Don't Let Your Insurance Coverage Go Up in Flames
David Rainer, CMCA® FirstService Residential, AAMC
Michael Berg, CIRMS, CMCA® Berg Insurance Agency
It's spring and it's beautiful outside. You have a fresh cup of coffee and you settle in at your computer ready to face the challenges of the day as a community manager. No need to worry yourself with the possibility of a wildfire threatening your community anytime soon, right? Wrong! The time to start thinking about wildfire preparations is now, because if you wait until the weather warms up, it is already too late.
You may be familiar with a number of articles previously published in the OC View that discuss mitigation of wildfire risk, maintaining compliance with fuel modification plans, and keeping your areas clear of potential fuel for a fire. Ideally, you are already discussing with your landscape supervisor the schedule for carrying out these necessary steps. You want to be ready when the temperatures rise, the days get longer, and moisture levels drop.
But there is another level of protection that we sometimes take for granted that perhaps we can no longer assume is a given - maintaining insurance sufficient to cover potential claims from a wildfire. Maintaining adequate coverage is absolutely necessary to ensure that the community can rebuild and survive after a catastrophic wildfire.
The most obvious coverage would be simple fire insurance. This is included in property insurance policies, and is the quintessential covered event. You want to make sure that all common area components, structures, and any other components required to be insured by the association under
the governing documents that can be destroyed in a fire are covered and correctly valued. Property appraisals, replacement cost calculations, and reserve studies are important tools used by insurance professionals and carriers to estimate property insurance needs.
Insurance carriers are concerned with a great number of things when deciding whether to bind or renew coverage. How close is the community to open space? Are eaves and roof vents to common area buildings clear of debris? Are the chimney caps up to code? When were the common area roofs last completely replaced? Are wood components treated with a fire retardant coating? When flames are 50 feet tall, it is easier to understand why the answers to these questions are important to the insurance carrier in deciding whether covering the community is a good risk. What is less obvious, but equally important, is how likely an ember is to land on an exposed piece of flammable material. An ember landing on an exposed, untreated piece of wood is just as likely to start a structure fire as those 50-foot-tall flames. The insurance carrier will want to know how good a job the board of directors has done mitigating this exposure.
But fire insurance is not the only insurance coverage that becomes crucial if a wildfire sweeps across your community. Liability insurance will play a major part in the aftermath of an extensive fire. In particular, directors and officers liability insurance (D&O) will be triggered. You might ask: why the D&O policy? The board did not decide to have a wildfire so how could a claim be made against the policy designed to cover the
16 May | June 2022
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