One of the most important things you need for your homeowners association is legal and financial protection. As much as we try to avoid incidents, they’re bound to happen. Maybe a storm blows over a stop sign in your community, resulting in a wreck. Or a pothole causes damage to a resident’s car. Accidents and injuries can be extremely costly to your HOA’s finances if you don’t have adequate coverage.
Association Liability Insurance
Also referred to as the Master Policy, this is general liability insurance that covers the association as a whole. If there is physical damage to shared spaces, or a resident or guest is injured on HOA property, this policy helps cover those claims and pay any damages. It applies to all communal spaces, such as the main area of a condo building, the swimming pool, any sports or playground areas and equipment, onsite gyms, etc.
Directors & Officers Insurance
The association liability insurance doesn’t cover individual board members or association employees. Board members need a different type of policy to cover themselves specifically in the event of legal issues.
A Directors & Officers (or D&O) policy is a form of professional liability insurance. Similar to doctors having medical malpractice insurance to cover human error, your D&O policy protects your HOA board members from legal action taken by residents seeking compensation when they believe a board member has been negligent. A D&O provides financial assurance to cover damages awarded in these situations, so the board member doesn’t face asset seizure or bankruptcy. And the insurance company will help provide legal defense if necessary.
Some things HOA board members get sued for:
- Insufficient oversight
- Misuse of association funds, (i.e. commingling)
- Conflicts of interest
- Libel or slander
- Violation of privacy
- Failure to pay HOA debts
- Unlawful discrimination in housing
- Violation of governing documents
- Aiding and abetting criminal or negligent actions of others
- Illegal or improper eviction
- Injuries on the property
Read more about common violations by HOA board members and how to help avoid them.
Other Useful Policies
While the two policies above are very necessary for the protection of your HOA and its board members, there are several other kinds of insurance you can get to protect yourself and your residents.
Social Host Liability Coverage
For associations with clubhouses where social gatherings are held, Social Host Liability Coverage is a good plan to have. This is typically most necessary if you permit liquor to be consumed at events.
If you have employees working for your HOA, you should have a Workers’ Compensation policy. This protects you from being sued by workers who are injured on the job. Even if you only hire freelancers or contractors, it is still smart to have this type of insurance. Depending on the scope of work they do, they might be able to claim employee status, putting you on the hook for their medical bills.
Discrimination Claims Coverage
If your association has the ability to foreclose on residents who don’t pay their mortgages, you need Discrimination Claims Coverage. It’s not uncommon for homeowners facing foreclosure to look for any avenue to keep their home—including filing a discrimination claim against you.
Have questions about HOA insurance or wondering which policies you need? Contact us and we’ll be happy to help!