The HOA Board Quarterly Winter 2015 Issue #12 | Page 11

Balancing Act: Responsibilities in the Association Insurance Program
By Michael Berg

W

hen we last spoke, I talked about the
difference between the property maintenance
responsibility of the association and members, versus
the property insurance responsibilities for each party.
I tried to answer the question, “why is that covered,”
and clarify the questions that many have over why
property attached to the interior of a condominium
unit may be covered on the association policy.
It is common for there to be some imbalance
between what is insured by the association inside a
condominium versus what needs to be insured by
the unit owner. Why would or should the association
be responsible for insuring property attached to the
interior of a condominium unit when the unit owner
is responsible to maintain that property? The short
answer is, because the insurance is required in the
CC&R’s for the association. So, here are some ways
to bring that back into balance:
• Revise the CC&R’s – this is probably the most
difficult action to take. It requires a vote of
the membership, and the responses needed to
approve a document revision (defined in the
CC&R’s) are significant. In addition, a revision can
be time-consuming and costly. But the benefit
of the revision is an update of language that can
allow the association to operate within current
norms, rather than being governed by language
that is years, if not decades, old.
• Review the CC&R’s for the potential to exclude
coverage under the association’s insurance policy
for property on the interior of a condominium
unit – In many instances, especially with older
communities, the insurance that has been
historically maintained is in a form commonly
known as a “walls in” policy. The association
insures property attached to the interior of the
unit, consistent with original instillation. In some
cases, the association also insures upgrades to the
interior of a unit. But it may not be required to.
It’s possible that the first policy placed after the
community was completed included coverage for
interior property because it was conservative to do
so. Also, the issues many associations experience
today, with water losses threatening association
insurability, were difficult if not impossible to
anticipate. Check with legal counsel and see if

the CC&R’s actually require insurance of interior
property.
• Increase the per claim property damage
deductible – This is probably the simplest change
to make, because it doesn’t typically require
a vote of the membership and there is rarely
language in the CC&R’s that limits