One common subject that often causes confusion in a homeowners association is grasping the difference between the maintenance responsibilities of an association and the items that are covered by the association’s insurance policy. Often owners and even HOA board members may not understand the differences between these two subjects.
1. Look at Maintenance and Insurance Separately
The main confusion seems to be in the idea that the insurance within an association is required to somehow follow along the same lines as the association’s responsibility for maintenance. For instance, if the homeowners association maintains only the roofs of the buildings, then the insurance would also be limited to only covering that component of the buildings. This is the wrong way to look at this issue. Insurance coverage and maintenance responsibilities need to be looked at separately, according to the governing documents of the association.
2. Refer to the CC&Rs
There's usually a section of the CC&Rs that will address the maintenance responsibilities of the association and those of the owners within the association. This is a completely separate part of the association’s governing documents that addresses insurance coverage. To say it plainly, maintenance responsibilities are a completely separate issue and should be considered separately from insurance coverage.
3. Pay Attention to Minimum Insurance Requirements
Usually a section of the CC&Rs, but possibly also included in the bylaws, there will be at least one section that discusses minimum insurance requirements of the association. A homeowners association should have certain types of insurance, such as directors, officers, and liability insurance.
3. Clear Up the Confusion About Property or Buildings
The main area of confusion regarding maintenance responsibilities and insurance coverage has to do with property or buildings in the association.
Let’s look again at the example above where a homeowners association only maintains the roofs of the buildings within the association. The insurance portion of the CC&Rs may, and likely will, have a requirement for "blanket” building coverage to the point that if the buildings were to be destroyed in a fire, the insurance would completely cover the rebuilding of the whole community. The insurance coverage would not be tied in any way to the limited maintenance responsibilities of only covering the roofs of the buildings.
It's not uncommon for HOA board members to have trouble understanding this because they started with the incorrect presumption that maintenance responsibilities and insurance coverage had to be somehow tied together in ways that the documents never consider.
5. Seek the Help of Professionals
Insurance language and requirements can be difficult to understand for those not immersed in that field. It's crucial that you seek and maintain relationships with insurance professionals that can guide you and your homeowners association in acquiring and maintaining proper insurance coverage.
Also consider hiring an HOA manager who will already have relationships with trusted professionals and help your HOA board members understand the association's maintenance responsibilities and the proper coverage that's needed.