W
hile attending one of the
“Zoom Rooms” at the recent
story was told about how a homeowner’s association had their insurance cancelled due to a claim. Tis association could no longer find coverage in preferred markets (admitted Travelers) and was forced to get their insurance from a surplus lines carrier. Not only price, the added insult was that the claim was a result of an out of control car speeding down a street adjacent to the association and crashing into an association building – something impossible for the HOA to control.
Te question then came up – what now? Once you have entered what we call the “surplus and excess” market – the carriers that folks go to when they can’t get coverage elsewhere – are you stuck? What can as association do, especially when the claim that landed them there originated outside the HOA’s boundaries?
Te bad news is they will likely be using a surplus or excess lines carrier for at minimum a year or two. Te good news is that yes, there are positive steps your association can take right now. Te better news is that these steps can potentially help HOA’s already with preferred carriers keep their premiums down.
1. INCREASE YOUR DEDUCTIBLE- Most of us understand that as deductibles go up, premiums go down. Additionally, if your as- sociation has a clear protocol that states unit owners are responsible for deductibles for claims relating to their unit, they are less likely to file frivolous claims and are more likely to have personal homeowners insurance that may provide coverage for the HOA’s deductible. Bot- tom line – higher deductibles lead to cleaner loss histories.
2. CLEAN UP YOUR LOSS HISTORY- Order a current loss history for at least the last 5 years (longer if you know there are claims there). If claims are still open, see what needs to happen to get them closed. If you see that there are still reserves listed for a closed claim, contact the adjustor or agent to get those reserves removed. To get back into the preferred market, you will likely need a few years with no new losses and the old claims to be closed.
3. LEARN FROM YOUR LOSS HISTORY- Looking at the loss his- tory report, do you see a pattern? Are there multiple water losses? Have there been fires with similar causes? If so, then your board of directors needs to be proactive. What steps can you take to prevent future claims? Hydro flushing or sealing the plumbing lines might help. You can also add a separate, higher deductible for water losses. Run stories in your newsletter about fire safety.
Install fire extin-
insurance agent so they can make the case for you at renewal time.
4. MANAGE WHAT YOU CAN’T CONTROL- Looking back to that runaway car, what can the HOA do about that? Have the board of directors communicate with the city if there is a speed problem on surrounding roads. Maybe the city can install a radar sign that shows the speed cars are traveling or install speed bumps or round-abouts if speed is a dangerous issue. Again, share this information with your insurance agent (even if the city didn’t act on your suggestions) to show that the board is being proactive.
When you approach your renewal date, be sure to have all this information communicated with your insurance agent so they can try and get coverage back in the preferred markets. Depending on your loss history, it may take a few years, but it is better to start now with these preventative measures.
- four years in management and thirteen years as an insurance agent. Her goal is to help managers and board members understand the insurance needs of their associations, both legally and logically. Terri comes from
a customer service background and holds a high standard for herself in this regard. A graduate
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