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Subject: Insurance Needs?
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Author Messages
GeorgeS21
(Florida)

Posts:3279


07/28/2020 10:06 AM  
Hi All,

650 single family houses, gated community in near coastal Florida (this means all roads are private), clubhouse/lodge, tennis courts, gym area, adult and kid pools, embedded detention ponds, generally apathetic board, management company. No obvious "warts." No employees. HOA handles a bit less than a million per year in assessments. HOA has suitable reserves.

What insurance coverages make sense in this particular set of circumstances? These are the usual ones mentioned by experts - and, by the independent agents attempting to sell - what do you think?


General Liability?

Damage for facilities (buildings, pools, courts, etc)?

D&O Liability?

Workers Comp (we have no direct employees, and no history of volunteerism to maintain facilities)?

Dishonesty/crime?

Umbrella?
ND
(PA)

Posts:504


07/28/2020 11:28 AM  
Similar to legal questions, I think insurance-related questions are best directed toward insurance professionals. Also, I would expect your management company to be another good resource specifically because they have more experience in HOA-needs and know the specific situation of your HOA a bit better (hopefully).

I also thing Google is a good resource and provides even more simple info/input.

Some people seem to think that pinching pennies when it comes to insurance is the way to go . . . because in most cases you hopefully never need to use it. However, I think more coverage is better, especially when it only boils down to a few dollars more each year for every homeowner. It's better to pay a bit more to have policies in place when you need them than to need them and not have the policies in place because you wanted to save a few bucks.

That said, I know some of this repeats what you said, but the following coverage is recommended as a starting point (some may not be applicable to your situation though).

General Liability Property Insurance
Regular Liability Insurance
D & O Coverage
Social Host Liability Coverage
Garagekeeper’s Coverage
Workers’ Compensation and Employee Dishonesty Bonds
Discrimination Claims Coverage
CathyA3
(Ohio)

Posts:1316


07/28/2020 12:03 PM  
Yes to all of the ones you've listed, with the possible exception of workers comp. If you don't have employees or volunteers doing work for the HOA, you can probably skip that one. The independent contractors we've worked with carry their own insurance, which we verify before signing the contract.

Our CC&Rs require us to carry fidelity/employee dishonesty insurance based on the amounts of money we have in our reserves, our annual operating budget, and our annual assessments (the greatest of these three numbers). The other items are left to the board's discretion. We review insurance once per year, looking at typical deductibles carried by other HOAs/COAs and things like the settlement amounts for recent lawsuits (our attorneys are helpful in providing the latter info, our insurance carrier lets us know about typical deductibles).
ND
(PA)

Posts:504


07/28/2020 12:14 PM  
Posted By CathyA3 on 07/28/2020 12:03 PM
Yes to all of the ones you've listed, with the possible exception of workers comp. If you don't have employees or volunteers doing work for the HOA, you can probably skip that one. The independent contractors we've worked with carry their own insurance, which we verify before signing the contract.



I wouldn't suggest skipping that one even if no direct employees/volunteers of HOA.

Certain hired contractors contractors or freelancers could potentially claim employee status depending on the scope of the job they perform and if they are a regular worker on association grounds. Further, even though there are steps to verify insurance beforehand . . . in the unlikely event that the Board forgets to verify, doesn't verify sufficiently (perhaps coverage exists but is inadequate), insurance is lost/ends before the job begins, personnel not covered by the policy are the ones who do the work, or any number of other potential scenarios where workers comp is needed . . . it's best for the HOA to have their own policy in place as well.
JohnC46
(South Carolina)

Posts:10017


07/28/2020 12:24 PM  
Posted By ND on 07/28/2020 11:28 AM
Similar to legal questions, I think insurance-related questions are best directed toward insurance professionals. Also, I would expect your management company to be another good resource specifically because they have more experience in HOA-needs and know the specific situation of your HOA a bit better (hopefully).

I also thing Google is a good resource and provides even more simple info/input.

Some people seem to think that pinching pennies when it comes to insurance is the way to go . . . because in most cases you hopefully never need to use it. However, I think more coverage is better, especially when it only boils down to a few dollars more each year for every homeowner. It's better to pay a bit more to have policies in place when you need them than to need them and not have the policies in place because you wanted to save a few bucks.

That said, I know some of this repeats what you said, but the following coverage is recommended as a starting point (some may not be applicable to your situation though).

General Liability Property Insurance
Regular Liability Insurance
D & O Coverage
Social Host Liability Coverage
Garagekeeper’s Coverage
Workers’ Compensation and Employee Dishonesty Bonds
Discrimination Claims Coverage




I see no need for Social Host if the association is not serving alcohol at association events.
I also question Garagekeepers if not storing cars for a profit.
Discrimination Claims Coverage is actually illegal in some states.

The other insurances I agree with.ates.
AugustinD


Posts:4160


07/28/2020 12:45 PM  
Posted By JohnC46 on 07/28/2020 12:24 PM
Discrimination Claims Coverage is actually illegal in some states.
Are you saying that providing insurance for the possibility that one's corporation; one's self; or one's fellow HOA director is unlawful in some states?

If you can name a state and cite something specific as evidence of this, then I would be interested in seeing it.

