Whether you are a first-time unit owner or a longtime board member, understanding what an insurance resolution is and why it is important may be new to you. An insurance resolution, in the context of a condominium association or homeowners association, is a document that clarifies any ambiguities related to insurance requirements, processes, or guidelines in the governing documents. Essentially, it is used to fill in any cracks and provide clarity in the governing documents, foster transparency, and minimize disputes. Due to the importance of the insurance resolution, it is highly recommended to have an association attorney help draft the resolution to make sure it does not conflict with any laws or the governing documents.
One common use of an insurance resolution is to lay out who is responsible for insurance deductibles. In a multiunit association, individual responsibilities can quickly become confusing when multiple unit owners are involved in a claim or when negligent vs non-negligent scenarios arise. If the governing documents do not clearly define the parties responsible for deductibles, then the association may be on the hook. If the association has a “per unit” deductible in place, the cost could get out of hand quickly.
Certain catastrophic insurance coverages, like flood or earthquake insurance, should also be clarified in the insurance resolution. You may not currently have the coverage in place or be required to carry it by the governing documents now, but the coverage may be added later. Rewriting the resolution to account for these coverages may be a costly and time-consuming endeavor.
Insurance coverage can change annually, and it is critical that the insurance resolution stays up-to-date with current coverage and association needs. Insurance resolutions need to be reviewed every seven to 10 years or when a significant change occurs in your insurance policy. If you do not have an insurance resolution in place, it is highly recommended to reach out to your association’s insurance agent and attorney to develop one for the association.
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