Event Insurance For Community Associations

Community events are one of the best ways to bring neighbors together and strengthen the sense of community. Whether it’s a Fourth of July celebration, summer picnic, parade, or owners reserving the clubhouse for a private gathering, these events create lasting memories. They also introduce additional exposure for the entire community and deserve thoughtful planning.

Event insurance is a stand-alone liability policy designed to provide coverage for a specific event. It can be purchased by the association for community-sponsored events or by an owner hosting a private event in a common area. Policies can cost as little as $100, although depending on the size of the event, number of attendees, alcohol exposure, and planned activities the costs can increase. If a covered claim occurs, the event policy may respond first, helping preserve the association’s general liability policy. Protecting the association’s primary policy can help reduce the impact a liability claim may have on future premiums, claims history, and insurability.

Does your association have a clubhouse? If owners are permitted to rent it, consider requiring them to obtain event liability coverage and name the association as an additional insured. Owners should also check with their personal insurance agent, as some HO-6 policies offer endorsements that extend liability coverage for a one-day special event, which may be a more cost-effective option.

A few simple planning steps can also reduce risk. Use licensed and insured vendors, consider professional alcohol service when alcohol is involved, and have trained medical personnel available for larger events such as parades or festivals. Community events build relationships and create culture. With thoughtful planning, they can also protect the financial well-being of the entire community.

Retroactive Date Trap In D&O Coverage

Directors & Officers (D&O) insurance isn’t just another line item on your renewal. It protects the Board when decisions made on behalf of the association are challenged, whether it’s an allegation of breach of fiduciary duty, discrimination, failure to enforce governing documents, or other wrongful acts.

Unlike property insurance, most D&O policies are written on a claims-made basis. That means coverage is triggered when the claim is made, but the alleged wrongful act must also fall within the policy’s coverage period. This is where the policy’s retroactive date, or full prior acts coverage, becomes critical.

The association saved $459 by moving its D&O coverage to a new carrier. Sounds like a great decision… until a lawsuit was filed alleging wrongful acts that occurred before the new policy’s retroactive date. Because the new policy did not provide full prior acts coverage, the claim wasn’t covered. What looked like a small savings turned into more than $50,000 in legal expenses paid by the association.

When evaluating Directors & Officers insurance, don’t compare premiums alone. Compare the coverage. A lower premium isn’t a bargain if it creates a gap that leaves your association responsible for defending a lawsuit.

Risk Tip: Before changing D&O carriers, ask one simple question: Will our current retroactive date transfer, or does the new policy provide full prior acts coverage? The answer could be the difference between a smooth claim and an expensive surprise.

Owners Question: I am in the process of selling my unit, do I need to still keep my HO6 policy in place?

Yes! Until the sale has officially closed and ownership has transferred, owners should keep your HO-6 policy in force. The owner remains responsible for the unit and can still be liable for a loss, even if under contract. Canceling the policy too soon could leave one without coverage if a water loss, fire, liability claim, or other covered event occurs before closing. Once the sale is complete and ownership transfer has been confirmed, the homeowners policy can be cancelled.

Update Of The Month: Ineligible Electrical Panels

At the insurance renewal, many older communities discover they are no longer eligible for preferred insurance programs because they still have outdated electrical panels in the units or common areas. This often creates an unexpected scramble to replace panels, resulting in unplanned costs for owners. Many electricians are unaware that certain panels are considered ineligible by insurance carriers because they don’t see the long-term claims data that drives underwriting decisions. While a panel may appear to be functioning properly, decades of claims involving overheating, arcing, and electrical fires have led many carriers to restrict or decline coverage for these older systems.

Boards can take a proactive approach by surveying owners or identifying units that are likely to have original electrical panels. Understanding what exists throughout the community allows the association to develop a replacement plan before it becomes an insurance issue or, more importantly, a life safety concern. Planning ahead can help maintain eligibility for the most competitive insurance rates and coverage while reducing the risk of a preventable electrical loss.