I believe discrimination claims generally fall under the category of wrongs known as torts. I believe insurance companies typically offer 'tort liability coverage.'
AugustinD


Posts:4160


07/28/2020 12:46 PM  
Pardon. I meant:
Are you saying that providing liability insurance, for the possibility that one's corporation; one's self; or one's fellow HOA director is accused of unlawful discrimination, is unlawful in some states?
JohnC46
(South Carolina)

Posts:10017


07/28/2020 1:11 PM  
Aug

I am in over my head on this subject so I attached the following link. Hope it helps.

https://www.thebalancesmb.com/general-liability-coverage-and-discrimination-462364#:~:text=Discrimination%20Coverage%20Under%20Umbrella%20Policies%20Some%20commercial%20umbrella,state%20laws%20prohibit%20insurance%20that%20covers%20discriminatory%20acts.
AugustinD


Posts:4160


07/28/2020 1:27 PM  
Posted By JohnC46 on 07/28/2020 1:11 PM

https://www.thebalancesmb.com/general-liability-coverage-and-discrimination-462364#:~:text=Discrimination%20Coverage%20Under%20Umbrella%20Policies%20Some%20commercial%20umbrella,state%20laws%20prohibit%20insurance%20that%20covers%20discriminatory%20acts.
I see the following statements from the above site:

"Note that some state laws prohibit insurance that covers discriminatory acts. For this reason, an umbrella may state that it covers discrimination only to the extent such insurance is permitted by law."

After a fair amount of googling, so far I find nothing to support this claim. Not even a hint of anything to indicate that this claim is true.

Just saying.

AugustinD


Posts:4160


07/28/2020 1:57 PM  
Posted By AugustinD on 07/28/2020 1:27 PM
Posted By JohnC46 on 07/28/2020 1:11 PM

https://www.thebalancesmb.com/general-liability-coverage-and-discrimination-462364#:~:text=Discrimination%20Coverage%20Under%20Umbrella%20Policies%20Some%20commercial%20umbrella,state%20laws%20prohibit%20insurance%20that%20covers%20discriminatory%20acts.
I see the following statements from the above site:

"Note that some state laws prohibit insurance that covers discriminatory acts. For this reason, an umbrella may state that it covers discrimination only to the extent such insurance is permitted by law."

After a fair amount of googling, so far I find nothing to support this claim. Not even a hint of anything to indicate that this claim is true.
On further study, I think the topic to which the above statements are referring is that many (most?) states prohibit insurance covering 'intentionally bad acts.' I believe an allegation of discrimination on the basis of race, sex, religion et cetera in the HOA workplace or in housing may or may not qualify ultimately being judged as an 'intentionally bad act.' The net has much discussion like the following:

=== Start excerpt ===
"Intentionally bad acts are not covered by insurance. Most states have statutory or common law prohibitions against insuring acts undertaken intentionally, with the intent to cause harm. Society simply does not permit a gross wrongdoer to profit by shifting financial responsibility for inherently bad acts to an insurance company. That is why Commercial General Liability ("CGL") policy forms exclude losses that are "expected or intended from the standpoint of the insured" and why errors and omissions, employment practices, and directors' and officers' liability policies have provisions excluding proven dishonest or fraudulent conduct. These inherently culpable acts do not qualify to be insured, and therefore are referred to as uninsurable.

But sometimes CGL policies do allow alleged bad actors to shift to insurers the expense of defending them -- and even the expense of paying settlements or judgments. The difference between uninsurable intentional conduct and insurable intentional conduct can be hard to identify and anticipate, creating a gap into which some losses can – unforeseeably – fall."
=== End excerpt ===

One may google on {"intentional act" "insurance"} and find both high-minded and practical discussion.

I do not think any state flat-out bans insurance coverage for acts alleged to be discriminatory against the several protected classes.
JohnC46
(South Carolina)

Posts:10017


07/28/2020 2:55 PM  
I do not play lawyer nor insurance agent so I am out of this conversation. However, I do play golf.
SamE2
(New Jersey)

Posts:302


07/30/2020 5:34 AM  
In New Jersey corporations are required to have workman's comp insurance even if you don't have employees.
CathyA3
(Ohio)

Posts:1316


07/30/2020 7:13 AM  
I was digging through Ohio's laws, and it appears that workers comp is required only if a corporation has at least one employee. The Ohio Condominium Act doesn't mention it at all - it only requires property and liability insurance on the common areas plus D&O insurance.

Our Declaration also does not mention workers comp, and the document was vetted by our attorney in 2014 to make sure we complied with Ohio laws. It seems like an odd oversight not to at least mention this insurance because there are large condo associations that employ people.

And why wouldn't liability and umbrella insurance cover any claims if someone were injured while working on the common areas (unless there are specific limits on the types of people/events covered)?

Once again, the more I learn, the less I know. :-)

Given how hard it is to get a definitive answer, I wouldn't be surprised if the typical board member wouldn't know about this stuff. A skilled property manager would know to look for proof of workers comp for any contractors that the association hires, but this leaves out all the communities that are self-managed. If I were on the board I'd probably want to amend our Declaration after a talk with our insurance agent and attorney to see what kind of exposure we have. The less creative thinking the board has to do, the better...

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