Insurance agent relationships between property managers and association boards are important. Insurance agents are required to obtain the best coverage at the best price. The problem is when different insurance agents, competing for business, start telling property managers and association boards different things about the insurance in place and comparing insurance coverages.
Here are some basic rules when it comes to dealing with insurance agents when purchasing Association insurance:
1. Make certain the agent is given all your bylaws. In writing, ask the agent to review the by-laws and obtain quotes for the coverages and properties required in the bylaws and state statutes.
Merlin Law Group attorney Corey Harris‘ mother is a director at Edgewater Condominium in Destin, Florida. She has a form letter she requires any agent providing proposals to confirm in writing they have obtained the coverages required in the by-laws and as required by state law. She asks that all the Association property required to be insured not be excluded property but insured, even if by endorsement.
Often, many association policies fail to cover all association property. The policies have a section for "property not covered." If the by-laws or state law requires that property be covered, endorsements need to be added to cover things like fences, pools and whatever is required to be covered.
Exclusions and limitations of coverage can lead to a better price. It is fine to purchase "cheap" insurance if it is your own property, but Association Boards and property managers have to purchase the mandated coverage in the by-laws or required by state law and can only avoid that obligation through waivers in a manner allowed in the by-laws which usually requires notice and votes by all the association members.
2. Ask the agents to confirm in writing your understanding of what they are saying so you get away from oral promises and oral "misunderstandings." If you have a question, put it in writing. If they have an answer, it should be confirmed in writing for the benefit of all.
If you are contemplating changing agents, make certain that they have agreed to abide by the instructions as stated in point one above. Then, if they are making comparisons, ask that those only be made in writing so all board members can view them and the property manager can safely rely on written acknowledgements of coverage rather than oral promises which can be misunderstood or not complete.
Agents who will not agree to deal in writing should not be association agents. As pointed out in Homeowner Association Managers, Agents and Officers Beware – Check Insurance Requirements to Avoid Lawsuits From Individual Members!!, board members and property managers can be liable for not obtaining the proper coverage. What is often not told is that many Board and property manager errors and omission policies exclude coverage for this omission. You can be personally liable for not following by-laws. So, only deal with agents that understand your concern and your significant legal responsibility.