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