Insurance is a mystery to most board members and managers. What is covered and what is not? Who can submit claims? What causes premiums to rise?
Recently, a question was asked about a broker's duty to submit claims. What happens if a homeowner suffers property damage from a flood and wants to file a claim against the association's insurance but the board is opposed to filing the claim?
I posed the question to four leaders in the field of HOA insurance: Clifford Treese, President of Association Data, Inc.; Tim Cline of the Cline Agency (representing a number of major carriers); Joel Meskin with McGowan Insurance; and Michael Berg of the Berg Insurance Agency (representing Farmers Insurance). The question generated a great deal of information from the four. I synthesized and edited their responses.
Owner Submits a Claim. Most CC&Rs make unit owners an insured under the association's commercial general liability (CGL) policy, which means they can file a claim against the association's policy. If a unit owner contacts the association's agent/broker, the representative is obligated to inform the carrier.
Upon receiving notice of claim, every licensee or claims agent shall immediately transmit notice of claim to the insurer. (CA Code of Regulations, Title 10, Chapter 5, Subchapter 7.5(d).) The carrier then makes a determination if the loss is covered and, if so, appoints an adjuster to set an appropriate value for the loss.
Association Withdraws the Claim. Because the board of directors is the "insurance trustee," it has the option of withdrawing a claim submitted by an owner. If the loss is small and the deductible large, the board can exercise its business judgment to handle the matter internally. Doing so preserves the association's loss history, which helps keep premiums down.
A Claim Is not Submitted. If a manager or board member calls the association's insurance broker about a loss and asks about coverage and how the claim would affect premiums if it were filed, is the broker obligated to notify the carrier of the loss even though the board is not submitting a claim? No.
"Notice of claim" means any written or oral notification to an insurer or its agent that reasonably apprises the insurer that the claimant wishes to make a claim against a policy... For purposes of these regulations, the term "notice of claim" shall not include any written or oral communication provided by an insured or principal solely for informational or incident reporting purposes. (Code of Regs., Subchapter 7.5(n).) As noted above, the board of directors can manage claims made against the policy. If it has a $10,000 deductible and a unit owner suffers a $3,000 loss, submitting a claim to the carrier offers no benefit to the unit owner and creates a record of a loss. If numerous small claims are filed over the policy period, the carrier could raise premiums or not renew the policy even if no monies are paid out by the carrier.
Later Submission. If the initial $3,000 loss slowly expands into a much larger claim, the board could submit a late claim. There are two potential problems. The first is that any litigation expenses incurred by the association prior to their submission of the claim will not be covered. The second is a potential denial of the claim because notice was not timely given to the carrier.
RECOMMENDATION: Boards should coordinate loss claims with legal counsel and their insurance broker. Putting their agent on notice of a potential claim while they investigate small losses makes sense but, at some point, the board must timely make a decision to either settle the claim internally or give notice to the carrier. If the association is experiencing numerous small water loss claims, it may indicate a larger maintenance issue that needs to be addressed. Deferring maintenance is not a solution. Boards should immediately address the problem before small losses turn into large ones.
Many thanks to Cliff Treese, Tim Cline, Joel Meskin and Michael Berg for their input. If there are any errors in the above summary, they are solely mine. For additional information on when and how claims should be made, see "Tendering Claims."
Pools and ADA. People with their disabled spouses use the pool for physical therapy. Is shutting down the pool a violation of ADA accommodations? Could the HOA make the pool accessible to members with a doctor's note or does this have to evolve into a lawsuit??? ‑Wendy L.
RESPONSE: Most associations in California have kept their facilities closed because they cannot meet the strict requirements imposed by the Governor. Opening facilities without meeting those requirements creates potential liability for the association. According to a survey by the Community Associations Institute, only 7%
of HOAs have opened their pools. No one is happy with the current
situation. You should direct your frustrations toward the Governor and your legislators.
Solar Panels. We are interested in installing a solar system for the community. The system would not cost us any monies up-front or monthly costs. Our solar committee distributed an unofficial vote whether owners favored the installation and received 114 yes and 2 no votes. Our board is concerned that this unofficial vote violates SB 323 and would make the association liable to legal action. -Roger E.
RESPONSE: The circumstances you described do not require a membership vote. As required by Civil Code §5100(a), the following matters must be voted by secret ballot:
Because the solar panels do not fall into any of these categories, a non-binding, non-secret poll of the members is acceptable.
- special assessments over 5% (see exceptions) or regular assessments over 20% (Civ. Code §5605);
- election and removal of directors;
- amendments to the governing documents (see exception); and
- grant of exclusive use of common area property (see exceptions).
Elevated Structures. SB 326 states "exterior elevated elements” must be inspected. Our development has many balconies that do not extend beyond the exterior wall. Do these balconies have to be inspected if they do not extend beyond the exterior wall? -David G.
