3 Major coverages to protect your HOA

#1 Liability limits for California HOA policies are set by law. Davis Sterling Act requires all Homeowners Associations with less than 100 units to obtain insurance at a $2 million Occurrence limit and a $3 million Aggregate limit. Many insurance agents will get to the limit by writing the primary liability at $1mil /$2mil and writing an additional policy called an umbrella for $1mil/$1mil; making the total coverage limit is now $2mil/$3mil. I recommend increasing the HOA Master policy limit to $2mil/$3mil, the increase in premium is nominal. By the way, keep the umbrella, the limit set by law is the minimum not what should be carried by your HOA.

#2 Crime/Fidelity coverage requirements 3xGeneral + Reserves

In 2019, a new law AB2912 required the limit for Fidelity/Crime coverage be set at 3 months of the general assessments and the reserve fund balance. The law requires specific coverages be included in the policy. The three main coverages: Employee Dishonesty including Property Management and Accounting Services, Computer Fraud, and Funds Transfer Fraud.

#3 Workers’ Compensation with no payroll — protect the HOA

Even if an Association has no employees, it can still have workers’ compensation liability exposure. In a recent decision, the Court of Appeals held that an Association and its managing agent were both liable to pay workers’ compensation benefits to an injured worker employed by an uninsured and unlicensed contractor. The cost for Homeowners Association workers’ compensation is generally less than $500 and provides $1,000,000 in protection, just in case the coverage is needed.

If you would like to read more great tips, email: phillybilly01@gmail.com Bill Catanese is an insurance broker since 1990. He has trained over 15,000 agents and is an expert consultant.