By Betsy Barbieux, CAM, CFCAM, CMCA / Published April 2022
Editor’s Note: The first part of this article was published in the March 2022 issue. It can be read online at www.fcapgroup.com/flcaj/flcaj-articles/details-who-cares/. Betsy addresses questions to a fictitious insurance agent, Tyler, to help clarify the issues at stake in the details involved in association insurance.
Betsy: Tyler, tell me more about what “service” means, and why is it important? Why do I want to see you more than once a year?
Tyler: We are one of the largest private insurance companies in the State of Florida. That means instead of paying stockholders, we can reinvest those dollars into services, which translates into insurance professionals and support teams. Our agency has licensed claims adjusters on staff who can assist with processing claims, any type of claim. Our adjuster does not replace the carrier adjuster or the public adjuster. Our adjuster acts as the liaison to coordinate the client and carrier’s adjuster. We help move the process along and make sure each side knows where we are in the process. There is no additional charge to our client.
Betsy: And again, respect-fully, “So what?”
Tyler: Take a slip-and-fall claim where the maintenance employee did not put a caution sign on the wet floor. A resident slips, falls, and sues for medical payments and damages. Our claims adjuster may be able to assist in a settlement of $10,000 instead of $100,000, which will be significant at renewal time. The goal is to keep the claims’ payouts smaller, so the association has a chance to better position itself for renewal, i.e., a lower premium.
One association had two slip-and-fall claims for $50,000 each, and they were non-renewed with that carrier. Moving the coverage to another carrier sent the premium up by $15,000, with the second closest quote at $35,000 more.
With larger properties, the carrier will often bind the coverage but require an inspection of the property within 90 days. The carrier then sends out an inspector who is looking for liability issues and may require immediate maintenance or repairs to concrete, roof, sidewalks, tree limbs, pool signage, paving, etc. Then a short timeframe is set within which to complete the maintenance or repairs. Failure to comply quickly may result in a non-renewal of the policy or a higher premium. Months BEFORE renewal time, our agency offers a loss control inspection walk-through of the property looking for ways to avoid claims. This allows the association the time to correct potential issues using their preferred vendors. Our loss control experts can then negotiate with the carrier’s (occasionally unreasonable) requirements and demonstrate a “safety conscious” community that is proactive about limiting its liability.
Betsy: What about D&O insurance. Do you see missed details there?
Tyler: Yes, the first thing I look for is the language about the defense costs. Are they included in the limit or outside the limit? They should be outside the limit, which means they will not be deducted from the settlement amount.
The other missed detail I come across is not having the current manager or management company listed as an additional insured. I have seen some policies where the manager from five years ago is still the named insured.
Betsy: What about the crime policy? How on earth do you determine “maximum funds that will be in the custody of the association or its management agent at any one time”?
Tyler: There are usually two scenarios used here.
Take the cash in hand plus reserves and use a percentage of it.
$1 million budget plus $200,000 in reserves
Agent A will use 1/3 of that as the insured amount = $360,000
Take the annual cash in hand plus reserves total. For example,
$1 million budget plus $200,000 in reserves
Agent B will use $1.2 million as the insured amount
I prefer Option 2 because of the way the crime policy responds. If someone embezzles $10,000 a month for five years for a total of $600,000, most policies respond as if it is one crime. If Option 1 is used and the coverage was for $360,000, there is a gap (difference) in the coverage and actual claim.
Yes, the management company could bear liability, but at the end of the day, it is the association’s money. The association needs to insure its money.
Betsy: And Tyler, last but not least, what about workers’ compensation? Overlooked details there?
Tyler: I get this question all the time. Do we have to have workers’ compensation even though we don’t have employees? Yes, yes, yes. Every association, whether they have employees or not, needs to have a workers’ compensation policy of some sort. It will also cover subcontractors who begin work with you having valid insurance, but it lapses. If they are uninsured to begin with, there is no coverage because the board didn’t do its due diligence. But if the subcontractor was insured, then the policy is canceled, and the subcontractor gets hurt, the policy pays. Always check certificates of insurance.
The workers’ compensation policy also covers volunteer workers who are approved by the board of directors to be doing volunteer work. Minutes should reflect the volunteer work. When sued, the community will have to demonstrate the work was officially approved. Minutes would be best to reflect that approval.
Betsy: Thank you, Tyler, for offering us the details on the details!
Betsy Barbieux, CAM, CFCAM, CMCA
Florida CAM Schools
Betsy Barbieux, CAM, CFCAM, CMCA, guides managers, board members, and service providers in handling daily operations of their communities while dealing with different communication styles, difficult personalities, and conflict. Effective communication and efficient management are her goals. Since 1999, Betsy has educated thousands of managers, directors, and service providers. She is your trainer for life! Betsy is the author of Boardmanship, a columnist in the Florida Community Association Journal, and a former member of the Regulatory Council for Community Association Managers. Subscribe to CAM MattersTM at www.youtube.com/c/cammatters. For more information, contact Betsy@FloridaCAMSchools.com, call (352) 326-8365, or visit www.FloridaCAMSchools.com.