Insurance Law for Common Interest Communities: Condominiums, Cooperatives And Homeowners Associations
Important New Book on the Market
Francine L. Semaya and Douglas Scott MacGregor have done a lot of thinking on a topic that affects the insuring community substantially. The result is a highly accurate, readable and useful 1,100 page to me: Insurance Law for Common Interest Communities. It is a winner and should be in every agency, claims and underwriting office in the business.
By way of background, the authors view their subject in a helpful context, explaining that Prior to World War II, common interest communities were rare. Here is an overview.
One form of common interest community, the housing cooperative, first appeared in the late 19th Century and by the roaring 20s, cooperatives were found in 16 cities and were the most popular form of “community housing” in the immediate post-war era. The homeowners association (HOA) also has a long history. One of the earliest was formed in the mid-19th Century in Boston. It had many of the features now associated with HOAs: common area maintenance, assessments for common expenses, and use regulations. It was not, however, until the post-war boom in suburban development that HOAs began to become popular. Condominiums existed in Puerto Rico in the 1950s, but did not arrive on the mainland United States in their present form until the Federal Housing Administration (FHA) adopted a Model Act in the 1960s based on which all 50 states adopted enabling legislation for the formation of condominiums. In the last quarter of the 20th Century, common interest communities spread rapidly across the landscape with condominiums and homeowners’ associations replacing housing cooperatives as the most popular form. Statistics compiled by the Community Association Institute (CAI) reveal that the number of common interest communities grew from approximately 10,000 in 1970 to 342,000 in 2016, with just under 70 million Americans—over 21% of the population—now residing in a common interest community.
Common interest community associations manage and maintain common property through elected governing boards. One of their most important functions is to obtain insurance to protect the community against liability and property damage. For many associations, annual insurance premiums are collectively their largest single expenditure. Yet, association governing boards and the professionals that serve them often know little about their insurance needs or the contents of the policies they purchase to meet those needs. In three parts, “Insurance Law for Common Interest Communities: Condominiums, Cooperatives and Homeowners Associations” provides a comprehensive survey of a wide-range of issues; everything from the insurance requirements imposed on associations by law or community documents to how standard insurance policy language affects associations.
Part One of the treatise consists of two “primer” chapters. The first—chapter Two—is entitled: “Insurance Primer for Common Interest Community Professionals.” It provides a basic understanding of the business and law of insurance for association attorneys and community association managers. Chapter Three of the treatise is called: “A Primer on Common Interest Communities for Insurance Professionals.” Its purpose is to provide lawyers and professionals in the insurance industry—agents, brokers, adjusters, and others—with a basic understanding of the terminology of common interest communities and of how they function. It begins with a discussion on the importance of insurance to common interest communities, then provides key definitions and discusses the importance of those definitions to understanding the functions of common interest community associations. Associations are governed by documents so there is also a section explaining the types of documents that govern associations and how they differ, depending on the type of common interest community.
Part Two of the treatise consists of four chapters on the sources of insurance requirements for common interest communities. The first chapter collects the statutory insurance requirements for common interest communities of all 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands. The second chapter discusses the Fannie Mae and Freddie Mac guidelines and the requirements of government agencies. The next chapter concerns the insurance mandates typically found in common interest community governing documents and in contracts that associations enter. Finally, the last of the four chapters reviews the insurance requirements of the various uniform acts and the Restatement (Third) on Property: Servitudes.
Part Three of the treatise devotes six chapters to addressing policies that should commonly be obtained by common interest community associations:
• Commercial Property insurance (Chapter 10);
• Boiler and Machinery or Equipment Breakdown insurance (Chapter 11);
• Flood insurance (Chapter 12);
• Commercial General Liability insurance (Chapter 13);
• Directors & Officers liability insurance (Chapter 14); and
• Crime/Fidelity insurance (Chapter 15).
Each of these chapters explains the contents of the typical association policy and highlights unique challenges common interest communities face in maintaining adequate coverage. The chapters are annotated with cases analyzing issues from the particular perspective of common interest community associations and their residents. A key feature of these chapters is an “Association Policy Content Checklist” which can help associations and their brokers evaluate their coverage.
An introductory chapter to Part Three—Chapter 9—describes the roles of designated directors and insurance committees and insurance professionals in obtaining the necessary coverage. This chapter explains how coverages are classified and the need for an annual insurance review. It also has a brief overview of workers’ compensation insurance and corrects the mistaken belief that associations only need such coverage if they have employees. The chapter also discusses three other types of insurance coverage common interest community associations need to consider:
• Law Enforcement Liability (LEL) coverage;
• Garage Keepers Legal Liability coverage; and
• Pollution or environmental liability coverage.
And there is a lot more. While it is not beach reading, it is quite interesting and, for a professional, even essential in great part.
We wholeheartedly recommend it. SA
For more information go to: http://sunshinegardenslp.com
