By Mike Barclay, Reconstruction Experts
The spring months of May and June typically bring severe weather to Colorado. Hail can cause catastrophic damage to an HOA community. Often after a storm, many community association managers are left wondering how to handle a claim. The common thought is to "get 3 bids." Getting 3 bids is fine for a conventional HOA construction project, but NOT for an insurance claim. Bidding out insurance work is a disservice to your HOA.
When an HOA suffers an insurance loss- such as fire, flood, or storm damage- the best solution for the community association manager is to help the HOA select a qualified general contractor and forego the bidding procedure. By requesting 2 or 3 bids from different contractors, the manager runs the risk of undercutting the scope of work to which they are entitled. Scope of work is a crucial element when describing how insurance companies compensate policy holders to restore their property to pre-loss condition, as stated in most policies. Most people don't understand or aren't aware that insurance companies all use the same software to determine pricing. It’s called Xactimate. Xactimate has a predetermined agreed upon price for every aspect of restoration, dictated per region, which is updated regularly to reflect current market value of labor and materials. What this means is price doesn’t matter when it comes to your claim. Scope of work, however, does. When it comes to price, the HOA only needs to cover their deductible. Sometimes HOAs think they can bid out their insurance work and pocket the “extra” money. This is fraud.
A good general contractor will focus on creating the most comprehensive repair plan, while the competitive bid process focuses on price and quickly becomes a race to the “bottom-of-the-barrel.” When contractors know they will be placed in a competitive bidding situation, they will tend to keep their scopes to a bare minimum to keep the price low and win the job. The most frequent means of keeping a scope lean is by repairing items that would normally be replaced, and these items should have been included in the comprehensive scope of work. Scope gap and/or scope lean could easily cause premature failure and construction defect issues in the future.
When selecting your contractor, ask 2-3 general contractors to present/interview with your HOA Board of Directors. Simply ask the contractors the following questions:
1. What’s your experience with HOA hail claims?
2. What’s your insurance coverage?
3. How would you approach our project?
4. Do you have HOA references?
These simple questions will help your board choose the most qualified contractor.
The storm on May 8, 2017 caused $1.4 billion in damages in Colorado according to the Denver Post. An estimated 200,000 claims were filed. This made it Colorado’s costliest storm ever. Be wary of out-of-state “storm chasers” looking to get a piece of the pie. When a large hail event hits Colorado, many contractors from surrounding states head our way. Often these contractors are not qualified to handle large HOA insurance claims and perform subpar work that leads to roof leaks. And once they get their money, they are gone. Often they do not honor their promised warranties and HOAs are left footing the bill to fix their shoddy work. Bottom line, your best bet is to keep it local.
Community association managers need to be aware that insurance fraud has many faces. Common types of fraud are:
1. The contractor offers to pay for the HOA’s deductible
2. The contractor offers to trade advertising for the cost of deductible
3. The contractor offers a coupon or voucher towards the HOA’s deductible
4. The contractor offers to split their profit with HOA
5. Contractor promises kickbacks
6. HOA bids out project and pockets the rest of the money
Beyond finding the right contractor, focusing on a comprehensive scope and not falling victim to fraud, community association managers also have juggle helping their HOAs fund their deductibles. Most insurance companies that offer insurance to HOAs no longer offer flat fee deductibles of $10K, $20K, etc. Instead, the deductibles are percentage based. They can be 2%, 5% and even 10% of the insurance company’s estimated replacement value of the entire property. This is not to be confused with the amount of the claim or the market value of the property. Many times a homeowner’s HO6 Policy will cover their portion of the deductible. Many community association managers regularly urge homeowners to purchase HO6 coverage.
Insurance loss- such as fire, flood, or storm damage is a certainly a reality for Colorado association managers and HOAs. The next time one of your communities is dealing with a claim, remember- qualify and select your contractor and focus on a comprehensive scope and not 3 bids. In a time when deductibles are high, your HOA will thank you for getting them everything they deserve.
Mike Barclay is the Colorado Regional Vice President for Reconstruction Experts, and has over 20 years of reconstruction and restoration experience. Mike manages the overall success of the Colorado Branches by pushing Reconstruction Experts towards the highest level of professionalism and expertise.
