Insurance is particularly important in any community, with the responsibility to maintain adequate protection vested upon the Association’s Board.

According to various legal sources, insurance is required by law to protect the property and the common elements, whether the Association is controlled by the owners or the developer.

An Association may also obtain and maintain liability insurance for Directors and Officers, insurance for the benefit of Association employees, and flood insurance for common elements, Association property, and units.

An Association, or group of Associations, may self-insure against claims against the Association, the Association property, and the Condominium property required to be insured by an Association, upon compliance with certain legal requirements which could be discussed with the legal Counselor of the Association.

A copy of each policy of insurance in effect shall be made available for inspection by unit owners at reasonable times if they require it.

One relevant aspect of the importance of adequate insurance is that the Association shall obtain and maintain insurance or fidelity bonding of all persons who control or disburse funds of the Association.

The insurance policy or fidelity bond must cover the maximum funds that will be in the custody of the Association or its management agent at any one time.

The term "persons who control or disburse funds of the Association" includes, but is not limited to, those individuals authorized to sign checks and the President, Secretary, and Treasurer of the Association.

The best way to keep the assets of the community protected by insurance is to request from the management company to research several insurance providers and get detailed quotes regarding the extent of the protection offered.

In the aftermath of Katrina & Wilma, many Associations have faced the reality of lower than expected cash payments from the insurance companies, due to the high deductibles assigned to the protected assets.

It is paramount to look very careful to the these line items, and request from the broker a spreadsheet showing them in a clear and precise manner.

There are two types of coverage: one that covers the Association and other the Individual Co-owners. 

This is a fundamental distinction, since in many instances the Boards get claims from owners for damages to their units that do not correspond to the Association.

Condominium and Home Owners Associations documents vary in how they allocate these responsibilities.  If obtaining the wider possible coverage is affordable to the membership, Boards should consider doing it. 

A good Condominium and Homeowners Associations insurance package would normally include:

o       Worker’s Compensation For Association Employees

o       Master Liability Insurance for Personal Injury and Master Fire and Extended Perils Property Loss Coverage for Claims Involving the Common Elements, and Automobile No Fault

o       Directors and Officers Liability, also widely known as D&O, to Cover for Acts and Omissions of Former and Actual Directors and Officers.

o     Fidelity Bonds On Those Handling Association Funds

o      Liquor Liability for the Club House & Pool Liability

o       Flood Insurance

It is recommended that individual policy holders should insure full replacement cost for all contents of the unit, such as furniture & fixtures, jewelry, fine art, collectibles, etc, as well as improvements, and temporary shelter, the latter to protect the owner should the unit be catastrophically damaged.

In Florida, there are relatively new insurance requirements for condominiums: a) To hedge against internal damages and b) for flooding.

Normally, the Association is responsible to change the drywalls in the event the damages are attributable to the master policy protection, thus internal damages are the responsibility of the owner.

As per the flood insurance, this is a new requirement by FEMA that affects owners that carry mortgages affecting their units. In this case, many associations have decided against purchasing flood insurance protection; instead, they have contracted surveyors to plot the flooding areas and issue Elevations Certificates that are provided free of cost to the homeowners that need them.

These Elevation Certificates allow the owners to purchase the policy around 10 times cheaper than the one impose by the mortgagors.

Buying Condominium and Homeowners Associations insurance is not easy due to the technical aspects and the terminology used in most policies. It is recommended to deal with Agents and entities with a good background in community insurance, and obtain several quotes for comparison of coverage and premiums.

Remember: it is always a good idea to have the Association’s lawyer review the policy and obtain an opinion from him, especially since in Florida the insurance industry has been affected by billions of dollars in claims, and “exclusions” have been added to policies which increase the risks or the costs if they would be removed.