Community Associations and Property Insurance: Many Questions, Many Concerns
Last Thursday, I was fortunate to participate on a panel at State Senator Eleanor Sobel’s request to discuss property insurance issues at the Hallandale Beach City Hall.
Joining me on the panel were:
- Robin Smith Westcott, Florida’s Insurance Consumer Advocate
- Alexander Dopazo, President of the Latin American Association of Insurance Agents
- Carlos Lacasa, former chairman of the Board of Governors of Citizens Property Insurance
- Bill Newton, Executive Director of the Florida Consumer Action Network
- Jay Neal, President and CEO of the Florida Association of Insurance Reform (FAIR)
Naturally, there was a lot of discussion about rising rates, shrinking coverage (particularly regarding sinkholes) and the fiduciary duties volunteer board members have when selecting insurance coverage and pursuing claims for damages. Not surprisingly, most of the people in attendance and many of the panelists found it difficult to easily understand the terms and provisions of their insurance policies. The suggestions provided were quite good including the need to always shop around for the best agent and the best coverage which seems to be such basic advice but is not all that common for some boards who have become complacent over the years with both their agents and their coverage.
So what did I have to say about property insurance and Florida associations?
One of the biggest problems for shared ownership communities is the fact that the policies they purchase to protect the common areas falls within the commercial-residential category. As a result, association boards have fewer consumer protections when it comes to understanding the terms of those policies. Unlike a purely residential policy, a commercial-residential policy is not required to have the same bold disclosures regarding pricing and terms. In addition, an association’s common property (the roof, the clubhouse, etc.) is not eligible for the mitigation credits that have lowered premiums for countless residential policyholders.
Property insurance concerns for a board of directors include the following:
- How much coverage do we need?
- Can we afford it?
- Do we really understand what our out-of-pocket costs will be if our community does sustain a loss?
- What can we do if our claim is denied or underpaid?
Property insurance concerns for the association members include the following:
- Has our board purchased sufficient insurance coverage for the items for which they are responsible? Incredibly, one Hallandale community was unaware that the condominium president had failed to renew the building’s property insurance policy and the building was subsequently devastated by a fire.
- Has our board comparison shopped for our agent, our insurance company and our coverage?
- Does our board understand how to properly file and diligently pursue a claim should we suffer a loss?
- Assuming our board is not comprised of insurance experts, have they reached out to the proper professionals to guide them with the foregoing decisions?
- How much could I be forced to pay via special assessment for our deductible, uninsured losses, etc.?
Association directors and managers continue to advise that insurance premiums are the single largest line item on their budgets each year. Since that doesn’t seem likely to change any time soon, doesn’t it make sense for all association members to become much more engaged with their public policy makers regarding insurance availability and affordability?