Condo Media - September 2012 - 23

an inexpensive coverage that can come in handy in a sticky claims situation.

Directors and Officers Liability
As a member of the board of trustees, you give much of your free time, privacy and patience to serve your association. The decisions you make as a collective have effects throughout the community, as well as outside of the association’s “walls.” The decision to hire one contractor over another, enforce bylaw rules and even select proper coverage for your association’s insurance needs all fall on your lap. Unfortunately all of this hard — and sometimes thankless — work puts you at personal risk come time for a lawsuit. You, as a board member, can be personally named in a lawsuit based on decisions you have made. For example, you have a no-pet policy, and one of your residents is a professional dog walker who occasionally brings her work home with her. Obviously this is a clear violation of the rules, but your decision to ban him or her from doing this has caused them to lose clients and revenue. When this resident sues the association, they name you, Jane Doe board member, personally for your role in the ban. Whether the lawsuit will hold up in court is important, but even still, the damage will have been done the instant you are named in the suit. Hopefully, most of you are saying to yourself, “We have D&O coverage. Next paragraph.” But not so fast. Not all policies are created equal for this insurance. Will your insurance company begin payments on a “first dollar” basis; or rather will they reimburse you after the fact? How is your lawyer paid? Is that covered in the policy, or just the settlement? Is your management company covered under this policy, or do they need their own coverage? Most, if not all, carriers will cover the settlement up to the policy limits. Where the difference lies is when they pay, and if lawyers, court fees and other incidental costs are

included. It is important that a full rundown is given on what coverage is provided so that the association can make an educated decision as to the amount of risk they retain and how much they pay to transfer the risk to the insurance company.

Ordinance and Law
Say you’ve had a fire in your condo, about 40 percent of the building is affected, and your building insurance

age pay for this? No. Normal building coverage will only pay for repairs to the damaged portion of the building, no matter what the town decides. Coverage for the demolition and rebuilding of undamaged building portions can be found in the ordinance and law section. However, it is not included on all policies. There are policies that have coverage for the entire building amount, cost to bring up to code, demolition of

will cover rebuilding the damaged area. If all claims were this cut and dry, it would make life much easier, but they rarely are. Your building was built in the early 1900s, and building codes have changed since then; the town or city orders that all the wiring be replaced and brought up to code, or that studs be moved and added throughout the entire building. Who pays for this? Without ordinance and law coverage, all these costs would fall on the association’s reserve, if one exists. The city will not allow your building to be used until these updates have been completed, leaving the entire community without homes. What if the town deems that too much of the building is damaged and the remainder of the building needs to be demolished, including the undamaged portion? Will the building cover-

undamaged portions and repairs. And there are some policies that offer none. Depending on the age of your building, how often updates have been performed and code laws in your area, this could be a very important aspect of your insurance. Though the building and liability portions of the policy can be considered the “guts” of your coverage, they only tell part of the insurance story. Making sure that a policy is tailored to your specific needs is critical in the selection of a proper insurance program — one size does not fit all. I suggest careful review of your policy, and a more in-depth checklist be asked of your agents. It’s always better being safe than sorry. CM Brendon Kilcoyne, CIC, is a sales executive with H&K Insurance Agency, Inc. and a Certified Insurance Counselor.

CONDO MEDIA • SEPTEMBER 2012

Condo Media - September 2012

Table of Contents for the Digital Edition of Condo Media - September 2012