As an attorney who has represented hundreds of condominium associations following losses, I understand the importance of having the right insurance policies in place to protect your association’s assets and financial well-being. Fidelity, Employee Dishonesty, and Crime Insurance are crucial components of a comprehensive insurance plan for condominium associations. Yet, it is a very complex type of insurance. Condominium boards and property managers often ask me what they should be aware of to purchase the best type of Fidelity, Employee Dishonesty, and Crime Insurance available and how to work with their agent to do so. I will share tips and personal insights to help your association navigate these specialized coverages and suggest how to work effectively with your insurance professionals to safeguard your community’s interests.

Fidelity, Employee Dishonesty, and Crime Insurance policies protect condominium associations from financial losses resulting from fraudulent acts, theft, or embezzlement by employees, board members, or even third-party contractors. These policies can include various coverages such as Commercial Crime Policy, Employee Dishonesty Coverage, Third-Party Fidelity Coverage, Forgery and Alteration Coverage, Computer Fraud and Funds Transfer Fraud Coverage, Money and Securities Coverage, Extortion, Kidnap, and Ransom Coverage.

Working with the Right Insurance Agent or Broker:

To ensure that your association receives the most appropriate coverage, it’s crucial to work with a knowledgeable insurance agent or broker who specializes in condominium association insurance. Look for professionals with experience in the following areas:

  1. Condominium association insurance, including Fidelity, Employee Dishonesty, and Crime Insurance
  2. Local and state insurance regulations and requirements
  3. Risk management strategies for condominium associations
  4. Ask for referrals from other condominium associations, your attorney, or a property management company to identify reputable insurance professionals in your area.

Tips for Selecting and Managing Your Insurance Coverage:

Assess your risks: Collaborate with your insurance professional to conduct a thorough risk assessment. Consider factors such as the size and complexity of your association’s financial operations, the number of employees and board members with access to funds and sensitive information. One of the most important discussions is detailing the controls and procedures in place to prevent and detect fraud and theft.

Customize your policy: Work with your insurance agent or broker to tailor your policy to your association’s unique needs. Make sure your policy addresses all potential risks, including employee dishonesty, third-party fraud, forgery, computer fraud, and theft of money and securities.

Regularly review and update your coverage: As your association’s operations evolve, so will your insurance needs. Schedule annual reviews with your insurance professional to ensure that your coverage remains adequate and aligned with your association’s potential risks.

Establish strong internal controls: Implement robust financial controls and procedures to minimize the risk of fraud and embezzlement. This may include segregation of duties, regular financial audits, and background checks for employees and board members who handle the association’s finances.

Educate board members and employees: Provide regular training and education to board members and employees about the importance of maintaining ethical behavior. Everybody should know how to identify potential fraud risks and how to properly report any suspicious activity. For financial purposes, I strongly suggest that an accountant provide the Board and property manager with a written set of procedures and processes for the approval and payment of expenses and the same for any type of incoming revenue. There should be an outside audit of the books and records on a periodic basis by a third party.   

Communicate with your insurance professional: Maintain open communication with your insurance agent or broker. Report any changes in your association’s operations or risk profile and promptly notify them of any potential claims. Most insurance contracts involving crime and dishonesty require prompt reporting from the time of first suspicious activity. Many insurance companies may help with the investigation but can only do so if the criminal or dishonest activity is reported promptly.      Securing the right Fidelity, Employee Dishonesty, and Crime Insurance coverage is an essential part of managing your condominium association’s risks and protecting your community’s financial well-being. By working with an experienced insurance professional and following these tips, your association can more effectively navigate the complexities of these policies and enjoy greater peace of mind.