HOA Directors’ Duties to be Aware of Regarding Their Association’s Insurance Coverage

Homeowners association directors need to be aware of their duties relative to the association’s insurance coverage, which include: (i) insuring against various risks that the association is exposed to; (ii) utilizing proper insurance agents and brokers; (iii) tendering claims to insurance companies; and (iv) keeping association members informed about association insurance policies.

Purchasing Appropriate Insurance Coverage.

Homeowners  associations, acting through their directors and management personnel, are responsible for purchasing and maintaining different types of insurance policies that insure the association against a variety of risks.  Knowing what type of insurance policies to purchase and the levels of coverage that are appropriate for an association requires a review of relevant state statues, knowledge of the content of the association’s governing documents relative to insurance, good professional guidance, and prudent business judgment.  All too often, well intentioned volunteer directors make important decisions about insurance coverage based solely on a desire to control expenses and avoid increasing annual member dues without complying with minimum insurance coverage requirements that may be specified in their state’s statutes and/or their association’s governing documents.  This can result in the association not having required insurance coverage at a time when needed and expose the association and its members to potential liability risks that would have been avoided had the proper insurance been obtained.

There are many different types of insurance policies that an association may be required to purchase which an association’s directors should be familiar with in order to make prudent insurance coverage decisions. The following types of coverage are typical for homeowners associations and may be required by state statutes and/or an association’s governing documents: