to insurers increases if the association is not tracking the lifespan of components and conducting required replacements or periodic maintenance as required. One Orange County community discovered that their fire alarm monitoring company was not repairing or maintaining fire system components when they changed companies and spent more than $100,000 over the course of one year replacing inoperable and failing 15-year- old fire system safety components. The self-inflicted pressure on the board was to do as little as possible to keep reserve expenditures low, nottoincreasefunding to thereserve, and not to raise assessments. The lack of reserve expenditures to replace life safety components could have been flagged by insurance underwriters looking at reserve studies and state mandated annual and five-year inspection reports. Fortunately, repairsweremadebeforeakitchen grease fire set off the sprinkler system and alerted the Orange County Fire Department.
How Old Are Your Buildings?
Older buildings create challenges for insurers. Older buildings may not be up to the current building codes. The insurance industry looks at construction, occupancy, protection, and exposure (COPE) data that changes risk levels and acceptance over time. Homeowners may have saved money by making exclusive use area renovations not compliant with building codes that damaged association infrastructure when the work wascompleted.Historicalorarchitectural valuemay limit what an association can do and be more expensive to repair if damaged. Asbestos, lead paint, outdated water supply lines and failing sewer lines, structural issues, and outdated safety or security measures increase the likelihood of loss and insurer risk. Older buildings carry a higher loss expectancy, and some associations are finding that coverage in the standard markets is no longer available after 30 to 50 years or $100 Million in insured value.
Do Your Association Members Enjoy Barbecuing on Their Patios and Decks?
There are dangers associated with open flame BBQ grills on patios next to wood siding or under wooden decks and on upper-level wooden decks with wood deck or roofing above them. A fire in a BBQ grill can extend into the wood structure of the condominium or home and ignite a building fire. While many might think that newer residences with fire sprinklers are not at risk, a look at the covered patios and upper decks will probably reveal that no fire suppression sprinkler system is outside the residence. This could allow a fire to extend into the residential
building.Community associations should checklocal city ordinances available on the OCFA Planning and Development Services web page and state adopted National Fire Protection Association (NFPA) fire codes.
Do Your Contractors and Their Contracts Pose a Risk to Associations?
Although many CAI-OC business partners may have worked with their legal counsel to ensure their contracts are written to enable work with homeowner and condominium associations, othernon-CAI member companiesmay notbeaware of associations specificcontractand insurancerequirements. Contractors must not have residential association exclusions – especially condominium exclusions -- or exclusions for the type of work to be performed. Subcontractors to primary contractorsmustabide by thesamerequirementsasthe prime. Prime contracts and any subcontracts must name the association and management company as additional insured. An association’s legal counsel and possibly insurance agent or broker should be reviewing contracts to ensure the association is protected. Recently, when a proposed vendor insisted that their contract must be used, an Orange County community rejected work from that general contractor on advice of the association’s legal counsel. Counsel had advised that the contract from the vendor placed the association at great risk. Associations should never indemnify contractors and place association members and the corporation at risk.
Does Your Association Have a Fire Risk from Certain Types of Electrical Panels?
Both Zinsco and Federal Pacific electrical panels have been designated as a fire risk for residential units. Zinsco or Zinsco- Sylvania panels include aluminum bus bars, which are subject to corrosion and overheating as energy demands increase. Federal Pacific Electric panels were found to frequently not trip at Underwriter Laboratories required levels for an overcurrent or short circuit condition, and if a breaker did manage to trip, would never trip in the future and overheat possibly starting a fire. Associations with these panels must take positive action to replace them with modern approved electrical panels. Getting this done is challenging because the panels belong to condo unit owners who may be reluctant to install a modern panel that can cost $4,000 to $5,000 and require building permits and licensed electricians. Failure to address and replace these panels puts the association at higher risk of fire and loss and jeopardizes insurability of the association if not replaced.
Does Your Association Have Elevated Decks and Railings on Those Decks?
The safety specifications for the space between railings and the style of safer versus unsafe railings has changed over time. Older communities may have horizontal railings that are great climbing opportunities for children – even if children are not primary occupants of the home. Older vertical railings may be too far apart and allow children to climb through space between
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