By Betsy Barbieux, CAM, CFCAM, CMCA / Published March 2022
Editor’s Note: The second part of this article will be published in the April 2022 issue.
Most association boards of directors and managers would put in the “urgent and important” category the need to have adequate insurance coverage for their communities. However, that does not mean that most of them would put into that same category the task of actually reading the various policies within their insurance package. That would most likely fall into the “not urgent and not important” category.
But, if you have ever had a conversation with your expert condominium insurance agent (fictional name “Tyler”) about the “most often overlooked details in your insurance package that could cost you,” you would most likely move that reading task to the “urgent and important” category.
A conversation like this with “Tyler” might capture your undivided attention.
Tyler, you have a very interesting presentation about the overlooked details in an insurance package. What are they? What should we be paying more attention to in those pages and pages of details? What do you see that we don’t see?
First, let me just say that regarding renewals, every agent has access to the exact same insurance carriers. As long as agents all use the same insurance appraisals, values, and deductibles, the premiums will be exactly the same. Your pricing as an association is much more dependent upon the construction type, year built, and where you are in the state than it is on the name of your agent.
We have a very limited marketplace for community association insurance in the state of Florida, especially in regards to the property. Each carrier will only issue one quote per community and to the first agent to submit an application. So when agent A submits his or her bid, agents B, C, and D will be “blocked” from obtaining a bid from that carrier.
So when boards say they are shopping insurance, they really can’t. It’s not the same as shopping personal auto insurance or health insurance. Is that correct?
Shopping insurance is something that each community needs to do, but there is a difference between shopping insurance and shopping agents. Think of it this way—if you were a professional athlete, would you have ten different agents represent you to ten different teams? No, that would be ridiculous. You would hire one agent (the one you trust most) to negotiate between all the interested teams to get you the best terms and conditions of your contract. Community association insurance needs to be purchased the same way.
So why then does it make any difference who we select as our insurance agent? If pricing is the same, why choose you instead of them?
That is a fair question, and the answer is “service.”
Forgive me, but I don’t think of insurance agents as being in the service business! What do you mean by “service”?
For our company, service means a detailed inspection of the coverage and carriers. That is, a detailed risk analysis, a review of all the policies within your package. Should a board discover significant deficiencies in coverage, they should change agents. And just in case what I am saying is not clear, significant deficiencies in coverage could mean significantly less in claims payout sums.
Can you give me an example?
Of course! Here is my favorite one that demonstrates a horrible lack of attention to detail. The association is on the beach. On the wind-only policy, the building is noted as a “fire-resistive” structure, which essentially means it’s a concrete fortress. The policy for the remaining property indicates the building is joisted masonry (brick with wood frame roof). The general liability (GL) policy (which generally does not indicate the building construction, but this one did), listed the building as a wood frame structure. In reality, the building was actually joisted masonry.
And, Tyler, as respectfully as I can say it, “So what?”
Betsy, the “so what” comes into play if/when there is a claim. For example, on the wind-only policy that indicated the building was concrete block, if a hurricane takes off the roof, the carrier could make a case for themselves that you intentionally misrepresented the claim or give you a lot less than you expected. The association will be penalized with a payout much less than indicated in the policy. And this particular carrier could potentially go back and collect from the association the correct premium for at least two years.
At best this missed detail was an accident and would be a potential errors and omissions (E&O) exposure for the agent who probably violated his fiduciary responsibility.
At worst, this agent has intentionally misrepresented the construction just to keep the premium down, betting a hurricane would not strike. In realty, in every association, the property and casualty (P&C) and wind only are the biggest pieces of the insurance package. Most agents spend their time getting these parts right.
So what would be other details that could be missed since this one seems possible but rare?
Our agency looks at the other insurance pieces: the directors and officers (D&O), general liability, workers’ compensation, and fidelity bond. An often-missed detail is a complete listing of the amenities on the general liability policy. I can’t tell you how many GL policies do not list all the amenities; the most common one omitted is the fitness center! In case of a lawsuit, if the fitness center (or other omitted amenity) is not listed, the carrier could deny coverage.
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 Matters™ at www.youtube.com/c/cammatters. For more information, contact Betsy@FloridaCAMSchools.com, call (352) 326-8365, or visit www.FloridaCAMSchools.com.