When levying a special assessment, an association must send the owners a notice at least thirty days before the assessment due date. This notice normally includes the amount of the assessment and why the special assessment is needed. This letter will be the first thing used by a carrier to determine if the special assessment is covered under the owner’s loss assessment endorsement. So, if the special assessment is needed to pay for repairs because of a high deductible, the notice should say so. The notice could also encourage homeowners to contact their agents about making a loss assessment claim.
In my experience, the homeowner’s insurance carriers want back-up for the loss assessment claim. They may need information about the claim tendered to the master policy, the coverage letter from the master policy, the invoices related to the casualty loss, or the minutes describing the imposition of the special assessment. Board members and community managers can save some time by providing these documents in a depository that the homeowners can access when making their claims. A link can be provided in the special assessment notice.
When drafting the special assessment notice, the author should not focus myopically on triggering loss assessment coverage. The priority is to make the notice clear so owners understand the amount of the assessment and the deadline. Consideration should be given to ensure that the letter is not misconstrued as a special assessment needed for deferred maintenance or “critical repairs.” To better appreciate the consequences of a poorly worded notice, please refer to my January/February 2025 OC View article about how special assessments may impact an underwriter’s decision to offer a mortgage, which can be found at
www.caioc.org/chapter-magazine.
Loss assessment coverage is relatively
homeowners are unlikely to purchase it what it
if
cheap. However, they don’t know
is. A board can really help the homeowners by
communicating the value of this additional insurance coverage and should be able to lean on the association’s insurance agent for help in making the message clear.
SIDE NOTE – RELOCATION COSTS
We all know the cost of goods and services is increasing. The cost of repairs after a casualty loss is increasing, too, particularly when you consider the need for mandated testing related to asbestos, lead, and other potentially toxic substances. Insurance claims, permits, testing, repairs, inspections – these all take time. But in my thirty years of representing homeowners associations, I have never worked with a client on repairing fire damage in which all the displaced owners had sufficient insurance to cover their alternate housing and relocation costs. I saw an owner file for bankruptcy over this mistake. I saw another resort to death threats because of the stress displacement had caused him and his family, who had worn out their welcome with friends and family and could no longer afford a hotel.
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