Is Your Association Properly Named On Your Insurance Policy?

Like other types of businesses, community associations rely heavily on their relationship with property managers. Most, if not all, day to day tasks are delegated to managers and management companies. In some instances, management companies have even been tasked with procuring insurance for the properties they manage with the hopes of using a large portfolio to obtain lower premiums.

While this practice has gone on for some time, in Florida and elsewhere, a new decision calls the practice into question. In Banta Properties Inc. v. Arch Specialty Insurance Company, the property management company (Banta Properties) filed suit against Arch for failing to pay its portion of the damage suffered by multiple apartment complexes. While Banta Properties was not the owner of the complexes, it had (according to Banta) been tasked with obtaining their property insurance.

In looking at the alleged contractual obligation to procure insurance, the appellate court noted that the evidence and testimony contradicted such a requirement. The management agreement appeared to place the insurance obligation on the owners of the property and designated the management company as an independent contractor and not an agent. This, along with the testimony at trial, led the appellate court to conclude that there was no written or nonwritten obligation to procure insurance on the part of the management. Thus it found that right to recover, if any, under the property was limited to the management company’s 4% commission of the lost rental income.

Because the court found that there was no obligation on the part of the management company to procure insurance the Court did not address whether such an obligation would have entitled Banta to recover more. Regardless, the argument made by the insurers in this case should cause associations, brokers, and managers alike to review their policies. If the property owner is not listed as a named insured on the policies, you could have a fight on your hands in the event of a loss.

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