By Michael Daley, Allied Universal
Lately, it has become unsettlingly common to wake up to stories of mass shootings, regular civil disobedience, violent robberies, and our nation’s ongoing opioid epidemic.
In Colorado, we have been shielded from some of these national issues for many years. However, as our population continues to grow by leaps and bounds, these problems are hitting home much more often. According to an article from the Denver Post, our statewide population exceeded 5.6 million people in 2017—ranking Colorado on the top 10 list of fastest growing states.
Population growth and surges in crime are not limited to city dwellings and urban areas. In fact, they spill over to areas where you may least expect. For example, most associate the safety for their HOA with security at the entrance gate, periodic patrols by the local police or shared vehicle patrols provided by a common contract security company. But what about at HOA Meetings that may be held at an offsite location?
When was the last time you attended a large group function, such as a town hall meeting, campaign rally, city hall meeting, or school board meeting, and did not see a security or police presence? Violence and unrest behaviors are not subject to any one particular socioeconomic group, so it is inherent for leaders to also account for the safety and security of their attendees in these situations as well. After all, these meetings typically dictate policy or changes to individuals’ lives, property, or employment and they can get very intense.
From your owners to your association lawyers and all the way to your developers, a wide range of audiences have a vested personal interest in the meetings as well as their outcomes. A study of HOAs and Condo Associations over a 20-year span revealed that more than 40 percent of board members claim they have been threatened with physical violence at one time or another. When dealing in matters of property and finances with large groups of stakeholders, it is incumbent on the HOA board to provide adequate safety measures for board members, stakeholders, and owners.
What can you do to strengthen your association’s security posture at gatherings?
Whether your community needs an off-duty police officer at meetings, a private security team at your entrance or a vehicle patrol service, make sure there is a plan in place and communicate it well. Give your stakeholders the tools and knowledge to participate in safety awareness so they too can become a part of the solution in ensuring an environment that is well protected beyond the gate.
About the Author: Michael Daley is Allied Universal’s Business Development Manager for Colorado, holding the Cultural Institution Protection Manager certification from the International Foundation for Cultural Property Protection (IFCPP) as well as the Terrorism Liaison Officer (TLO) designation from the Department of Homeland Security (DHS).
Mike started his service-industry career 17 years ago and has held positions from front line security and support roles to Senior Vice President. Mike has been a leader with Allied Universal Security Services for the last 11 years of his career and is proud to bring best-in-class security solutions to his customers.
In addition to being a national sponsor of CAI, Allied Universal Security Services is the largest provider of security services, systems and solutions in North America and serves hundreds of HOAs, Apartment Complexes and Condo Associations across the United States.
By Michael Lowder, Esq. and Heidi Storz, Esq., Benson Kerrane Storz & Nelson
As we head into the summer season, it is inevitable that Mother Nature will bring some wild Colorado weather to the Front Range. These storms could result in damages that require Associations to make insurance claims. Whether it is hail, wind, or some other weather-related Act of God, it is important to know some of the games that insurance carriers might play when you make a claim under your Association’s property insurance policy.
1. Multiple Causes of Loss
Most Association insurance policies contain what is known as an “anti-concurrent causation clause.” This is “insurance lingo” that means that if your loss is caused by multiple different causes, and one of those causes is not covered, the insurance company can deny your claim. For example, if you have a sewer line back up in your basement (covered under the policy), and you also have water get into the basement from exterior flooding (not covered under the policy), your entire claim could be denied because of an anti-concurrent causation clause in your policy, even though some of the damage was caused by a covered loss. Lesson: be careful about how you describe your claim when you submit it.
2. Policy Sub-Limits
Some policies will contain “sub-limits” for certain types of insurance coverage. While your overall coverage under the policy may have a $1,000,000 limit, certain components of that coverage may be limited to a smaller “sub-limit.” An example of this is coverage for debris removal. Your Association’s policy may have a sub-limit for debris removal, which limits coverage for costs to remove debris to $10,000 or some percentage of the overall limit. Practically, this means that even though you have $1,000,000 in coverage, if your debris removal sub-limit is $10,000, but the actual debris removal costs $15,000, your Association could only get $10,000 for that work (the sub-limit for debris removal). Lesson: make sure you know the sub-limits when you buy your policy.
