Emerson Poort knows condo association insurance. The INGUARD vice president and advisor has more than 13 years of experience insuring these associations against critical risks like building damage, liability for injuries or tenants, and claims brought against association directors and staff.
Unfortunately, too many associations don't get the insurance they need to stay adequately protected. That's why we sat down with Emerson to get his expert answers to the key questions associations must answer when they purchase insurance.
Q: What are the most important risk areas condo associations need to protect against?
A: Condo associations need building insurance, general liability for the building's common area, and directors and officers (D&O) insurance that pays special attention to the retroactive and / or pending and prior litigation dates, if applicable. Retroactive dates are the starting date of coverage; any event that happens prior to this date is not covered by the policy. Pending and prior litigation dates refer to any lawsuits before the policy's coverage date. Associations should request pending and prior litigation dates be as far back as allowed.
Associations should also have crime coverage, including employee dishonesty coverage, to cover non-compensated officers, property managers and employees.
Q: Are there any risks condo associations commonly overlook?
A: Associations often overlook the important retroactive dates and pending or prior litigation dates.
When it comes to D&O policies, they also need to check if the coverage only applies to defense in court. This means the insurance covers only the defense costs of litigation, but not settlements.
Additionally, condo associations should ensure their employee dishonesty policy covers non-compensated officers and property managers, since board members and some executives may not be employees.
Q: What are the most common mistakes associations make when they purchase insurance for a property or properties?
A: Associations often only review the price of the policy, without taking a close look at the actual coverage, deductibles, endorsements and exclusions. Unfortunately, information sharing among advisors is low in some of these organizations, so their policy comparisons miss crucial coverage details. An experienced agent can help in this area.
Consider: quotes may include endorsements or exclusions, which can cause great financial harm to an association depending on their terms. Because some associations focus only on price, they overlook these details and learn the hard way much later that their insurance is more costly than they anticipated.
Q: What should condo associations look for in an insurance agent?
A: The agent needs to be honest, trustworthy and able to work with multiple carriers if needed. Experience insuring condo associations is a must, as is responding to requests in a timely fashion.
Q: What questions should associations ask of their current or prospective agent?
A: You need to know how many years the agent has specifically been insuring condo associations, how many they currently insure, and what the agent plans to do for you over the next year. It's also important to ask the agent how he or she handles claims and certificate of insurance requests.
Q: When should an association get a second opinion on an insurance matter or find a new agent?
A: There are several indicators to look out for that may indicate you need a second opinion or to find a new agent. One, if your current advisor isn't responding in a timely fashion to questions or requests. Two, if your board questions the advisor's response, or the price or coverage has changed. You may even want to anticipate possible changes, such as prices going up, market conditions or the upcoming likelihood of a claim.
Q: What are the questions a condo association needs to ask when buying insurance?
A: First, ask, "Is the insurance carrier admitted?" This means they are approved by the state, so the answer should be "yes." Related, you should also ask about their A.M. Best rating. A.M. Best is a firm that rates the credit of insurance companies. The company is designated as a Nationally Recognized Statistical Rating Organization by the U.S. Securities and Exchange Commission, making it the industry standard judge of insurer quality.
Second, ask the following questions:
- Does the insurance policy properly correspond to our by-laws?
- Can an agent explain what is not covered by a given policy?
- Is there an inspection of the property necessary?
These questions will help you have an honest, productive and valuable conversation with an insurance professional.
Q: What unique scenarios do condo associations need to consider when buying insurance?
A: Associations must follow their by-laws when it comes to insurance coverage. Spend enough time and analysis upfront to ensure by-laws are compatible with policies you're considering.
The majority of insurance premiums you'll encounter are based off the prices for property insurance. Therefore, it's imperative that all insurance professionals you talk to are using the same rate card to quote prices.
Lastly, it is an excellent idea to hire a professional to do a rate card appraisal. This appraisal process will take crucial property details like square footage and year built, and assess rate card value based on that information. Even if you don't hire a professional, make sure your property records are organized, so you can easily and accurately relay any information needed during the insurance buying process.
Does your condo association need free expert consultation before moving forward with your insurance purchase? Schedule a free consultation with INGUARD today.