Q&A: Ask Elliot California Condo Association HOA Insurance Questions Here


The Q&A category is where you get to ask the expert your California  HOA Insurance questions.

If you have an insurance problem or concern, please reply to this post and maybe we’ll post your condo and HOA insurance related question with Elliot’s expert answer soon.

Why would an insurance agent need to see my condo associations CC&Rs?

An agent would need to see the CC&R’s at a minimum to be able to figure out if the association or the unit owner is responsible for the improvements within the unit.

My Farmers agent says he can get multiple bids why do I need to use an independent broker?
A Farmers agent by his contract with the company is only allowed to bid other companies when Farmers does not want to insure you. If you are already insured by Farmers, he cannot bid it outside of Farmers without violating his contract and fiduciary responsibility with Farmers.  Independents do not have these types of limitations so that their companies know that they are going to be shopped on regular basis.   This forces companies that are represented by independent agents to actively alter rates to reflect the current marketplace.

How much liability coverage does an association need to carry?
At a minimum the association needs 2,000,000 of liability coverage per CA civil code 1365.9.  If an association does not maintain that level of liability coverage there is a possibility that individual owners could be named to the suits and responsible for the settlements of the association.

Why does the amount of insurance the association purchased not correspond to the market value of the unit?
The market value of a unit has two components, land value and construction hard costs to replace the structure. Insurance is never concerned with land value. We assume if the building burns to the ground the dirt is still going to be there.  Even with the cost of replacing a structure there can be differences for a condo association.   Is the association responsible for the interior betterments or is the unit owner.  This can cause the amount of insurance needed to vary by 30-40%.  An agent that gets this wrong can either leave you dangerously under insured or you could be overpaying by as much as 30% just from this one mistake.  This is an example of what I call a “broken” insurance policy.

Why do we need building code and ordinance coverage?
Your regular building coverage only provides coverage for those items that are currently part of the building, if after a major loss you now need to add items that are not currently part of the building then this coverage would provide for cost of adding them to your building. An example of this would be a building that currently doesn’t have a fire sprinkler system, but if it was built today it would need to have one.  This coverage would pay for the fire sprinkler system.

What does loss assessment coverage do?
Loss Assessment coverage pays a unit owners special assessment that arise from a covered loss. Two examples of this are 1. If the association has a $25,000 water deductible and it now needs to be covered after a loss. Loss assessment coverage would pay for your portion of that $25,000. It also provides coverage for an item that might have a very small limit. So if a building only has a $10,000 limit for building code and ordinance and now has a $250,000 of code upgrades after a major loss, this would provide coverage for the unit owners special assessment that is going to happen when the association needs to pay the $250,000.

Why do we need to include the property manager on our employee dishonesty coverage?
If the property manager’s bookkeeper decides to clean out your operating and reserve accounts, if you do not have the property manager included on the coverage you are going to find out that you won’t be able to recover the money.   Many companies that offer an employee dishonesty endorsement do not cover the property manager, you need to look closely at your contract to make sure that you have the proper coverage.