3. Cosmetic v. Functional Losses
Some insurance policies contain limitations on the types of damage they will cover relating to whether or not the damage or loss is “cosmetic” or “functional.” Some policies do not cover “cosmetic” losses. Figuring out what is “cosmetic” versus “functional” is something that Associations and their insurers often fight about, but it’s important to realize that if your Association’s policy has a cosmetic loss exclusion, this could be an issue that the insurance company raises. For example, if hails dents your Association’s metal roof but does not cause leaks through the roof, that may be a “cosmetic” loss. If you have a cosmetic loss exclusion, that damage may not be covered and you’ll be stuck with the unattractive dented roof, even though there’s no dispute that the hail caused the dents. Lesson: if you want to ensure that cosmetic damages are fixed, make sure you don’t have a cosmetic loss exclusion in your policy when you buy it.
4. Code Upgrades
When an older building suffers a loss, the repairs made are required to comply with the building code that is in effect when the repairs are made. In this example, let’s assume the building was up to code when it was originally built. However, due to changes in the building code since then, if the building suffers an insurance loss, it may not be code-compliant. Although the building is grandfathered in as it stands, any repairs made after the loss have to bring the building into compliance with the new building code requirements. Some insurance policies contain coverage for these additional repairs and required upgrades. This coverage is called “code upgrade” coverage. However, if the building was never built up to code at the time of its original construction, you are not entitled to code upgrade coverage if you suffer a loss that’s otherwise covered under the policy. Lesson: if your building is older, make sure you have coverage for code upgrades.
5. Actual Cash Value v. Replacement Cost Value Policies
Another thing that is crucial to determine is whether your Association has an “Actual Cash Value” policy or a “Replacement Cost Value” policy. With a Replacement Cost Value policy, the insurer must pay the full cost to replace the damaged components, i.e., it must pay the full cost to replace a roof damaged by hail. However, with an Actual Cash Value policy, the insurer can deduct depreciation, which is essentially the “value” that the insured has received of the damaged component over time. In the example of the roof above, let’s assume that, at the time of the hail storm, the roof had an expected life of 20 years, and had already been on the building for 10 years. Then, the hail storm happens and the roof has to be replaced. The insurer calculates the amount it owes to the Association by taking the “replacement cost value” (the full replacement cost for the roof), and then deducts the depreciation (the value the Association has gotten out of the roof for the last 10 years), and then pays whatever is left. Lesson: if the insured component (i.e., roof) is older, an actual cash value policy may not provide much coverage, if any, for a loss.
Dealing with storm damage and the resulting insurance claims can be confusing and frustrating, but hopefully these tips can help you with some of the insurance lingo that you might hear when dealing with insurance claims. If you ever feel like something doesn’t seem fair, or doesn’t make sense, it’s best to bring in a professional to assist you in negotiating a claim with the insurance company.
Michael Lowder is a senior associate attorney with Benson, Kerrane, Storz & Nelson, P.C., where Heidi Storz is a partner. Mr. Lowder and Ms. Storz practice insurance and construction defect law, serving homeowners and homeowners’ associations throughout Colorado.
By Tressa Bishop, MBA, CIC, CB Insurance
A community association manager’s job is rewarding, but it’s not without risk. Today’s management professionals do much more than just focus on taking good care of the properties. They also act as accountant, human resource manager, complaint mediator, law enforcer, property inspector, real estate guru, insurance consultant, and much more. With such a wide array of responsibilities, many community managers worry about whether they’re protected against mistakes or oversights that could come back to haunt them in the form of lawsuits. Errors and Omissions (E&O) and Commercial General Liability (CGL) insurance help protect against financial losses that are directly related to mistakes made by managers.
How can I be sued even if an error was truly a mistake?
