Condo Media - February 2020 - 36

Self-Managed Challenges

Insurance is a complex and expensive burden for
condominiums and needs to be handled with the utmost care.
Insurance is a complex and expensive
burden for condominiums and needs to
be handled with the utmost care. The
implications are vast and complicated
regarding insurance coverage, the
association is always one major incident
away from financial ruin, should a fire,
hurricane, earthquake, or some other
peril befall the community.
INSURANCE CONSIDERATIONS
When dealing with insurance,
associations have four major issues
they need to consider: communication,
claims, renewal coordination, and
budgeting. All these issues are
important and are typically handled by
a property manager, however, when an
association is self-managed, it falls upon
the board to supervise these tasks, and it
can prove timely and cumbersome.
Communication is the most
key component in dealing with
condominium business partners,
insurance not being the least of those
partners. The association needs a point
of contact, a spokesperson who has
the authority to make decisions on
behalf of the board, one that speaks
without reproach. According to
policy, all unit owners are considered
"insureds," given this fact it allows
any unit owner the authority to make
decisions regarding the association.
These responsibilities include, but are
not limited to, claim submission and
policy and coverage alteration. It is
near impossible for an insurance agent,
or any other business partner, to attend
every board meeting. We rely on clear
lines of communication to ensure that

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CONDOMEDIA February 2020

policies are in order in terms of scope
of coverage and pricing consideration.
Insurance is a unique purchase, in that
you pay every year for a service you hope
to never use. The only parallel I can
think of is a fire extinguisher. You buy it,
put it in your kitchen, and hope that the
plastic security band is never broken,
and the chemical powder remains in
the extinguisher. Though you never
wish to use your insurance policy or fire
extinguisher, you feel a comfort in them
being there. You know that if the worst
were to happen, you can extinguish
a fire, and if that fails, there is the
insurance policy to restore and return
you to whole again.
Given that all unit owners are
"insureds," it also allows for all unit
owners to have the ability to submit
claims. This allows for a free-for-all of
sorts. If all unit owners have the right
to submit claims, it opens the insurance
policy to be treated as a "maintenance"
policy, causing more frequent smaller
claims. Insurance carriers, in many
cases, prefer larger claims that are
fewer and far between than the small
claims that happen on a more frequent
basis. Claims handling costs money, and
carriers know that the more claims they
have, the less profit they realize.
When a claim is submitted, there are
many facets that must be handled-adjuster selection, remediation, money
allocation and rebuild, to name a few.
Scheduling is key to the completion of
a claim, and the proper allocation of
funding given the emotion of unit owners when they have damage in their
units can be a tricky balancing act.

All units affected by a claim will think
that they should have priority. Managing the emotion and demand of the
unit owners is a difficult balancing act
and can leave many with hurt feelings
and animosity.
There are a few points of communication that hold more weight than
others-claims, policy changes, and
renewals. Renewals are an important
time to verify coverages and ensure
that coverage is proper in both scope
and pricing. The association and
insurance agent must work together
to make certain that the proper coverage remains in force with no lapses. A
lapse in coverage can be damning to
the association-not only will there be
a period with no insurance, but in the
future, other insurance carriers will
question why coverage was suspended,
causing hesitation to quote for the association's coverage.
BUDGETING FOR FUTURE COSTS
If your association is performing all the
functions properly, a budget should be
made annually. This can be challenging,
given the many aspects that go into
running a successful condominium
association. Maintenance, accounting,
legal matters, and special projects
are just a few of the many factors in
determining a budget. Insurance can be
a complicated line item in the budget.
Have rates increased? Did we make
improvements or additions to our
property? Have we placed claims over
the most recent years?
Many considerations go into a
prediction of future insurance costs.
Condo Media - February 2020

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