Risk & Business Magazine JGS Insurance Magazine Fall 2018 | Page 27

CONDO ASSOCIATION UNDERWRITING
coinsurer. Those who are underinsured
will share in even more of the loss when
insurance settlements cover only a
part of their building’s total worth in
a catastrophe. Therefore, Insurance to
Value is always the prudent path. Having
your buildings appraised is typically up
to you, unless your broker provides this
service. Replacement cost appraisals
should be performed at least every five
years, as rebuilding costs continue to rise.
ORDINANCE OR LAW COVERAGE
When looking at your insurance
coverages and discussing them with your
broker, be sure to pay special attention
to Ordinance or Law coverage. This
separate coverage limit comes into
play especially with older buildings. It
responds to building improvements that
must be made when rebuilding part or
all of the building to satisfy the current
building code. Sprinkler systems may
need to be added, whereas before there
were none. Improved (and more costly)
construction standards and materials
may be mandated, which will require
coverage outside of the building limit.
Losses in the millions of dollars are not
uncommon.
KEEP SMALLER CLAIMS OFF THE LOSS
RUN
A loss run—generated by your insurance
company—is simply a summary of your
association’s loss history over a period
of years and is one of the first and most
important pieces of information an
underwriter looks at when considering
pricing, coverages, and whether or
not to offer coverage. A loss run with
a multitude of water claims, fires, or
slip-and-falls will quickly cause your
underwriter to take a hard look at your
association. The underwriter’s job is
to write and keep good business and
avoid those accounts that will cost his
company money. One of the best ways
to keep smaller claims off the loss run is
to use higher deductibles. Deductibles
ranging from $5,000 to $10,000 are
standard today and serve to reduce
premiums. The old underwriting adage
“frequency leads to severity” holds true
today, and a loss run with many small
claims will concern your insurer.
CONTINUALLY UPDATE AND
MAINTAIN BUILDINGS, ROADWAYS
AND SIDEWALKS
Associations with buildings, roadways
and sidewalks that are not maintained,
repaired and updated regularly can
easily find themselves paying much
higher premiums or losing coverage
with standard carriers. Underwriters
consistently check—through surveys
and physical inspections—for building
improvements and maintenance as one
of the best ways to help prevent claims. If
your carrier has given your association
recommendations for improvement, be
sure to fulfill the requirements quickly
and completely. Associations with
proactive programs, such as water heater
replacement and washing machine hose
replacement, will be looked upon much
more favorably than those without
such plans. Instances of ice damming
must be addressed and corrected, with
documentation of repairs forwarded
to the insurance company. Sidewalk
repair and roof replacement should also
be completed as needed and evidenced
wherever possible.
PREPARE FOR INSPECTION
If an insurance carrier (incumbent or
prospective) makes an appointment
for an inspection, be sure to have the
association looking its best that day. Try
to schedule the inspection on a day other
than garbage collection day (for pleasing
inspection photographs) and make sure
roads and sidewalks are well plowed in
the winter. In warm months, try to plan a
day when grass and landscaping is freshly
cut and looking good.
Potholes and frost-heaved sidewalks, if
any, should always be repaired quickly,
and absolutely before an inspection.
The same goes for any missing siding
or broken windows. Associations with
swimming pools should make sure
depth markings around the pool edge
are clearly marked, and wording such
as “No Diving” should also be included.
Pool rules should be clearly displayed and
enforced. Fences around the pool should
be inspected for unwanted openings and
repaired immediately. Entrance gates
should be equipped with self-closing,
positive latching mechanisms and locked
after pool hours.
Associations with playground equipment
must make sure the equipment is safe
and in good working order, with no sharp
edges or splintering wood components.
Protective cushioning material under
playground equipment must be
maintained regularly, as sand and wood
chips have a tendency to either blow
away or become compacted over time,
significantly reducing effectiveness.
USE A STRONG INSURER AND
AN AGENCY EXPERIENCED WITH
CONDOMINIUM ASSOCIATIONS
A comprehensive review of your
insurance carrier can be found by
consulting AM Best Company, either
in the library or over the Internet. Be
sure to use a company with an “A”
rating, and take a look at the types
of business the carrier writes. Some
companies may come in and drop out of
the condominium business, depending
on results. Try to find a company that
specializes in condos or at least writes a
large number of associations in your area.
Utilize insurance brokers that specialize
in community associations. These
brokers typically have solid connections
and relationships with several carriers
that write this line of business, and if
they’re doing their job, they will market
your association every year looking for
the best prices and coverages available. +
In 2001, Sean Ahern joined JGS Insurance
as a producer and through his commitment
over the years to the NJ Community
Association Institute earned his CIRMS
designation (Community Insurance and
Risk Management Specialist) in 2014. Sean
continues to enjoy developing superior
coverage options for his community
association clients, working closely with
Boards of Directors and other professionals
to meet the challenges presented every day
in the ever-changing world of community
associations.
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