HOA Premiums Out of Control? Put Them in a POD!

by Brit Weimer

In recent years, most Colorado associations have experienced astronomical premium increases from their insurers, causing HOA dues to escalate. According to the Colorado Division of Insurance, the cost of association master policies has increased by an incredible 200-500%. So, if that has happened to your association, you are not alone!

Fortunately, there are proactive ways to constrain future premium increases. The “POD” acronym is helpful – Policies, Opinions and Declarations:

Policies

Adopt an insurance & deductible policy to clarify owner vs. association property insurance responsibilities, including payment of the deductible for claims under the association’s policy.

By clearly dividing responsibilities for insuring common areas vs. owner property, reporting claims to insurers, and assigning responsibility for the HOA’s deductible, for losses affecting both owner property and common elements, a well-written policy reduces common pressures to over-report duplicative insurance claims.

Opinions

Get coverage opinions before strategically submitting liability-insurance claims. Most community associations have Directors and Officers (“D&O”) Commercial General Liability (“CGL”) policies, and some have other more specialized liability insurance policies such as Employment Practices Liability and Errors and Omissions.

Reporting claims that miss the mark on coverage can cause significant premium increases and non-renewals, even if coverage is ultimately denied. It’s not always clear, even to experienced managers and directors, which liability insurance policies are best suited to a particular lawsuit. An experienced HOA insurance attorney can quickly steer you in the right direction on the most likely policy for a given claim.

Declarations

Revise your Declaration to minimize property-insurance obligations. For example, for Colorado townhouse associations, there is generally no statutory requirement for the association to insure building exteriors, even if the association is responsible for their maintenance and repair.

In addition to analyzing and revising the declaration, experienced counsel will help you communicate the changes with owners, to reduce the risks of coverage gaps between owner policies and the association’s policy.

So, if your premiums are racing out of control … time to put them in the POD?