Understanding Umbrella Coverage

Community associations, whether they are condominiums, townhouses, or planned unit developments, are susceptible to numerous risks from lawsuits related to injuries or other accidents on their property. Umbrella or excess liability coverage provides a cost-effective solution for associations to obtain additional liability coverage that surpasses the primary policy limits, serving as a vital safety net for the community. This type of coverage can extend to general liability, directors and officers liability, auto liability, and employers’ liability.

Consider a scenario where a slip and fall accident results in severe injuries and the general liability policy quickly reaches its limits. In such cases, excess liability coverage becomes crucial. This type of policy safeguards a community financially from a potentially devastating lawsuit which, without such coverage, would financially burden the association. Excess liability coverage is recommended for all associations, but it is particularly vital for communities with higher risk, such as those with a large number of units, high foot traffic, or amenities like pools or clubhouses that increase the risk of accidents.

A frequent question from associations concerns whether umbrella coverage extends to building coverage in cases of underinsurance. The answer is no. Excess liability coverage does not cover property damage or association funds under policies like crime or fidelity insurance. It only applies to liability policies that are specifically listed or scheduled. It is important for associations to understand that not all excess liability policies cover all these types of liabilities, such as directors and officers coverage. Differences in umbrella policy coverage can be significant and should be thoroughly discussed with an insurance agent to ensure adequate protection.

Auto Collision Into Association Property

Sometimes vehicles cause damage to community structures or shared spaces such as fences and retaining walls. It is essential for both the Board and the owners to understand how the association manages these incidents.

Generally, such damages are covered by the association’s property insurance, though deductibles apply. These deductibles can range from $1,000 for smaller HOAs to over $10,000 or more for larger condominium or homeowner associations that insure the buildings.

If a vehicle causes damage in the community, the Board may file a claim against the vehicle owner’s insurance policy for compensation. However, if the vehicle is uninsured, the association may not be able to obtain reimbursement from a third-party insurance company and could be in the unfortunate situation where the community absorbs these costs. In such scenarios, exploring legal avenues like small claims court may become necessary, although this route can be expensive and time-consuming.

Having video footage or a witness to an incident can be extremely helpful for an association. Although not every incident can be captured on video, educating owners to be more vigilant and prepared can significantly impact how effectively a situation is handled.

Owners Curious Questions

I recently moved into the association and do not know if I need to get insurance coverage for my unit. Could you advise?

As a new owner, it is important to understand what kind of insurance is needed on an individual basis.

Homeowners within a community that has shared walls should have an HO6 policy. Knowing how much coverage to carry is based on understanding what the association’s insurance coverage provides. There are multiple levels of coverage the association can insure and every association can be different. The three most common coverage types are all inclusive, original specifications, and bare walls.

Regardless of whether a homeowner has a mortgage on the unit, an HO6 policy is still necessary because it may ultimately cover the association’s deductible or the unit itself in the event of damage. Insurance at the unit owner level is required and this also includes landlords.

For new homeowners, understanding their insurance needs on an individual basis is crucial. In communities where homes share walls, such as condominiums or townhouses, having an HO6 policy is essential. Determining the necessary coverage depends on the extent of the association’s insurance coverage, which can vary widely.

Associations may provide different levels of coverage including all-inclusive, original specifications, and bare walls policies. Regardless of whether a mortgage is held on the unit, homeowners must obtain an HO6 policy, as it may need to cover the association’s deductible or the unit itself in case of damage. This requirement extends to landlords as well. Being underinsured or uninsured can be financially detrimental.

Update of the Month: Emergency Kits

Preparation is key when it comes to emergencies, and having both home and car emergency kits can be lifesaving. Whether facing unexpected power outages, natural disasters, or becoming stranded on the roadside, readiness is crucial for association owners and the Board of Directors, particularly in larger associations with multiple livable units.

These kits should include first aid supplies, non-perishable food, water, flashlights, batteries, radios, blankets, personal hygiene supplies, and necessary medical items. Emergency kits vary in size and content and are commonly available at department stores across the city, typically ranging from $30 to $200.

Investing in preparedness is a wise decision. Ensuring that emergency kits are fully stocked and that items are not expired helps guarantee their effectiveness when an emergency occurs.