Condo Media - January 2022 - 26

PRICE VS. COST
4
CONFLICT OF
INTEREST
Some management
companies or CAMs
have their own preferred insurance
professional who in turn has its
own preferred insurance carrier(s)
or insurance programs. There are
also some where the insurance is a
division, affiliate, or subsidiary of a
management company. These may in
fact provide the best products to protect
the managed association's assets.
However, there are two key requirements.
First, any such relationships
must be expressly disclosed to the
association board. Second, under this
scenario, the management company
or CAM must still conduct its due
diligence as to the best available
coverage, and not just the best price.
5
BUSINESS GOOD WILL
There are " Good Will " issues that can arise from insurance issues.
First, very often the management agreement has a unilateral indemnity
agreement flowing from the association to the management company
or CAM. Theoretically, if the CAM does not purchase and maintain the appropriate
coverage, it is still protected, because the association must defend and indemnify the
management company or CAM. Who will tell the board that the management company
is being sued, and the managed association that did nothing has to defend them?
As long as the management company is not concerned about losing the client, there is
no problem. Does the management company and CAM have an obligation to disclose
this to the association before the management agreement is entered?
Second, what will the neighbor associations or other associations think when
they hear about this? What will the impact be on the association property values?
6
MANAGEMENT COMPANY CEOS BEWARE
One of the biggest mysteries I have encountered in my years in this
industry is why there are management company CEOs, executives, and
owners who do not make it one of the highest priorities to make sure
the association's insurance program is the best. Management companies spend so
much time making sure they are additional insureds on the association insurance
policies, but they do not make sure the association's policy is not the best. The
management company and the CAM's coverage is only as good as the associations.
This is why the community association insurance professional should be intimately
involved in the insurance procurement process and the presentation to the board.
TAKEAWAYS
l Community association insurance professionals do not charge to meet, counsel,
or present to your board. Make the insurance professional's E&O on the line,
not the management company or CAM. The insurance professional, not the
CAM, is the licensed insurance expert.
l Boards should exploit community association insurance professionals for two reasons.
First, boards owe a fiduciary duty to the association and relying on a licensed
community association insurance professional, and must rely on the insurance
professional. If the board advises the CAM to take care of the insurance, you are the
professional manager and should not want to try and understand insurance, insist
that meeting with the insurance professional is part of the management agreement.
By doing so, the board develops a strong case to a strong business judgment defense.
Second, the community association insurance professional's counsel is free.
l CAMS should never sign an insurance application on behalf of an association.
The association does not pay the management company or the CAM enough to
accept that responsibility.
l Always make the board review the application, make any changes they need,
and have the appropriate board member sign the application.
l Not all insurance coverage is equal.
n JOEL W. MESKIN, ESQ., IS THE MANAGING DIRECTOR
COMMUNITY ASSOCIATION PRODUCTS WITH
MCGOWAN PROGRAM ADMINISTRATORS.
© 2018 JOEL W. MESKIN
26 CONDOMEDIA January 2022
Condo Media - January 2022

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