RESPONSE: Even if the balcony itself can't fall to the ground, its railings may be covered by the statute:
“Load-bearing components” means those components that extend beyond the exterior walls of the building to deliver structural loads to the building from decks, balconies, stairways, walkways, and their railings, that have a walking surface elevated more than six feet above ground level, that are designed for human occupancy or use, and that are supported in whole or in substantial part by wood or wood-based products. (Civ. Code §5551(a)(3).)You should have them inspected and included in your reserve study. Safety rails have a limited life and will need to be replaced at some point.
NorCal Counties. Alameda County has a new order that allows for a number of additional activities: small outdoor gatherings of those outside the same household; childcare for all children; educational institutions to offer career internship and pathways programs; libraries can offer curbside pickup; utilizes a site-specific Protection Plan; allows some businesses with limited person-to-person contact to resume; allows outdoor religious services and cultural ceremonies; allows outdoor political rallies and protests; allows outdoor dining; allows outdoor non-contact fitness classes; allows outdoor museums, historical sites and publicly accessible gardens to open; allows dog parks to open subject to conditions; allows school and college sports teams to train or hold non-contact practices, conditioning, or drills outdoors; allows professional sports teams to resume practices, games, and tournaments without fan attendance.
Unstaffed pools must create a reservation/sign-up system and staffed pools must implement capacity and lane limits. Face coverings must be worn when not swimming. Hot tubs, saunas and steam rooms must remain closed. Indoor pools are closed except if part of a healthcare operation or a personal pool used only by those of the same household.
Butte County has resources related to school reopening waivers.
Calaveras County has been removed from the State's Monitoring List, pursuant to their August 20 press release file. Places that offer tattoos, piercings and electrolysis may not be operated outdoors and must close. Schools that have not yet started the school year will continue to conduct distance learning only until Calaveras County remains off the County Monitoring List for 14 consecutive days. Schools that have already started the school year will not be required to move to distance learning educational delivery only.
Contra Costa County has begun accepting waivers from elementary schools to allow in-person classrooms. The waiver checklist is here. They have also noted that live music is not permitted at outdoor dining establishments or wineries.
El Dorado County's website providing guidance for HOA pools links to the State's fitness center guidance.
Marin County is reopening local hotels, motels, and short term rentals for tourism-based businesses and clients.
Mendocino County has a Health Order dated August 14 that will be effective through September 11. The new Order reduces the number of persons from 100 to 50 who may attend outdoor faith or cultural ceremonies, funerals or weddings, or protests. The Order updates the definition of Children's Extracurricular Activity Unit to a stable group of 12.
Mono County has a new order related to the isolation period for those suspected to have COVID-19 dated August 14, 2020.
Sacramento County has Health Order shutting down all public and private schools in Sacramento County for in-person learning; the Order makes it clear that doing so under the guise of day care, child care etc. is not permissible. There are a few exceptions that allow students to be on campus, which are identified in the Order.
San Mateo County has released their application and review process for elementary schools to apply for waiver to allow in person learning.
Santa Clara County has an Ordinance dated 8/13 allowing for enforcement of Health Orders.
Santa Cruz County indicated that they have been removed from the State's Monitoring List effective August 14. Beaches in the unincorporated area of Santa Cruz County will be closed September 5 at 5 a.m. through Monday, September 7 at 5 p.m. Beach crossings would be permissible to access the ocean for the purposes of activities such as surfing, paddle-boarding, boogie-boarding, swimming, snorkeling and kayaking. Beaches will remain open for public use on Saturday, September 5, and Sunday, September 6, between the hours of 4 p.m.-8 p.m. each day. Jurisdictions throughout Monterey Bay are expected to have same or similar beach restrictions in place.
Tulare County issued a press release August 21 indicating that they were aware some schools were opening under the "day camp" guidelines. While Tulare indicates that they do not have the authority to allow or disallow this, they discourage it and have contacted local schools who are utilizing this model.
SoCal Counties. Under the Los Angeles County update to shared residential pool protocols and campground and RV parks protocols, only outdoor pools can be open; indoor pools remain closed.
Riverside County elementary schools can apply for an in-person instruction waiver starting on 8/24.
San Diego County revised its Health Order effective 8/22, requiring temperature screenings of employees at all essential and reopened businesses, and not allowing anyone to enter the workplace with a temperature above 100. Also allows schools to follow state industry guidelines.
Santa Barbara County issued an order on 8/20 which expires on 9/18,
to continue the use of face coverings in high-risk situations.
City of San Diego issued an Executive Order for Department of Recreation and Parks to issue permits to faith based organizations, gyms, fitness facilities, and personal trainers to hold activities at city parks.
READING THE CHART. Because the chart is large and the text small, you can easily make it larger for viewing by holding down the "Ctrl" key on the left side of your keyboard and then using your finger to scroll forward or backwards with the wheel on your mouse. You will see the text grow larger or smaller as you move the wheel. For a list of county restrictions and links to health department orders, see County Chart 8-22-20. The chart is also posted on our website.
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