Choosing the Wrong Contractor is Costly

When boards choose a contractor, the pressure to stay within budget can tempt even the most well-meaning association into cutting corners—but the cheapest bid often comes with the highest long-term price. Hiring an unqualified, uninsured, or poorly vetted contractor opens the door to construction defects, failed inspections, and liability exposure that insurance may not cover. One mistake can trigger a chain reaction of issues, including water intrusion, mold, structural damage, lawsuits, and ultimately special assessments. The fallout does not just affect the building; it impacts owners’ finances and the association’s insurability for years to come. Boards carry a fiduciary duty to protect the financial and structural health of the community, which includes conducting thorough due diligence before awarding contracts. This process should involve verifying licensing and bonding, confirming insurance certificates with the correct endorsements, and ensuring the scope of work is clearly defined and properly supervised. Insurance carriers are paying close attention to contractor selection, and a history of claims tied to poor workmanship or defect-related losses can lead to higher deductibles, restricted coverage, or even non-renewal of the association’s policy. For unit owners, this issue is equally important. Many governing documents make owners responsible for repairs inside their units or for damages up to the association’s deductible. If a contractor causes a loss—or if the board’s selection leads to broader issues—owners could be left with unexpected financial responsibility. Effective risk management begins with selecting the right contractor. Rather than choosing the lowest bidder, boards should prioritize qualifications, experience, and proper insurance coverage to protect the community in the long run. The Community Associations Institute (CAI) is an excellent resource for locating industry-specific contractor specialists.

Coverage Corner: Backup of Sewer and Drain & Overflow

Sewer or drain backups are among the most disruptive and costly types of property damage, often flooding units, damaging flooring, and creating significant health and safety concerns. Determining responsibility and coverage typically depends on where the clog originated. Association commercial policies generally respond when the blockage occurs outside the building, while personal lines policies, such as an HO-6, typically apply when the source is inside the building or within an individual unit. This subtle distinction can mean the difference between a covered claim and a substantial out-of-pocket expense. Even when coverage is triggered, many policies include relatively low sublimits for backup and overflow damage, often ranging from $5,000 to $10,000. These limits may be insufficient to cover cleanup and repairs, particularly in communities with stacked plumbing systems where multiple units can be affected. Both boards and homeowners should proactively review their insurance policies, understand how coverage is defined, and ensure that limits adequately reflect the true risk. Increasing coverage limits is often an affordable way to provide meaningful financial protection against these messy and expensive incidents.

Owners’ Question: Is Backup of Sewer, Drain, and Overflow Covered on an HO-6 Policy?

This is an important question that every unit owner should understand. Homeowners should ensure that their HO-6 policy includes coverage for backup of sewer, drain, and overflow. Many policies provide only a minimal sublimit, often around $5,000. If the association’s deductible is $25,000 and a loss such as an overflowing washing machine, sink, or toilet occurs, the owner could be underinsured by a significant amount. Increasing this limit is a smart and often affordable way to reduce financial exposure. A quick review with an insurance agent can help confirm that adequate protection is in place and prevent costly surprises in the future.

Update of the Month: AC Components

As temperatures rise, maintaining your air conditioning system is about more than comfort—it is essential for preventing costly property damage. While replacing the air filter is a good first step, several other components require attention. Clogged condensate lines, full drip pans, frozen evaporator coils, and poorly insulated refrigerant lines can all lead to water damage, mold growth, or even fire hazards. In condominium communities, a small leak from one unit can quickly impact neighboring homes and result in expensive insurance claims. A seasonal inspection by a licensed HVAC professional, typically costing between $150 and $250, can identify these issues early and prevent larger problems. For owners using window units, it is important to clean or replace the filter monthly, inspect for mold buildup, and ensure the unit is tilted slightly downward toward the exterior to allow proper drainage. Regular upkeep is not only a smart maintenance practice but also demonstrates consideration for neighbors and helps protect the financial stability of the entire community.