Community Insider Winter 2017 - Page 40

Rotten Apples: How (not) to Bid Insurance “We just want an apples-to-apples bid to what we have now” While apples, oranges and all other fruits leave a far sweeter taste in the mouth than insurance, a concerning trend on the insurance side has become frequent requests from communities for “apples-toapples” bids to the association’s existing coverage. Given the uptick in such requests, it is important to briefly go over best practices for the insurance bid process. After all, what happens if you have an apple but actually need an orange? Before constructing our insurance fruit salad, let’s first substitute the fruit for the policies needed by most community associations. These are the property, general liability, fidelity and directors & officers liability policies. Associations may carry coverage such as workers compensation, umbrella liability, earthquake and/or flood insurance, as well, though it will vary by community. Who’d have known that fruit salad could still be fun without the fruit? Once you’ve picked out the insurance professionals for the bid process (a great place to find qualified agents is CAI-San Diego’s online business partner directory!), you’ll want to make sure that the bidders have the proper documents needed to complete their quotes. These documents include: CC&Rs Recent balance sheet Site map BY BRIAN A. KALMENSON, CIRMS Current certificate of insurance (not the current policy itself) Recent reserve study Five-year loss history (ordered from existing agent) While the agents may have property-specific questions upon initial review, the above listed items will largely be everything needed to finalize a bid, assuming a bid can be submitted. An HOA with extensive losses or unusual exposures could limit the number of carriers that can provide bids for review. Once the bids are in, now what? It’s very possible that the bids received show at least a slight difference from the coverage currently in place. How is the board to know what is proper? While only an insurance professional can deem coverage to be appropriate or not in most cases, here are a few pointers on what to look for on the policies maintained by most communities: Property Coverage. Request that each submitting bidder provide a statement of values for the board’s review. This will show what the agent’s offering is really covering and gives the board and management confirmation that the agent’s bid encompasses the proper common area components. For communities that insure structures (clubhouses, condo or townhome buildings, etc.), the association should request the replacement cost report for the structures. This should be updated every year to ensure that the communities are insured to 100% replacement and it will show the board how the biggest number on the bid (building limit) was determined. General Liability. Verify that the proposed limits of coverage are at least equal to the requirements set forth in California Civil Code §5805. Not carrying sufficient coverage can expose members of the association to be held personally liable for claims that exceed the association’s coverage limits. The minimums per Civil Code are: At least $2,000,000 per occurrence for communities with 100 or fewer units At least $3,000,000 per occurrence for communities with more than 100 units Fidelity / Crime. Confirming that the limits of coverage are at least equal to the requirements of the association’s CC&Rs. Typically, this will 40 | SAN DIEGO COMMUNITY INSIDER | WINTER 2017 WWW.CAI-SD.ORG Rotten Apples: How (not) to Bid Insurance BY BRIAN A. KALMENSON, CIRMS “We just want an apples-to-apples bid to what we have now” While apples, oranges and all other fruits leave a far sweeter taste in the mouth than insurance, a concerning trend on the insurance side has become frequent requests from communities for “apples-to- apples” bids to the association’s existing coverage. Given the uptick in such requests, it is important to briefly go over best practices for the insurance bid process. After all, what happens if you have an apple but actually need an orange? Bef ɔՍѥȁɅեЁͅ)ӊéЁՉѥєѡեЁȁѡ́)Ёչ䁅ͽѥ̸Q͔ɔѡɽ)Ʌ䰁䁅ɕѽ̀́)̸ͽѥ́䁍䁍ٕɅՍ)ݽɭ́ͅѥյɕ䰁ѡՅ)ȁɅ́ݕѡ՝Ёݥم䁉)չ丁]eٔݸѡЁեЁͅձ)ѥոݥѡЁѡե)=׊eٔЁѡɅɽͥ)ȁѡɽ̀ɕЁѼՅ)́́ $Méͥ́ѹ)ɕѽ䄤׊e݅ЁѼɔѡЁѡ)ٔѡɽȁյ́Ѽєѡ)սѕ̸Q͔յ́Ց)Aɽ ٕɅIՕЁѡЁ)Չѥȁɽ٥хѕЁمՕ)ȁѡɓéɕ٥ܸQ́ݥ͡܁ݡЁѡ)ӊéɥ́ɕ䁍ٕɥٕ́ѡ)ɐЁɵѥѡЁѡ)ӊé͕́ѡɽȁ)ɕ̸)ȁչѥ́ѡЁɔՍɕ(Չ͕̰ȁѽݹե̰)ьѡͽѥ͡ձɕՕЁѡ)ɕЁЁɕЁȁѡՍɕ̸)Q́͡ձѕٕ啅ȁѼɔ)ѡЁѡչѥ́ɔɕѼ)ɕЁЁݥ͡܁ѡɐ܁ѡ)ЁյȁѡեФ݅)ѕɵ)Mє ɕЁѥєɅЁѡɕ)䁥͕ЁЀȰȁɕ)չѥ́ݥѠȁݕȁչ)IЁɕ͕ٔՑЁЀ̰ȁɕ)չѥ́ݥѠɔѡչ)IЁ͡)ٔ啅ȁ́ѽ䀡ɑɕɽѥФ)]ѡ́䁡ٔɽՕѥ)ѥɕ٥ܰѡٔѕѕ́ݥɝ䁉))=ѡ́ɔ܁ݡ%ӊéٕ)ͥѡЁѡ́ɕٕ͡܁ЁЁ)ͱЁɕɽѡٕɅɕѱ䁥)!܁́ѡɐѼ܁ݡЁ́ɽ)]䁅Ʌɽͥ)ٕɅѼɽɥєȁЁЁ͕̰)ɔɔ܁ѕ́ݡЁѼȁ)ѡ́х䁵Ёչѥ)Ʌ1丁YɥѡЁѡɽ͕)ٕ́ɅɔЁЁՅѼѡ)ɕեɕ͕́ЁѠ ɹ ٥ + Ը9Ё她ՙЁٕɅ)͔́ѡͽѥѼ)ͽ䁱ȁ́ѡЁፕѡ)ͽѥéٕɅ̸Qյ)ȁ ٥ ɔ) I()ٕѡѼ锁յ)Չѕ!=ݥѠѕ͕ͥٔ)ȁչՅɕ́ձЁѡյȁ)ɥ́ѡЁɽ٥́ȁɕ٥ܸ)M8%< =55U9%Qd%9M%H))]%9QH$)䀼 ɥ ɵѡЁѡ́)ٕɅɔЁЁՅѼѡɕեɕ)ѡͽѥé I̸Q䰁ѡ́ݥ)]]\ $M=I