An insurance resolution is a document that clarifies the insurance requirements and guidelines for a community and owners when the governing documents are not clear. The resolution could outline coverage and deductible responsibilities along with claim notification requirements and expense allocations. An insurance resolution doesn’t always require a Board vote to implement. However, we strongly urge associations to seek counsel from an association attorney. The attorney can help draft and review the document, to make sure it does not contradict the governing documents. The final step would be to ask for final comments from the association’s insurance agent.
Clarifying the deductible is a crucial part to the resolution. It can spell out who is responsible for the association’s deductible. Within the deductible section, the resolution includes direction for claims involving one or more units, along with negligent and non-negligent situations. When the governing documents don’t list responsible parties, this could mean the association is responsible for the deductible as a common expense. Association insurance companies utilize per unit deductibles more frequently to help offset the high dollar amount of claim activity. With no resolution in place, a per unit deductible could be extremely problematic for a community and create confusion with regards to deductible responsibility.
Coverages like flood and earthquake should be defined within the resolution, even if your community doesn’t currently have the coverage. Coverage could be included at a later time or re-evaluated by a future Board. This could cost the association more money in the long run if the resolution needs to be rewritten. The earthquake deductible should be assessed to all owners and not specifically to damaged units. The insurance resolution can clearly define the deductibles of catastrophic coverage.
Not all claim expenses are covered in a claim. Some insurance companies do not pay claim expenses if a community manager handles the claim details. Claims management is often outside the contract of a community manager’s daily duties. If the Board does not oversee the claim management themselves, additional expenses could be incurred. The insurance resolution can help define claim expense responsibilities if the insurance policy does not provide coverage. It is possible the owner’s HO6 policy could pick up uninsured expenses not covered by the association’s policy.
If your community already has an insurance resolution in place that’s great! Resolutions should be reviewed every seven to ten years or during major policy changes. If you do not have this document in place, reach out to your community’s insurance agent and attorney for help.
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