CONDO ASSOCIATIONS
BY : SEAN M . AHERN , CIC , CIRMS , VICE PRESIDENT , JGS INSURANCE
“ Insurance premiums continue to increase for condominium associations ”
Michael Flippin , property manager of Integra Management , “ Putting Band- Aids on a bad roof leads to recurring leaks and maintenance issues . Owners often get frustrated and upset that they continue to suffer damage and inconvenience . By utilizing an engineer and doing the roof replacement right the first time , you will see a drastic decline in the number of maintenance requests .”
Insurance companies feel the same way . Underwriters reward associations that take proactive measures with better rates and frown on those who make repairs “ as needed ” ( i . e ., after damage has occurred ). If an association fails to maintain the property and then submits claims for water heater bursts or ice damming damage , those associations are considered to be using its condo insurance as a “ maintenance policy .” Insurance is designed for a sudden and unexpected loss , not for losses which could have been prevented if proper maintenance efforts were performed .
Steven Baroncini , vice president of claims of Greater New York Mutual Insurance Company , takes it a step further . “ In terms of adjusting claims , aging condominiums present a host of coverage issues that may require more than what a simple adjustment can accomplish . Sometimes , experts need to be brought into a claim ’ s investigation to help provide a more accurate determination of causation , especially when distinguishing a sudden and accidental loss from long-term , agerelated damages .”
Owners in high-rise buildings , especially older ones , can face repair bills in the millions of dollars . The failure of original equipment , such as risers ( large pipes which carry water to the highest floors ), can result in leaks and bursts . Though there are newer , more modern solutions to reline the interiors of the pipes , the expense is still great . Insurance companies , as a provision of providing coverage , insist that these pipes be repaired or replaced to prevent water and mold claims . If funds have not been reserved , the association must assess unit owners or take on a new loan to get the job done .
Since there ’ s only a handful of insurance carriers available to insure a condo , associations have no choice but to comply . If these carriers get hit with too many claims , they ’ ll pull the plug on your association , leaving only the excessand-surplus ( E & S ) market to provide coverage where you will typically pay a greatly increased premium .
THE GORILLA IN THE ROOM Associations should hire an engineering firm , experienced in condominiums , to review their buildings and prepare a reserve study . They should then work closely with their property managers to face the challenge . According to Bruce Young , “ Reserve studies are a great tool to give an association a picture of how many years of useful life exist for just about every capital item in the association — swimming pools , garages , roofs , tennis courts , sidewalks , asphalt streets etc . They provide approximations of the monies needed to make those repairs or replacements at a future date .” The board must then convey and drive home this information to unit owners and make a strong stand to collect the funds needed in relatively small increments in order to avoid a painful , lump-sum assessment .
Insurance premiums continue to increase for condominium associations , due in most part to worldwide pressures . As Michael Flippin points out , “ Many people overlook how the lack of maintenance impacts insurance claims .”
Without proper maintenance , insurance claims will become more frequent and probably increase in size . The end result will be higher insurance premiums . Boards of directors , with the help and guidance of their property managers , must make the tough decisions for the continued success and well-being of their associations .
WHAT CAN BE DONE ? JGS Insurance , with our staff of over seventy-five insurance professionals , specializes in producing comprehensive insurance programs for community associations . We present your association to prospective carriers , emphasizing all the good things your association has accomplished . By interviewing the property manager and members of the board , we can learn about the improvements made to the property which will have a positive impact on future losses ( and premiums !). In addition , we leverage our relationships with carriers in order to secure excellent coverages at the best possible price .
The gorilla in the room must be taken care of and we can help . He ’ s not going to just get off the couch and leave !!! +
In 2001 , Sean 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 .
SPRING 2017 | 29