As you may know, homeowner associations in California are required by law to have certain minimum levels of insurance and coverages. However, not all associations are adequately covered creating a huge liability for board members and other owners of units. In addition to the HOA, each unit owner should carry their own individual homeowner insurance policy to cover what is not protected by the association. Most importantly, this should include loss assessment coverage. In addition, renters should be required to provide a renter’s policy to the association. While nearly all HOA boards know they must purchase insurance to protect the homeowners in their association, most board members are not insurance experts and therefore rely on an insurance broker or agent for advice. The important question is who should the board rely upon to get the most comprehensive coverage at the best price for its members. There are two types of insurance providers. There are captive agents who represent only their own company and there are independent broker - agents who work with many insurance companies. Captive agents are companies like Farmers, Allstate, and State Farm. These agents represent their company, not the insured. Independent broker - agents represent the insured which is the HOA, not the insurance company.

To illustrate: If you go to a Farmers agent and ask who has the best policy, they are going to tell you Farmers because they can only sell you a Farmers policy. If you go to an Allstate agent and ask who has the best policy, they are going to tell you Allstate because they can only sell you an Allstate policy. If you go to a State Farm agent and ask who has the best policy, they are going to tell you State Farm because they can only sell you a State Farm policy.

Farmers, Allstate and State Farm write lots of insurance policies, each one cannot have the best policy for your HOA. The best policy may be one of these carriers or it may be one of 50 or more other highly rated insurance companies that can be shopped by an independent insurance broker or agent. If your HOA is insured by Farmers, Allstate, or State Farm, and it turns out to be the best policy for your association, an independent broker-agent will tell you. If it turns out that your current insurance policy is not the best and least expensive policy available, your an independent broker-agent will also inform you as to how you can better protect the members of your association. On the subject of selecting an independent insurance broker, many will provide your board with a no cost insurance coverage evaluation. It’s recommendation that if you can find a broker-agent that also provides expert witness and consulting services to attorneys, you have found the right person upon which to rely.

 

One of the homeowners in our association recently suffered a loss due to water damage. The loss is covered under the association's master policy as well as the owner's individual homeowner policy. Our board wants the owner to make a claim against her policy so the association will not be required to do so. The owner wants the board to make a claim against the master policy. What is your advice?

If the loss is covered under the master policy, the association must make a claim on behalf of the owner or the owner may do so. Generally, where there is overlapping coverage, the association's policy is primary and the homeowner's policy is secondary. This means that the association's policy will pay any loss up to the policy limit. Any uncompensated loss would then be covered by the homeowner's policy if coverage exists.

 

We recently had an incident at a board meeting where one member pushed another. Can we install a camera in our community room and record our board meetings?

Yes. Installing cameras and recording the meetings is likely to deter such future conduct.

 

In order to provide better security, our board recently installed security cameras in the common area. Are we required to post signs informing members and visitors that we have surveilance cameras?

No. If the cameras are limited to common areas where there is no expectation of privacy, posting signs is not required. If the cameras are in the pool area, signs should be posted because of the greater expectation of privacy. Notwithstanding, I believe posting such signs is a good idea because these types of signs act as an added deterrent.

 

Will the association's insurance policy cover the cost of repairs resulting from the leaking of our building's old galvanized pipes?

Most insurance policies will not pay for such damage if it determines that the board knew of the deteriorating pipes and failed to replace them. Insurance policies generally cover only sudden, unexpected losses. Leaks from old deteriorating galvanized pipes are expected.

 

Our condominium building in Los Angeles has old galvanized pipes that have been leaking for several years. The board makes repairs, but has refused to repipe the building because our reserves are inadequate. What is their legal duty?

The board should borrow the funds to repipe the building if possible. If a loan is not available, the board should immediately begin the process of increasing assessments so the work can be done at the earliest possible time. Given that the board has knowledge of the deteriorating pipes, the association will probably be liable for the total cost of all repairs resulting from future leaks. Repiping will cut off the association's liability.

 

Our association has built steps within the common area that don't meet the requirements of the building code. What are the ramifications?

