HOA Homefront – Insurance: Does your HOA have ALL it needs?
The previous column discussed considerations regarding property insurance, but that is only one of many insurance types that most HOAs should have in place.
First and foremost is liability insurance. This is the insurance which covers claims of negligent damage or injury affecting persons (owners, tenants, or visitors) on the property. Civil Code Section 5805 protects the individual members of the HOA from being sued personally just because they are HOA members, so long as the HOA has at least
Individual owners should have their own homeowner insurance policies, insuring their lot or unit from liability and from property damage incidents. Many condominium associations have little or no responsibility to restore a unit beyond bare walls ready for fixtures and finishes, and the condominium owner without an "HO6" insurance policy may find themselves in dire circumstances if the HOA property insurance does not cover finishes, fixtures, or belongings inside the unit.
Fidelity insurance insures against losses from dishonesty by persons handling HOA funds. In 2018 Civil Code Section 5806 was enacted, requiring all HOAs to have such insurance covering directors, officers, employees, and the management. The insurance amount must match or exceed the total of the HOA's combined reserves account balance and three months of HOA assessments.
Earthquake insurance is often a subject of discussion in HOAs due to the potential high damage from major seismic events and the insurance's high cost and high deductible. Some HOA CC&Rs require such insurance, but most do not. Even if the final decision on such insurance is within the board's authority, consider taking time to first disclose to the members the pros and cons.
Workers compensation insurance is a good idea for HOAs, even those which apparently have no employees. The definition of "employee" was substantially broadened in 2020, so someone who might have been an independent contractor in 2019 might be an employee in 2020. HOAs should check with their insurance broker about having a minimal workers compensation insurance in place. Injured employees are mostly limited to the workers compensation insurance benefits if that insurance is in place.
For more helpful insurance information, visit the
Kelly G. Richardson CCAL is Senior Partner of
This story originally appeared in
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