Condo Media - December 2017 - 47

Please don't make the mistake of saying,
"we will never have a total loss," because it does happen.
secure coverage. If you have no history
of water damage and claims, you may
want to consider asking for a policy
without this provision but remember
that having this deductible may be a
useful tool.
■ Wind Deductibles
Depending on your proximity to the
coast and type of construction, you
may have a separate wind deductible.
This can either be a flat number, say
$25,000 per occurrence, or a percentage deductible such as 5 percent
per building. Wind deductibles can
present a large burden to associations financial health or lead to an
assessment should a large claim
occur. Let's say your association has a
replacement cost of $45 million with
a 5 percent building wind deductible,
your maximum risk in a wind event
is $900,000. Let's say at renewal you
are offered a policy at renewal with a
$25,000 flat wind deductible, meaning your maximum risk to wind is
$25,000 but that policy costs $10,000
more a year.
Would $10,000 more a year be worth
reducing the association's possible
budgetary impact by $875,000? This
example shows the importance of
evaluating coverage and not just focusing on price.
UMBRELLA COVERAGE
"How much umbrella coverage should
we purchase?" is a common question
we hear. Generally, this decision falls to
the board.
Community pools are a good example
of why Umbrella Coverage is needed.
Your association has a pool and you
are required by law to have a lifeguard on
duty. Tim, your lifeguard, quits one day
and you have not had a chance to replace
him. Carol, in Unit 5, has a niece, Amy,
visiting. Carol lets Amy go to the pool,
thinking that there is a lifeguard on duty.
Amy, not a great swimmer, sadly drowns.
Amy's parents sue and the jury finds
the association negligent and awards
them $10 million. The association's
general liability pays $1 million and its

umbrella pays $5 million for a total of
$6 million. The association is $4 million
short and now needs to make a major
assessment and is in financial ruin. The
board was offered a $10 million umbrella
but declined because they believed it was
too much coverage and
it cost $500 more a year.
As we approach the end of the year and
budget and strategic planning processes
begin to finalize, associations should give
serious pause to whether they are practicing good risk management. Recently,
Cyber Liability exposure and Directors &

Officers coverage have been hot topics-
even though not traditionally associated
with property management. Your chosen
insurance partner should be one of
your most valuable financial planning
tools and should be offering advice and
consultation on your specific properties'
changing needs.
■ JEFF COTTO IS ASSISTANT VICE
PRESIDENT, SALES EXECUTIVE, BUSINESS INSURANCE WITH ROGERS AND
GRAY INSURANCE.

LE
AB
L
I
VA ON
W A BOST
O
N IN

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December 2017

47
Condo Media - December 2017

Table of Contents for the Digital Edition of Condo Media - December 2017
