HOA/COA's insurance company is not liscenced in California, if it was, I'd tell our agent to contact you. Because, our insurance covers the market replacement cost of the ENTIRE unit as it was conveyed to the original owners at their original purchase in the event of a loss. This is extremely unusual, and extremely beneficial to the owners. This coverage is mandatory because it is stated as such in our governing documents. Perhaps there is an insurance company in California that offers this?

GeraldT1

I am just curious. You said the BOD decided to increase your insurance coverage based on advise to do so. The management company was paying the premiums on your behalf. If your annual budget wasn't sufficient to pay those premiums, how did you expect the management company to pay them if not outof reserve or special assessment?