Let’s be honest, anyone can be sued for just about anything. Even though you do the best for the associations you serve, there may be situations where you find yourself in a bit of hot water whether you did what is alleged or not. This is why the liability policies all include defense language similar to "the insurer will defend whether the allegations are frivolous, false or fraudulent.” Imagine each of the following scenarios:
No matter how well trained, experienced, and meticulous managers strive to be, there’s a good chance that one day they could still be sued. Mistakes happen. Not only do mistakes happen, but challenging association members happen. There’s no way to guarantee that you’ll ever be fully protected from risk.
I have an “indemnity agreement” or “hold harmless provision” in my management agreement with the association. Doesn’t that mean I’m already covered?
No. Indemnity agreements and hold harmless provisions under general liability policies typically only cover bodily injury, property damage, personal injury, and advertising injury claims. Further, they generally require the manager to spend his or her own money to defend a lawsuit or a claim, then apply for reimbursement later. There’s no guarantee that the reimbursement will ever be received. If this should happen to you, you could drain your bank accounts with no promise of recouping the costs. The less considered unintended consequence is that not only will you be seeking indemnity to recover your costs, but you will be seeking it for "your" mistake from "your" client.
I’m already covered through the community association’s Directors and Officers (D&O) liability policy. Do I really need E&O insurance?
In Colorado, Community Association Managers (CAMs) are licensed. All licensed professionals require E&O insurance and, if you do not have it, it is imperative that you disclose that to your client or prospective client in the management agreement or other notice.
Many management professionals don’t realize that D&O policies don’t provide coverage if the community association itself sues them. You would need to purchase a separate E&O policy to protect yourself against this circumstance.
You should keep in mind that not all D&O policies are the same with respect to coverage for management professionals. Some do not provide any coverage for the CAMs, some only provide coverage pursuant to the express services stated in a written management agreement, and some provide coverage as long as there is an agreement, whether written or not.
If you own a management company that has employees, you should be aware that there is no D&O policy on the market that will provide coverage for a management professional when their employee brings a claim against the management professional or company. Employment practices liability coverage is needed to protect against this type of exposure (this can be added to an E&O policy).
Why do I need CGL coverage? Isn’t E&O coverage enough protection?
Managers need both Commercial General Liability (CGL) and professional liability (E&O) coverage. The CGL policies that the associations carry naming the manager/management company as an additional insured have exclusions that may prevent the manager from being covered. Specifically, most CGL policies include a professional services exclusion.
The association CGL is there to protect the management professional if its services or lack of services caused a third party bodily injury (BI) and/or property damage (PD). Most E&O policies will expressly exclude BI and/or PD, although there are a few policies that provide "contingent BI/PD” when the damage arises out of the management professional’s act, error, or omission.
Are all E&O policies the same? Can’t I just purchase the cheapest policy?
Errors and Omissions insurance is designed to protect managers against claims such as discrimination, wrongful eviction, class action suits, hiring unlicensed contractors, and other actions. Just like all insurance, the cheapest policy is often the cheapest policy. Not all policies are created equal, so below are some questions to ask when shopping for an E&O policy:
Unfortunately, we live and work in a society that’s increasingly susceptible to legal complaints. And, like other service professionals, managers must wear multiple hats, with no room for mistakes. Therefore, managers should view Commercial General Liability and Errors & Omissions insurance the same as any other cost of doing business. These policies should give you comfort in knowing that you have protection against claims of wrongdoing - no matter how careful you are in trying to prevent them.
Our team at CB Insurance is solely dedicated to Colorado’s unique association insurance marketplace. When you work with one of our qualified insurance professionals, you can be assured that you’re getting the coverage you need - so you can focus on caring for your associations, satisfying your current clients, and attracting new ones. Call us today to begin your insurance review!
The information in this article does not change or amend any actual policies. The terms, conditions, exclusions and endorsements of policies will apply. Every policy and every claim is different.
By April Ahrendsen, VP Regional Account Executive, Mutual of Omaha Bank
Stories of cybercrime continue to make front-page news, and companies of all sizes are consistently impacted by cyber theft and data security breaches. According to the Breach Level Index, over 5 million data records are lost or stolen every day.
