Condo Media - February 2018 - 31

CONSIDER THE PROS AND CONS
OF FILING SMALLER CLAIMS.
Some boards fear that if they file
too many claims, their insurer will
increase the association's premiums,
and that is a legitimate concern.
But if a seemingly small claim turns
into a much larger one, failing to
report it may render the association
ineligible for coverage that would
otherwise have been available.
Thayer learned that lesson painfully,
when a $20,000 damage claim an
association didn't submit morphed
into six figures because an owner,
who, Thayer says, was "trying to
game the system," filed a series of
lawsuits the association had to defend. "Now, we report everything,"
Thayer says. "We think the possibility that a claim won't be covered
because it isn't reported in a timely
manner is greater than the risk that
the premium might be increased."
Pierce agrees. "You don't know
what you don't know," he says.
"I can't tell you how many times
I've seen $10,000 claims turn into
$100,000 when a contractor opens a
wall." It is true that carriers will consider claims frequency in setting premium rates, he acknowledges, "but
they also consider loss ratio." If an
association files several claims below
the deductible and the loss ratio
"is still zero," Pierce says, "a good
broker will push back if the carrier
demands a premium increase. Your
broker should be able to make
the case for why the association is
still a good insurance risk," either
because the loss ratio is reasonable,
or because the small claims were
all related to a single issue (aging
pipes, for example), which have
been replaced, eliminating the risk
of a major claim in the future.
Condominium attorneys recommend that boards should make
the decision to file a claim or not
through a formal board action, discussed, voted on, and recorded
in the minutes so if questions
arise later, the board will
be able to document its
decision-making process.

Pierce, emphasizes. "It won't pay for
a better kitchen or a better common
area than you had before the disaster.
If owners had Formica counter tops,
the insurance won't cover the cost of
granite. If the association didn't have a
gym before the fire, he notes, the insurance proceeds won't cover the cost of
creating one.

UNDERSTAND THAT
ASSOCIATIONS ARE NOT
RESPONSIBLE FOR PROVIDING
RELOCATION ASSISTANCE
TO OWNERS TEMPORARILY
DISPLACED BY A DISASTER.
Owners who often expect associations
to do everything assume that relocation assistance is on that list. The HO-6
policy may cover "loss of use" costs-
but many owners don't have HO-6
policies, and even if they do, relocation
assistance isn't automatic-they have
to request it. When displaced owners
turn to managers for help, McNabb,
says, "managers can be sympathetic
and supportive and maybe even helpful, but they also have to make it clear
that the association isn't responsible for
finding alternate housing for owners or
paying for it."
BE REALISTIC ABOUT
THE TIME FRAME.
The claim resolution process will almost
certainly take longer than anyone
expects. Managing the expectations of
owners will be difficult, Ziner points out.
"They will often get a check from their
HO-6 carrier in a week or so of filing a
claim," and expect the master policy
claim to be resolved as quickly. If insurers are dealing with a regional disaster
like ice dams in a brutal New England
winter, Ziner notes, "they're not likely to
send adjusters the day after a storm or
even the day after that." The best you
can do, McNabb suggests, "is let owners know the claim has been filed" and
provide the insurer's best estimate of
when an adjuster is likely to appear.
UNDERSTAND WHAT INSURANCE
IS DESIGNED TO DO.
Insurance will cover the cost of restoring the property, not upgrading it,

MAKE SURE YOU HAVE THE RIGHT
COVERAGE, AND KNOW WHAT
COVERAGE
YOU HAVE.
Boards sometimes assume that their
communities have sufficient coverage
without actually knowing what kind of
insurance they have, which can be a
painful and expensive mistake. "Don't
take anything for granted," Timothy
Mailloux, insurance producer and risk
manager for Troy, Pires & Allen, advises.
"And don't make any assumptions
about the coverage you have." Boards
should review their policies annually
with their agents, he suggests, making
any adjustments needed before the
policy is renewed.
UNDERSTAND INSURANCE
REPORTING REQUIREMENTS.
In addition to knowing what their insurance policies will cover, boards need to
understand what the policies require
them to do if they suffer a loss. When
boards obtain or renew a policy, they
should review the "conditions" section,
which spells out those obligations.
Joel Meskin, vice president in charge
of community association products for
McGowan & Company Inc., a national
insurance underwriter, advises boards
to ask their carriers to identify any additional expectations, beyond those
specified in the policy.
MANAGING THE CLAIMS
PROCESS: WHY MANAGERS
CHARGE FOR THE WORK.
That's an important consideration,
Meskin notes, because of the need
to provide information, coordinate
varied schedules, and arrange for
the access the insurance adjuster will
need to assess the damage, meet
with contractors and technicians,
and develop the settlement recommendation.
February 2018

Condo Media - February 2018

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