What a Co-Op or Condo Board Member Should Know About Insurance

If your building is managed by a professional property management company, they are probably the ones handling the insurance for your condo/coop association. Having a professional property management firm handling your insurance, doesn't mean that the board members don't have to know anything about insurance, after all they are the ones making the final decisions on the insurance, and they're the ones that will be effected if anything was not right on the insurance policy. Here are just a few things you should know when it comes to the insurance of your condo or coop association.

Shopping for Insurance

Make sure that your managing agent markets out your insurance policy every year. Rates change from year to year, so you have to make sure that you're getting the best policy out there. It's very important that he should be giving it out to at least 3 insurance brokers. The time to start shopping for insurance is 90 days before your renewal date. This way the brokers have enough time to negotiate coverage & pricing with the underwriters. It's also very important to make sure that the managing agent is not getting any kickbacks from the insurance brokers, it is illegal and it creates a conflict of interest, so you're not getting the best insurance policy that your condo/coop deserves. Insurance

Company Rating & Stability

It is important to make sure that your carrier is an "Admitted" insurance company in your state. This will help you in the event that your insurance company denies a claim, or becomes insolvent. The insurance company should have a rating of at least 'A' or better, rated by A.M. Best rating. You could check the company's rating at ambest consumer's website. The size of the insurance company is another important factor to consider. Make sure that they are a big insurance company and have enough money in reserve. You'll find the size on A.M Best. The biggest size is XV.

General Liability Insurance

Over the years, insurance companies have been adding exclusions to their GL Insurance policies. Some of the most common exclusions to look out for are; 1) Lead & Mold Liability Exclusion - This will exclude any claims for lead & mold contamination. Any building built prior to 1980 should make sure not to have this exclusion. 2) Employment Practices Liability Insurance (EPLI) Exclusion - This will exclude any litigation for employment related claims, i.e. minimum-wage discrimination, wrongful termination, etc. 3) Assault & Battery Exclusion. Also, make sure to add 'Hired & Non Owned Auto' coverage to your GL policy. This will cover third party damages, in the event of an accident caused by you or anyone else, while driving for business use. i.e. if the superintendent of the building causes an accident, even with his own car, while going to the store to pick up building supplies, the association is then liable for those damages, and the auto insurance carrier will subrogate against you.

Workers' Compensation

When your coop or condo building has employees, we all know that you need to have a workers' compensation policy in place. But what if your building does not have any permanent employees? Even if your building doesn't have any employees, you should still carry a workers' comp policy, for those times that a laborer is hired, to do any type of work for your coop or condo building. This will protect you against any claims from injured workers. This is generally not an expensive policy, because the rates are based on the amount of annual payroll, (which is obviously low in your case,) and also the workers comp rates are regulated by the state.

Umbrella Insurance

Umbrella/Excess insurance is very important for your coop or condo building. There are programs out there, which will cover you up to Two Hundred Million Dollars ($200,000,000), at a very manageable premium. Sometimes you might find that your management company has their own master umbrella policy, which covers all the buildings that they manage. This is not good for your building for 2 reasons; 1) the banks might give the unit owners a hard time with mortgages if you don't have your own umbrella policy. 2) You might be overpaying, since your rates will be affected by claims from any one of the other buildings, covered under the same umbrella insurance policy. If you do end up being covered through your management company's master policy, you need to make sure that the policy has a per-location aggregate limit. This will provide separate limits to each building, and will avoid the limits to be exhausted from a claim at one of the other buildings.

Tenants Liability

Your management company should make sure that all unit owners or share holders carry their own property and liability insurance. This will prevent any claims, arising due to the negligence of a unit owner or share holder, go against the condo or coop association.

Protecting the Board Members with a D&O Policy

And most importantly, make sure that as a condo or coop board member, you are personally protected against any law suits that might be filed against you. You should have a Directors & Officers liability Policy, which will prevent unit owners or share holders to go after your personal assets, in the event of a claim.

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