SAX Insurance Agency / 866-729-5390 / www.saxinsurancenm.com1

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Overview

� CC&R’s with Explanation of Coverage’s

� Condo Interior Coverage’s - Options

� Q&A

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CC&R’s – (Covenants, Conditions and Restrictions) are the governing

documents that dictate how the homeowners association operates and what rules the owners must obey.

� Establish the Guidelines for the HOA Insurance

Coverages

� Set Minimum Insurance Limits for Specified Coverages

� Set Maximum Deductible Limits

� When the HOA is responsible for the Structures or

Buildings, CC&R’s should detail the responsibility of the

HOA and the unit owner as it pertains to the interior of the

unit

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CC&R’s – Insurance Section - Liability

� Liability Requirement - Insurance protects members for damages sustained in the common areas.

� Detail exposures that need to be covered

� Set a minimum level of Coverage ($)

– # 1 Exposure - Slips, Trips and Falls

– # 2 Exposure - Pools and Spa

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CC&R’s – Insurance Section – Property

� Property Requirement– Common Area & Association Property

– Commercial Units

– Landscaping

� Verbiage to Note– The HOA’s coverage is Primary – Noncontributing

– Waiver of Subrogation – HOA is waiving it right to recover damages from causing party (members/owners).

– May call for Endorsements – Inflation Guard, Ordinance or Law, Replacement Cost

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CC&R’s – Insurance Section – Individual

� Individual Requirements

– Detail what the owner has a right to insure from a

property standpoint

– Identify what the owner does not have a right to insure

– Liability Insurance – Personal/Business

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CC&R’s – Insurance Section – Fidelity Bond

� Fidelity Bond – coverage of losses resulting from

dishonest or fraudulent acts on the part of anyone who

handles or is responsible for funds held or administered by

the HOA, including directors, officers, trustees,

employees or volunteers.

� Coverage should include:

• Employee dishonesty

• Forgery or alteration

• Theft

• Disappearance & destruction

• Computer fraud

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CC&R’s – Insurance Section – Directors & Officers

� Directors & Officers – Insures the Associations Directors

and Officers against liability for their negligent actions or

omissions while acting in their capacity.

� Most carriers offer an endorsement to add the property

manager.

� Claims are either Monetary or Non-Monetary

� 75% of Claims are Non-Monetary

Directors & Officers cont.

� Common Misconceptions

– If I don’t do anything wrong, I won’t get sued.

– My neighbors are my friends. They would never think

of suing me or the association.

– My community manager will handle any potential

lawsuits.

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Directors & Officers cont.

� Remember:

– A complaint does not have to have any basis in reality

in order to become a lawsuit.

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Directors & Officers cont.

� The Most Frequent D&O Claims:– Breach of Fiduciary Duty

– Breach of By-Laws

– Assessment Disputes

– Discrimination Allegations

– Employment Disputes

– Election Disputes

– Challenges to Architectural Review Decisions

– Insured vs. Insured Disputes

– Third Party Contract Disputes

– Pet Related Disputes

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CC&R’s – Insurance Section – Workers Compensation

� Workers Compensation - Workers’ compensation is a "no

fault" system in which injured workers receive medical

benefits no matter who causes the job-related accident. If

an illness or injury is job-related, the injured worker is

guaranteed medical care and may receive monetary

awards for disability and job retraining. In exchange for

these guarantees, injured employees are barred from suing

their employers and co-workers.

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CC&R’s – Insurance Section – Review of Insurance

� Review of Insurance – Typically there is a provision that the board shall review the adequacy of all insurance at “least” once a year.– Is that happening within your Accounts?

– If so, is it documented in the minutes?

– What’s the consequence if the HOA is not properly insured?

– Garbage in…Garbage out

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Interior Coverage Insurance Options

� Bare Walls Coverage

� Original Specs Coverage

� All-in Coverage

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Bare Walls – There is no coverage for the individual unit. The insurance

company will be responsible up to “Unfinished” Drywall with electrical and plumbing stub-out.

� Advantage– Loss occurring within the unit

will be the responsibility of the unit owner and/or their personal insurance policy.

– This reduces the amount of potential claims that could have an adverse effect on the HOA’s renewal premium’s.

� Disadvantage– Failure to recognize the need

for this coverage where it exists can lead to uninsured losses.

– The Board of Directors, Property management company and insurance Agent can be subject to legal action.

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Original Specs – Original specification requirements dictate that

the association is responsible for all real property, regardless of location or classification, but only the kind and quality originally installed by the association developer and/or required in the bylaws.

� Advantage– The Building limit is available

on a blanket basis for all unit-owner claims

– Unless the Association is under-insured, it is unlikely the insured will ever exceed their limit

� Disadvantage– Failure to recognize the limit

of this coverage where it exists can lead to uninsured losses.

– The Board of Directors, Property management company and insurance Agent can be subject to legal action.

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All-in – Condominium associations are responsible for insuring common

elements, limited common elements and all real property that makes up a “unit.” This means the master policy will insure any improvements to the building made by unit-owners.

� Advantage– The Building limit is available

on a blanket basis for all unit-owner claims

– Unless the Association is under-insured, it is unlikely the insured will ever exceed their limit

� Disadvantage– This is the most expensive of

the three options.

– In the event of a total loss, the building limit adequacy could be jeopardized if the limits were not increased to include the entire unit-owner exposure

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Conclusion

� Know your HOA’s Insurance CC&R’s section

� Do not confuse the Maintenance section of the CC&R’s with the HOA insurance responsibilities

� Make sure your current HOA Insurance policy is in alignment with the CC&R’s

� Make sure you have the appropriate “interior unit” coverage option in place

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Obtaining Bids

� The Right Bid Information

– Brief Outline - # of Units, Year built, Construction Type (Structure & Roof), any improvement to the building, Amenities ( Pool, Spa, Tennis Court, Gym, Rec Room, Club House, ect.)

– At minimum, the insurance section of the CC&R’s

– The site plan or plot plan

– Current three year loss runs on Carrier’s letterhead

– Association’s current budget or financial statement

– It’s never to early to get the bid process started

Definitions

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� Insurance - Insurance is defined as the equitable transfer of the risk, from one entity to another, in exchange for payment (Premium).

� Peril – The causes of loss (fire, lightning, wind, hail, flood, etc.).

� Subrogation - Refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim.

� Indemnify - To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril.

� Claims-made Coverage - Coverage will respond to incidents arising on or after the policy retroactive date and which are reported during the term of the policy.

� Occurrence Coverage - Coverage will respond to incidents arising from the coverage period - regardless of when those claims are reported.

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Q & A

Vincent Marciano

866-729-5390

505-490-0182

marcianov@saxagency.com

http://www.saxinsurancenm.com

THANK YOU!