Recent articles in the Miami Herald and Insurance Journal reported on massive fraud from a Condominium Association by its officers, board members, and leaders. The Miami-Dade State Attorney’s Office said it had charged five current and former association board members with racketeering violations, grand theft, money laundering, and fabricating evidence. In addition, two vendors were criminally charged for receiving payments from the fraudulent invoices, which totaled over $1.2 million. Florida law requires Condominium Associations to carry Crime and Fidelity Insurance or bonds to protect against this type of activity.

Florida Statute 720.3033(5) provides:

The association shall maintain insurance or a fidelity bond for all persons who control or disburse funds of the association. The insurance policy or fidelity bond must cover the maximum funds that will be in the custody of the association or its management agent at any one time. As used in this subsection, the term “persons who control or disburse funds of the association” includes, but is not limited to, persons authorized to sign checks on behalf of the association, and the president, secretary, and treasurer of the association. The association shall bear the cost of any insurance or bond. If annually approved by a majority of the voting interests present at a properly called meeting of the association, an association may waive the requirement of obtaining an insurance policy or fidelity bond for all persons who control or disburse funds of the association.

What is Crime and Fidelity Insurance?

Crime and Fidelity insurance protects the Association’s money in the operating account and reserve financial accounts from criminal and fraudulent activity. The coverage protects that money from crimes like theft, embezzlement, invoice padding, and false invoicing. It should include crimes involving computer fraud, wire fraud, and check fraud. The insurance is similar to employee dishonesty insurance. It is important for Associations to obtain broad coverage covering crimes by spouses, committee members, community managers, accountants, bookkeepers, and volunteers.

Most insurance agents and many of the insurance carriers writing these crime and fidelity policies require certain risk management—activities such as a CPA annually auditing the books and financial statements specifically looking for improper disbursements. I would suggest that the review be done quarterly to reduce the risk and amount of loss. Surety One noted on its website:


The HOA or COA applicant should have an independent party (CPA, audit firm, etc.) look at the books annually. This is more important as the requested fidelity amount increases. A fidelity and surety company would like to receive an annual financial statement prepared by a CPA as part of renewal requests or if the initial coverage request is large. If any recommendations are or were made by the auditor, then underwriters will want to understand how the HOA has instituted those recommendations.

The bottom line is that association monies are always at risk from wrongful and criminal activity. Associations should seek the broadest crime and fidelity coverage in terms of activities that could cause a loss of those monies and broad in the description of those involved with wrongfully taking those sums.