Understanding Community Insurance Prepared by: AssuredPartners 4600 S Ulster St. 14 th Floor Denver, CO (303)

Insurance Property vs. Liability Property Liability Building * General Liability Business Personal * Umbrella/Excess Property (BPP)* Directors & Officers Ordinance or Law* Hired & Non-Owned Boiler & Machinery Auto Fidelity/Crime

Property Coverage  Building Coverage  A permanent structure including anything that is permanently affixed to that structure.  Property that is used to maintain or service the building(s).

Blanket Building Limit The full building limit of the policy is available for any damaged portion of the property within the Association. Example: Without Blanket Building Coverage: $750,000 Building Limit $250,000 $250,000 $250,000 *The policy will pay a maximum of $250,000 per location.

Blanket Building Limit With Blanket Building Coverage: $750,000 Blanket Building Limit { $750, } A Blanket Building Policy will pay the policy limits for any single location.

NOTE: The Trend in the market is to breakout all Permanent Structure items such as fences, monuments, signs, and even light posts if the association is responsible for them. These may need to be assigned a dollar amount to cover them properly.

Business Personal Property (BPP)  Property that is not permanently attached or used to service building property.  This coverage most commonly pertains to the clubhouse/lobby amenities such as furniture (indoors), exercise equipment, electronics and appliances.

Ordinance or Law Coverage – Three Parts  The purpose of insurance is to replace damaged property with the same like kind and quality that existed prior to a loss.  Older buildings may present unique challenges requiring additional coverage such as Ordinance or Law Coverage.

Coverage: A.Partial Loss can be turned into a Total Loss B.Debris Removal C.Increased Cost of Construction Coverage A: (Rare)  A portion of a structure that is significantly outdated, but unaffected by a loss occurring to its surroundings, may cost more money to restore than it would to tear it down and rebuild from the ground up.  This coverage part will provide insurance for a building that is intentionally demolished. Coverage B: (Rare)  Removes the debris from the portion of the building intentionally demolished. Coverage C: (most commonly used)  Pays for the increased cost of construction associated with bringing an outdated structure up to current building code after a loss.

Boiler and Machinery (Equipment Breakdown)  A property insurance policy is intended to pay for a loss resulting from a sudden and accidental occurrence.   Expensive and vital components of a building can be damaged as a result of internal malfunction.   Boiler and Machinery or Equipment Breakdown Coverage is intended to protect those working systems. Such as:  Heating, Ventilation, and Cooling Units (HVAC)  Elevators (make sure your policy includes these)  Pool Pumps  Etc.

Fidelity/Crime Coverage (Employee Dishonesty)  Insures the money collected through general assessments and the money within reserve accounts from theft, forgery, etc.  Required in nearly every Association Declaration under the Insurance Section.  FHA Requirements and DORA Compliance  ETF Protection and Cyber Crime *Important to note:  Not all Employee Dishonesty policies are intended to cover a volunteer board of directors, committee members and other non-compensated individuals.  If not written correctly, coverage could be declined in the event of a loss.

Liability Coverage General Liability  Provides coverage for damages causing bodily injury or property losses that result from the NEGLIGENCE of an Association. Rules of Negligence  Negligence occurs when an individual has a duty to act, fails to act or did not act in accordance with standards, caused damage and damage actually occurred. In some instances, multiple parties are at fault; this is referred to as contributory negligence or comparative negligence.  Most commonly written with a $1,000,000/$2,000,000 limit. (Higher limits are available, but it is better to put the additional premium towards an umbrella liability policy)  $1,000,000 per occurrence  $2,000,000 aggregate  Examples: Slip and Falls, Pool related injuries, Playground related injuries

Directors and Officers (D&O)  Intended to protect Board Members, Committee Members, and Volunteers from law-suits alleging WRONGFUL ACTS committed by Board of Directors.  D&O coverage should include protection for the Property Manager and Property Management Company. *Very Important to note:  Not all D&O policies are alike and may exclude important coverage such as:  Non-Monetary Suits  Discrimination  Sexual Harassment  The Developer acting in the capacity of a board member  AND coverage for the Property Manager and Management Company.

Umbrella/Excess Liability  Intended to provide additional liability coverage in the event that an Association or the Board of Directors is successfully sued for an amount greater than the underlying liability limits.  Often times required in the Association Declaration under the Insurance Section.  This coverage is highly recommended for all Associations, but more importantly for any Association containing attractive nuisances (pool, pond, stream, playground, etc.). *Important to note:  Not all umbrella/excess liability policies extend over all the underlying liability policies.  In particular, it is important to verify whether or not coverage is extended over the Directors and Officers policy.

Hired & Non-Owned Auto  Provides liability coverage to an Association who is named in a lawsuit that involves a vehicle (owned by a separate entity) that is operating on Association business or Association Property. Example:  A board member is driving to the Management Company to sign a check on behalf of their Association and is involved in a major accident for which he or she is at fault.  During the discovery period it is noted that he or she is on Association business and thus the Association is listed in the lawsuit.  Non-Owned Auto coverage would provide defense costs to the Association for such an event.

Your HO6 Policy  The HO 6 form covers the real property interest and the personal property of insureds who own a unit in a condominium or share an ownership interest in a cooperative building. It also provides personal liability coverage and medical payments coverage. This form is similar to the HO 3 in many ways but provides less real property coverage since it is designed to coordinate coverage with a master policy covering the structure and common areas that the condominium or cooperative association purchases.

Here are 10 steps to Design a Quality HO-6 Policy 1.Take this letter with you and a copy of your covenants to list items not covered by the association. 2. Estimate the replacement costs which you are responsible for including the $5,000 deductible per building. 3. Take a copy of the Master Policy Certificate with you. 4. Total your personal property and round up to be safe. Take your phone/camcorder and video your personal property and the condition of your unit. State the item and its value on the video. 5. Add Special Perils coverage to your policy coverage A changing any perils covered from named perils to all risk. This will expand your coverage typically to include water damage, roof leaks. This also should improve your coverage regarding loss assessment and coverage A by broadening both forms.

6. Add Special Perils coverage to your contents coverage to cover damage for personal property from roof leaks and paint spills etc. 7. Add sewer and drain backup and sump pump failure coverage. You want to do this for two reasons: first, to cover direct damage to the unit or contents from these two perils; second to broaden the loss assessment coverage to include assessments from either peril. 8. Determine if you need earthquake or flood coverage. 9. Obtain at least $500,000 on liability coverage…and discuss to a level of liability that you feel comfortable with in association with your life style. 10. Price umbrellas these can add additional coverage for items like association volunteering activities, and can cover you if you serve on non-profit activities like working with youth sports or activities where you donate your time.

Claims Property Vs Liability