RISK MANAGEMENT
4 . Follow the reserve study , but be prepared to move forward ahead of schedule . It is not uncommon to begin to see failures of components one-to-five years prior to a scheduled replacement . If a roof , for example , is scheduled for replacement in five years but weather conditions have caused early failure resulting in water infiltration and unit damage , the roof should be replaced sooner to avoid more costly expenses including insurance losses and self-insured deductibles .
5 . Remember that the insurance program is not a maintenance contract . Insurance is intended to respond to losses of a direct , physical nature that are sudden and accidental . Losses from ongoing leaks and failure to maintain may not be covered or may garner only limited coverage .
6 . Consider group purchases of inunit components when relying on owners to do regular replacements and repairs can result in certain loss . High-rise associations that are seeing a spate of condensate line leaks or water heater bursts , for example , would do well to consider group service agreements where all the condensate lines are cleaned prior to air conditioning season . Group water heater replacements , too , can yield a cost savings while avoiding costly water heater failures . While this may seem like an enormous effort , it ’ s far easier than managing a loss and the inconvenience and expense that can impact many units and common areas .
7 . Work with your attorney when it comes to the Association ’ s right of entry . Many Boards are reluctant to enter units or believe they don ’ t have the power to make proactive repairs . Maryland law , for example , includes among the broadest right-of-entry laws in the country , and most bylaw language allows an Association to make repairs or compel owners to make repairs and replacements to avoid losses .
8 . Work with your insurance professional and don ’ t be afraid to ask questions about Property Coverage limit adequacy . Regardless of state-specific laws , obtaining a certified appraisal can be very helpful if you are unsure of your building ’ s replacement value . Ask questions about how the buildings are insured . Unless an association has limited coverage due to loss frequency and severity or some exposure that limits coverage , the vast majority of Property policies available are written on either a Replacement Cost basis ( coverage up to the policy limit absent depreciation ), an Extended Replacement Cost basis ( adds an additional 25 %, 50 %, or more of the coverage limit in the event additional coverage is needed ), or on a Guaranteed Replacement Cost basis ( which affords property coverage without limit or cap regardless of the limit used for rating purposes ). All options should be based on as close to 100 % of the blanket replacement limit as possible , and coverage ideally should be written on a blanket basis , which allows for the full limit of the policy to be applied to any given loss , as well as on an Agreed Amount basis , which waives any co-insurance .
9 . Resist objecting to your agent ’ s or your carrier ’ s application of a building value increase . Costs of building supplies and services are on the rise , and valuation
increases should be expected . Smaller valuation increases at annual renewals can help to avoid larger increases that can impact premiums and budgets . Your agent can discuss with you why a valuation increase is being applied .
10 . Create an environment of inclusion and then work together . Too often in community associations , resistance , lack of trust , misunderstandings , and personal agendas prevent otherwise lovely communities from succeeding and moving forward , which can result in resignations of experienced but frustrated volunteer board members and low interest in volunteering among the rest of the community . Communicate to owners and volunteers alike that the association ’ s goal is to remain healthy and vibrant for many years to come . In making and fulfilling those goals , members ’ investments are protected . But as Benjamin Franklin was so keenly aware , failing to plan is planning to fail . +
BY : ROBIN MANOUGIAN , CIRMS VICE PRESIDENT JOHN MANOUGIAN INSURANCE AGENCY , A DIVISION OF JGS INSURANCE
Robin Manougian is Vice President of John Manougian Insurance Agency , A Division of JGS Insurance , in Silver Spring , Maryland , and is a 13-year member of the Community Associations Institute ’ s Maryland Legislative Action Committee .
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