June 2023

Coordinating and Maintaining INSURANCE COVERAGE in Community Associations By Cheryl Rhine, CIC, CIRMS, EBP, USI Insurance Services

I t is always a good time to talk about insurance, espe cially when this month’s topic is maintenance. Although damage caused by maintenance issues are not insur able events, there is a correlation between the insurance and how you maintain your property. Insurance carriers are tightening their guidelines regarding updates to roofs, electrical, plumbing, etc., so the better job your commu nity association does maintaining their property, the more attractive your community will be to the insurance carriers. Let’s go over what the community association master insur ance provides coverage for and what residents will need to secure to protect themselves. The community’s master insurance is designed to protect the community from losses that arise out of “sudden and accidental” events. For a claim to be paid, all three of the following must be met for coverage to be provided: (1) there needs to be a covered cause of loss; (2) damage must be to insured property; and (3) the amount of damage must exceed the association’s deductible. If ALL three of these are met, the master policy

will respond; if they are not met, the master policy will not respond. When there is coverage afforded based on the above, the community association’s master policy is going to be primary. One of the most common reasons an insurance claim is denied is because the damage was caused by a mainte nance issue. Maintenance issues such as wear and tear, rust corrosion, etc., are exclusions on a policy and damage caused from those issues is not an insurable event (also/ known/as – a covered cause of loss). As noted above, a covered cause of loss is one of the three requirements that must be met to have a potential claim covered by the association’s insurance. If a claim is denied for these reasons, repairs must still be done! In these situations, you will need to refer to your association’s governing docu ments to understand who is going to be responsible for the cost and obligation to do the repairs. In the association documents, there are three definitions that are important, the ownership definition, maintenance definition, and the

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JUNE 2023