Importance of an Insurance Resolution

Insurance resolutions are a vital component of an association’s governing framework, providing clear guidelines on insurance coverage and claims responsibilities for both owners and the Board of Directors. These resolutions help safeguard the financial health of the association by balancing risk between individual owners and the community as a whole. While an insurance resolution cannot contradict the association’s Bylaws, it can clarify expectations and establish consistent procedures. A well-crafted resolution typically outlines coverage requirements for both the association and individual owners, including recommended liability limits for owners, tenants, and commercial occupants. It should also define how deductibles are allocated when a loss occurs, addressing both unit and common area damage and clarifying responsibilities in negligent and non-negligent situations. Additionally, the resolution should establish clear claims processes and expense allocation, recognizing that certain costs—such as the time spent by community managers assisting with claims—may not be covered by standard insurance policies. Associations may benefit from designating a committee or specific role to oversee claims management. If your community does not currently have an insurance resolution, or if it has not been updated within the past ten years, it should be prioritized. While sample resolutions can provide a helpful starting point, it is essential that the final document be reviewed and approved by the association’s attorney to ensure compliance with governing documents and to avoid potential liability. Taking these proactive steps is an investment in the long-term protection of the community’s assets.

Claims Story: Maintaining Heat as a Policy Condition

As winter approaches, maintaining adequate heat within units and common areas becomes a critical requirement under many insurance policies. Failure to meet this condition can result in denied claims for damage caused by freezing temperatures. Most insurance policies require that heat be maintained at or above 50 to 55 degrees Fahrenheit, although the exact requirement may vary by policy. Owners leaving their homes for short or extended periods should ensure that the heat remains on and set to at least the minimum temperature specified in their policy. Board members should also monitor common areas such as clubhouses and meeting rooms to confirm that these spaces remain properly heated. A real-world example illustrates the importance of this requirement. An association experienced an HVAC system failure in November and promptly hired a contractor for repairs; however, replacement parts were back-ordered until January. During December, extremely low temperatures caused two pipes to burst in the association’s clubhouse. The insurance policy excluded coverage for freezing damage unless one of the following conditions was met: heat was maintained in the building, structure, and units; all equipment was drained and the water supply shut off if heat could not be maintained; or if the plumbing could not be completely drained, heat had to be maintained. Because the Board was aware of the impending freezing temperatures and did not take sufficient alternative measures, the insurance carrier denied the claim. This situation underscores the importance of proactively evaluating potential risks and implementing contingency plans, such as draining water lines or providing temporary heating solutions, to prevent costly exclusions.

Owners’ Curious Question: What Are the Best Practices When Hiring a Contractor?

When unit owners need to hire a contractor—whether for remodeling or to address property damage—selecting the right professional is essential for protecting both the owner and the association. Owners should seek contractors who have experience working within community associations, as they are more familiar with governing documents and operational requirements. Resources such as CAI (Community Associations Institute) can help identify qualified service providers. Contracts for work performed within a unit should be signed by the unit owner, while the association is responsible for contracts involving common areas. An exception may occur during mitigation efforts following a loss, where the association may need to act quickly to prevent further damage due to its fiduciary responsibility. Insurance companies typically rely on industry-standard estimating software to determine the value of covered damages. If an owner selects a contractor whose costs exceed the insurer’s approved estimate, the owner may be responsible for paying the difference. It is also essential that any contractor or service provider working within the community carries appropriate insurance coverage. Proof of insurance should be collected before work begins, and the association should be listed as an additional insured to ensure adequate protection.

Update of the Month: Galvanized Pipes

Galvanized plumbing pipes are increasingly becoming ineligible for coverage with most insurance carriers, including those operating in high-risk markets. Over time, these pipes corrode internally, leading to reduced water flow, leaks, and sudden failures that can result in extensive water damage. Commonly installed in buildings constructed from the 1960s through the early 1980s, galvanized piping presents a significant risk to both property and insurability. If galvanized pipes are present within a community, it is essential to begin planning for their replacement as soon as possible. Ideally, a coordinated community-wide replacement minimizes risk and improves the association’s eligibility for preferred insurance markets. Although such projects can seem daunting, consulting with qualified contractors, reserve specialists, and the association’s insurance professional can help develop a practical and financially sound plan. Proactive replacement of galvanized piping is a critical step in maintaining insurance eligibility and protecting the long-term financial stability of the community.