Insuring Southern California Community Associations

Insuring the common area of your association's property, and corporation should be reviewed on an annual basis. Where do you start with this process? First, take a look at the associations governing documents. It's important at a minimum to meet the limits in the CC&R's. I always send insurance brokers the section of the CC&R's that is pertinent to insuring the association. I will be touching on each type of insurance typically required, and the limits I commonly see bound for coverage.

General Liability:

I recommend at a minimum having two million per occurrence and a four million aggregate. Long story short, this type of policy protects the association from lawsuits arising from third parties.

Excess / Umbrella Liability:

This policy protects the policy holder beyond the standard limits outlined in the general liability policy. I generally see the limits for this policy at two million.

Directors & Officers:

This policy protects the "directors and officers" from alleged wrongful acts/lawsuits that may come up while acting in the capacity as a director/officer of the corporation. I recommend having this at two million, but I commonly see this policy go up to four million depending on how conservative the directors are.

Property:

This type of coverage affords coverage to replace common area property in the event of a loss. In condo associations property insurance is more expensive because you actually insure the exterior of the building. I do not have a recommended limit on this type of policy because each property is different.

Workers Compensation Insurance:

I always get push back on this one, but it's important to realize the protections this type of policy affords. I pulled this text from Timothy Cline's website:

"Workers’ Compensation is required by law. Any association that has employees on the payroll must maintain a workers' compensation policy. But what if the association does not have any employees and all work is contracted? Should the Association still maintain a workers compensation policy? The answer is a resounding 'yes.'

This scenario is all too common. If an association ever hired a non licensed contractor, or hired a licensed contractor who does not maintain an active workers compensation policy at the time of loss, then the association could be deemed to be the employer. If that contractor misrepresented the fact that they maintained a workers compensation policy, and an accident occurs while on the job, the state of California could still consider the association to be the employer of that injured worker, and liable for all medical payments that result. The law also prohibits the Association from entering into a contract to avoid workers’ compensation insurance.

With this in mind, it is important for all associations, whether big or small to maintain worker’s compensation coverage. Even with a workers' compensation policy in effect, it’s still imperative that the Board contract with ONLY licensed contractor with a workers compensation policy in force. The Board should request a Certificate of Insurance evidencing the workers compensation coverage and such evidence should be in the Board’s possession prior to the work commencing."

Have a look at Timothy Cline's website for more information: http://www.timothycline.com/

Conclusion:

Review your insurance policy and make sure your property manager is on top of expiration dates. This is just a short review of what an association's insurance policy should cover.  This does not include what each owner in an association is required to insure. It's important to get more information from a California licensed insurance agent.