If someone is injured on the steps, the fact that they don't meet code will make it much easier for the plaintiff's attorney to prove that the association was negligent. In short, it increases your association's risk. The steps should be corrected to meet code.

 

Can our condominium association amend its CC&Rs to make every condominium owner responsible for interior damage caused by water intrusion?

Yes. However, unit owners may still claim that the association is responsible for such repairs due to negligence.

 

Will the association's insurance policy cover the cost of repairs resulting from the leaking of our building's old galvanized pipes?

Most insurance policies will not pay for such damage if it determines that the board knew of the deteriorating pipes and failed to replace them. Insurance policies generally cover only sudden, unexpected losses. Leaks from old deteriorating galvanized pipes are expected to occur.

 

I own a condominium and have suffered a substantial loss due to water damage. I want to file a claim with the association's insurance carrier but our board and management company will not allow it. Am I within my rights to file a claim?

Yes. Members of an association are considered additional insureds under the association's policy and therefore have an absolute right to benefit from the association's coverage. It is your policy as much as it is the association's policy.

The California Code of Regulations, states that an insurance agent is obligated to immediately transmit a notice of claim to the insurance company regardless of whether the claim is made by the association or homeowner.

 

One of the homeowners in our association recently suffered a loss due to water damage. The loss is covered under the association's master policy as well as the owner's individual homeowner policy. Our board wants the owner to make a claim against her policy so the association will not be required to do so. The owner wants the board to make a claim against the master policy. What is your advice?

If the loss is covered under the master policy, the association must make a claim on behalf of the owner or the owner may do so. Generally, where there is overlapping coverage, the association's policy is primary and the homeowner's policy is secondary. This means that the association's policy will pay any loss up to the policy limit. Any uncompensated loss would then be covered by the homeowner's policy if coverage exists.

 

During the recent rains, the roof to my condominium leaked through a crack causing damage to my furniture and other personal property. I have been informed by the association's insurance company that the master policy excludes coverage for my personal property. I don't have insurance. Can the association be held liable for not maintaining the roof?

Possibly. If the board of directors fell below the standard of care in maintaining the roof, they could be liable for negligence and would then be responsible for paying your damages. The fact that the roof leaked is insufficient, by itself, to prove negligence on the part of the board. For example, if the crack was new, the board would probably not be held liable for negligence. If the crack was old and the board failed to have the roof inspected, it would be more likely that a court would hold them liable. The facts of your case must be fully investigated before an educated opinion can be offered.

The lesson is clear. It is prudent for all condominium owners to obtain insurance to protect their property. It is inexpensive compared to the risk of harm an owner can suffer.

 

Our homeowner association in Van Nuys is spending a great deal of money on several security guards at our condominium association. We are considering hiring our own guard employees who will be required to obtain guard cards. The board is split. Some board members are agreeable to paying more to a guard company even though it is more expensive. What is your opinion?

Do not hire your own guards. Hire a professional security firm that trains and supervises its guard employees. You will greatly reduce your association's potential liability. The money you will save is not worth the increased risk. If there is a serious incident at the property resulting in a lawsuit, you want the benefit of the guard company's insurance and expertise in training and supervising guards.

 

Our association in Santa Monica is not incorporated. Do you recommend that we incorporate?

Yes. The cost is relatively small and incorporation will reduce the association's liability. There is a long history of case law which provides protections and procedural guidelines that do not apply to unincorporated associations.

 

Will the association's insurance policy cover the cost of repairs resulting from the leaking of our building's old galvanized pipes?

Most insurance policies will not pay for such damage if it determines that the board knew of the deteriorating pipes and failed to replace them. Insurance policies generally cover only sudden, unexpected losses. Leaks from old deteriorating galvanized pipes are expected to occur.

 

I own a condominium and have suffered a substantial loss due to water damage. I want to file a claim with the association's insurance carrier but our board and management company will not allow it. Am I within my rights to file a claim?

Yes. Members of an association are considered additional insureds under the association's policy and therefore have an absolute right to benefit from the association's coverage. It is your policy as much as it is the association's policy.

The California Code of Regulations, states that an insurance agent is obligated to immediately transmit a notice of claim to the insurance company regardless of whether the claim is made by the association or homeowner.