Property Insurance
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HOA PROPERTY INSURANCE

Property Insurance insures against physical loss or damage by fire or other risks to buildings or other common area improvements. The amount of insurance should equal the actual replacement cost of the buildings. Boards and managers should discuss this with the association's insurance broker. Look for the following coverage:
  1. Building Ordinance. This endorsement covers any increased costs of construction following a covered loss which may be imposed due to changes in the building codes. Most city and county building codes require compliance with current building codes whenever 50% or more of a building repaired. The requirement will apply regardless of the source of the damage--flood, fire, earthquake, etc. The older the building, the more costly the code upgrades for plumbing, electrical, elevators, fire sprinklers, seismic stability, and the like. The costs can be substantial and result in significant special assessments on the membership if a "Building Ordinance" endorsement is not part of the association's insurance. NOTE: Condominium associations need building ordinance coverage if they wish to be compliant with Fannie Mae requirements. See Form 4335's highlighted description of the coverage.
  2. Demolition and Debris Removal. This important endorsement covers demolition and debris removal costs. Following a major fire, the debris will need to be removed and disposed of. It is quite likely that undamaged portions of structures will need to be demolished and removed as well. Once the site has been cleaned, a new building can be built. If the association's insurance policy does not cover this expense, it will be borne by the membership in the form of a special assessment.
  3. Maintenance Fees Receivable. This coverage covers the loss from unpaid or uncollected assessments resulting from a covered property loss.
  4. Boiler and Machinery. An endorsement for boilers covers the loss or damage to or as a result of boilers, pressure vessels and pressure pipes. It also provides coverage for mechanical breakdown of items such as elevators, sump pumps and pool equipment.
  5.  Garage Keepers Liability. This is for associations that have vehicles in their care, custody and control. This is most common for highrise buildings.

Reporting Requirements. Actual and potential claims must be timely reported to the association's insurance carrier or the association risks loss of coverage.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC