Group Insurance
Adams Stirling PLC


Defined. In a "shared umbrella" program (also known as group or pooled insurance) unaffiliated entities are grouped together in a single insurance policy in an attempt to save costs. An example is CIBA insurance. Typically, a management company might obtain a single group policy covering all the associations in its portfolio. That means the insurance policy is not put in each association's name. Instead, associations in the pool are made additional insureds. There are two types of shared umbrella programs:
1. Shared-Limit Umbrella. In a shared limit umbrella, the insurance policy's limits are shared by everyone in the program.

2. Shared-Policy Umbrella. In this program, all associations program share one policy, but the limits of that policy apply on a "per location" basis.
Potential Problems. Shared or group insurance is can offer lower premiums but there are trade-offs that raise concerns.

  • Additional Insureds. Because participants in group programs are "additional insureds" instead of being the "First Named Insured," they receive a certificate of insurance rather than an actual complete insurance policy. That makes notification an issue since entity other than the association is the First Named Insured. This means that the association may not be notified if the policy lapses for non-payment of premium or the carrier cancels or modifies the coverage. Another potential problem is if the management company holds the insurance in its name and the association changes management, it could unexpectedly lose coverage.

  • Limits Exhausted. In the shared-limit plan, if one association makes a claim that exhausts the limits of the policy all other associations in the program are left with no coverage. Policies are written under an assumption that no single disaster will impact them all. Since no board member knows exactly how many associations are sharing the limit (and the value of each of those properties), it’s impossible to adequately assess whether the shared limit is truly sufficient to cover a large loss which impacts multiple locations.

  • Payouts Limited. In the shared-policy plan, language in the policy often limits the number of payouts per policy year. That could leave participants without coverage.

Recommendation: The risks described above do not necessarily mean the policies should be avoided, it means that boards should be aware of the risks and talk to their insurance agent so they can make an informed decision before taking on those risks.

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Adams Stirling PLC