One of the biggest traps for common wall homeowner associations like condominiums is that their insurance coverage often permits payment of claims that rightly belong to homeowners. This is due to the broad or “blanket” coverage nature of the policy. In effect, the insurance carrier looks to the board to determine whether it should pay a claim or not. If given no direction, the carrier usually errs on the side of the homeowner.
The problem is that if the board allows all insurance claims regardless of their source or cause, soon the premium would skyrocket or worse, the policy would be canceled. To protect the HOA insurability, the board should develop and enact a policy concerning insurance claims and put the HOA’s insurance carrier on notice. Each owner would then be responsible for notifying his own insurance carrier of the HOA’s policy.
Barring conflicting insurance requirements in the governing documents or state statute, here are reasonable guidelines for the HOA to follow in developing a policy for handling insurance claims:
Since insurance is such an important element of the HOA’s well being, it behooves the board to formalize a comprehensive policy. Why wait for an accident to happen? An HOA policy on insurance claims is proaction in action.
If you have any questions, please get in touch with me; I’m always happy to speak with you.