Condominium Association Insurance
Photos by Gary Elliott | Dockside

Condominium Association Insurance


Gary & Sandy Elliott

The condominium association insurance policy is usually one of the largest line items of the association budget and proper coverage is an important fiduciary responsibility of the board of directors.

Florida’s condominium laws dictate who covers what for the property insurance perils of loss, other than flood insurance. Coverage for “paint in” is provided under the condominium unit owners HO6 policy. Coverage for “drywall out” is provided under the condominium association’s property insurance policy and may include things like foundation walls, floor framing systems, exterior wall framing, interior wall framing, roofing, windows, electrical wiring within the walls, plumbing to the unit and exterior painting. The replacement values for this coverage are best determined by independent third party appraisers.

General liability insurance covers the association from liabilities that arise due to bodily injury or property damage caused by a negligent act of the condominium association. Typical events such as slip and falls, tripping over raised sidewalks or pavers and pool gates not locking properly fall in this category. General liability comes with a separate coverage called medical payments, which help take care of medical bills regardless of negligence. Another endorsement is hired and non-owned auto, which covers the association while someone is doing business for the association in a non-association owned vehicle, such as taking checks to the bank.

Directors and officers policies help protect the board members from certain legal actions due to alleged wrongful acts while performing their duties for the association. Even though they are not paid for these positions, board members can be vulnerable and personal assets might be at risk. An option on many D&O policies is called EPLI (Employment Practices Liability Insurance), which covers issues involving harassment, wrongful termination or discrimination.

Fidelity bond coverage for employee dishonesty protects the association from things such as theft of monies, forgery and alteration, computer fraud, fund transfers or embezzlement. Coverage can also extend to the property manager and their employees. Florida law requires a condominium association to carry this coverage with limits equal to the maximum amount of money the association has in its operating and reserve accounts at its peak collection time.

Workers compensation insurance is important even if the association has no employees. It is fairly inexpensive for the protection it provides. With no employees, coverage is purchased on an “if any” basis. This insurance can pick up losses from a contractor who unknowingly had their policy lapse and one of the contractor’s employees was injured on association property.

An umbrella liability policy is a good investment for an association. This provides excess liability coverage over the general liability, directors and officers, and workers compensation. Overall, this protection can be fairly inexpensive for the amount of coverage purchased, which can range from a $1 million to $50 million or even higher. The appropriate limit is determined by the overall assets of the association.

Finally, cyber liability coverage can protect associations from a breach of private confidential information it may be holding for the members of the association such as social security numbers or credit card numbers. The policy could cover notification costs, credit monitoring, costs to defend claims by state regulators, fines and penalties, and loss resulting from identity theft.

Lee Gorodetsky and Jason Huff with Accentria Insurance (239-333-4833) contributed to this column.

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