According to the Community Associations Institute (CAI), there are roughly 346,000 community associations in the US. Since HOA boards are tasked with protecting physical, human and financial association assets, identifying potential liabilities is critical to serving all of their stakeholders.
Every year, association boards find themselves in the midst of lawsuits that could have been avoided. The good news is that creating an all encompassing insurance portfolio to manage risks can help reduce your exposure. While coverage plans are uniquely tailored to fit a given property, there are some insurance policies that most boards will want to consider when looking for liabilities specific to their property.
What you will learn:
- HOA volunteers & paid employee liabilities
- Community security liabilities
- Financial loss protection
- Risk management assessment
1. Your HOA Volunteers & Paid Employees
Many board members volunteer their services, so you'll need Directors and Officers (D&O) insurance that covers things like harassment and wrongful termination legal challenges as well as fiduciary negligence.
You may also want to hire landscaping crews, maintenance workers and administrative staff for cost containment. Providing adequate workers compensation insurance ensures coverage against injuries resulting from performance of duty.
If employees operate machinery or drive association-owned vehicles, auto insurance protects community assets when accidents happen on-site or in route to getting supplies.
Proactive risk management might also include:
Uninsured motorist – to cover accidents where an uninsured driver collides with your employee, causing an accident
Comprehensive coverage – to protect against non-accident loss, such as vandalism, theft, and other perils.
Hired and non-owned liability – which protects the HOA when employees use personal vehicles to conduct community business, like going to pick up the mail or transporting mowing equipment from the service shed to a community park.
2. Your Community Security Detail
Your community may utilize a neighborhood watch program to supplement patrols by an outside security firm. According to FBI crime statistics, security firm ADT reports neighborhoods with watch programs in place may experience 43% less crime than areas without watch programs.
However, in incidents where your security detail gets into an altercation and someone gets hurt, the association may find itself in the middle of a civil suit. Commercial general liability coverage protects boards against civil suits, usually paying for:
Damages, if approved by the court
3. Protecting Against Financial Loss
Every community association needs insurance to cover property damage resulting from natural and man-made disasters, like arson, lightning strikes, and tornadoes. However, loss of income is another area some boards overlook.
For example, every association will - in one way or another - be exposed to fidelity bonds and directors and officers liability. Without the right type of coverage, associations can be at risk for significant losses. Staying proactive is key. For example, board members are responsible for reviewing their community's finances every month to ensure that all money going out is for legitimate expenses.
Covering All the Bases With a Comprehensive Risk Management Assessment
Liabilities aren't always easy to identify. Relationships with employees, volunteers, and outside vendors deserve close scrutiny to prevent financial and legal exposure for community associations.
Today, proactive risk management specialists closely monitor potential liabilities to protect their valuable assets. If you find areas of exposure, it is best to protect your board and your owners from unnecessary financial burdens rather than react when a situation develops. Fortunately, a fully-customized insurance portfolio gives you the tools you need to prepare today for tomorrow's challenges.