Understanding and managing HOA insurance can be overwhelming, but it’s crucial for the safety, compliance, and financial stability of your community. In one of the latest episodes of TCM’s What The Boards Should Know Webinar Series, Megan Owensby from Brown & Brown Insurance and attorney Cynthia Hodge unpacked the nuances of HOA insurance policies, exclusions, and responsibilities.
Here’s a detailed breakdown to guide board members and homeowners alike.
1. Essential HOA Insurance Policies: What Your HOA Needs
Industry experts highlighted the fundamental policies every HOA should consider:
Property Coverage: Protects shared spaces and structures like clubhouses, pools, and fences from risks such as fire or vandalism.
Key Tip: Ensure your policy covers “replacement cost” to rebuild assets fully.
General Liability: Shields the HOA from claims related to injuries or property damage on common grounds.
Example: If a tree in a common area falls and damages a homeowner’s car, liability insurance steps in.
Directors & Officers (D&O) Liability: Protects board members from lawsuits over decisions they make while serving the HOA.
Notable Insight: Megan Owensby emphasized the increasing importance of D&O insurance due to rising legal disputes targeting board members.
Cyber Liability: Covers data breaches and cyberattacks.
Pro Insight: Cynthia Hodge advised boards to assess their data protection practices, as even simple databases with homeowner details can be targeted.
Fidelity/Crime Coverage: Protects HOA funds from theft or fraud, whether by a board member or an outsider.
2. Avoiding Common Pitfalls: Lessons Learned
Both experts identified frequent mistakes boards make when managing insurance:
Misinterpreting Governing Documents: Governing documents often outline whether the HOA or the homeowner is responsible for specific repairs. One example is when a homeowner files a claim for water damage, but the HOA is only responsible for the common plumbing line per the CC&Rs.
Overlooking Maintenance: Insurance doesn’t cover neglect. Failing to address a leaking roof may disqualify a future claim for water damage. It is advised to conduct annual maintenance checks to avoid unnecessary disputes and denials.
Ignoring Key Exclusions: Many policies exclude natural disasters like floods, earthquakes, or mold. Georgia’s position on a fault line makes earthquake insurance a worthy consideration for HOAs.
3. Best Practices for HOA Insurance Preparedness
The experts shared actionable steps boards can take to stay ahead:
Schedule Routine Reserve Studies: Ensure reserve funds align with projected maintenance and repair needs.
Consult Professionals for Appraisals: Accurate valuations of HOA assets prevent underinsurance.
Example: Updating replacement costs every three years helps avoid surprises during claims.
4. Georgia’s Fault Lines and Earthquake Risks
Did you know? Georgia’s fault lines place it at risk for seismic activity. While earthquakes are infrequent, their potential impact makes earthquake insurance an essential consideration for many HOAs.
5. Lessons from the Surfside Condo Collapse
Cynthia shared insights from the 2021 Surfside Condo tragedy, highlighting the consequences of neglecting building maintenance and safety. This case underscores why board members must uphold fiduciary responsibilities, conduct regular inspections, and document all decisions thoroughly.
The Role of the HOA Board: Collaboration is Key
Megan Owensby concluded with a powerful reminder: “The board’s role is not just about compliance but about fostering trust within the community.” Transparent communication with homeowners about insurance policies, maintenance efforts, and budget allocations builds confidence and ensures smoother operations.
What’s Next?
At TCM, we empower HOA boards to make informed decisions and safeguard their communities. From navigating insurance options to managing day-to-day operations, we’re here to help. Start by requesting a proposal here.