Each theft causes headaches for consumers and businesses alike, as well as reputational damage for businesses, and often times, financial loss. Cybersecurity Ventures estimates that cybercrime will cost the world $6 trillion annually by 2021.
While not immune to the impacts and consequences of a data breach, multi-billion dollar organizations employ legal, security, and technical experts while utilizing vast resources to limit potential liability. Small businesses must also prepare for potential attacks from a growing number of cyber predators. The impact of cybercrime on small businesses can be devastating. Trustwave® reported that 71% of attacks target small businesses. Within 18 months of a breach, 80% of small businesses go out of business.
It is impossible to be 100% secure from cyberattacks, but businesses can take steps to minimize their risk. Education is a great first step in protecting your business.
It is important that business owners educate their employees on the dangers and potentially serious consequences of cybercrime. The knowledge that such theft can cripple a business, thereby affecting an employee’s own livelihood, is an added incentive to remain vigilant. Involving the financial institutions of the business can also be beneficial. Many banks are willing to provide in-house education seminars to companies as a way of keeping all levels of the organization well informed. There are several online resources available to educate small companies on protecting their business from cyberattacks. The following are a few examples of resources available for small businesses.
In addition to education, business owners have the option of investing in cyber liability insurance as a way to proactively protect their business from potential cyberattacks. Cyber liability insurance often covers the cost of business interruption, client notification, and even hiring a public relations firm to repair damage to a company’s reputation as a result of the attack. Reputations are critical in the community association industry. The cost of cyber liability insurance is often far less than the potential monetary loss due to a tarnished image.
Cybercrime does not discriminate. All industries are effected, and no business is too big or too small to be targeted. Advanced preparation and education are the two crucial tools to combat the growing problem.
The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of Mutual of Omaha Bank. For any matters concerning your specific needs and objective, you should seek the professional advice of your own independent legal counsel, insurance advisors or other consultants.
By Brad Henderson, Network Insurance Services
It's no secret, the marketplace for habitational insurance is changing rapidly. What used to be a broad offering of insurance carriers and products has now been whittled down to a select few insurance carriers offering products that 10 years ago no one would have thought viable options. The marketplace for habitational insurance today is a hostile one.
Winds of change are driving the property insurance market in this new direction. Hurricane Harvey hit Texas in August of 2017. Harvey was followed by hurricane Irma in Florida, which was followed by hurricane Maria hitting Puerto Rico shortly after. The losses from these storms amount to over $100 billion dollars.
It’s not just hurricanes that are causing the disruption to the marketplace. Wildfires devastated over 1.2 million acres of land in California in 2017. And as we are familiar with here in the Rocky Mountains, hail storms are becoming more frequent and more damaging than ever. Colorado experienced the costliest hail storm in our history on May 8th of last year, with insured losses exceeding $1.4 billion dollars.
With natural disasters on the rise, insurance carriers are taking note (and losses) and adjusting their underwriting discipline to remain profitable. Over the last few years, carriers have introduced percentage deductibles for Wind & Hail losses as a method to insulate them from this catastrophe. The deductible is a percentage of the Total Insured Value of the property, not the value of the claim.
For example, a building with $10,000,000 in Total Insured Value may now be subject to a 2% Wind/Hail Deductible, or $200,000. Many insurance companies have recently announced that they are moving to a mandatory 5% Wind/Hail Deductible on all habitational accounts. That $200,000 deductible just increased to $500,000.
Insurance carriers are also becoming stricter on enforcing a ‘No Grills on Balconies’ underwriting guideline to protect themselves & their customers from life safety claims related to fires. The National Fire Protection Association (NFPA) indicated an average of 8,900 grill fires occur per year in the United States.
These 8,900 fires cause an annual average of 10 civilian deaths, 160 reported civilian injuries, and $118 million in direct property damage. While gas grills may seem safer than charcoal, 83% of grills involved in home fires are fueled by gas. State & local fire codes vary with respect to grilling on balconies, however many insurance carriers are following the standard adopted by the NFPA which prohibits grills within 10 feet of a frame multi-family structure.
While its clear that the tides are changing in the property insurance market nationwide, there are ways to prepare the associations you manage for these changes and insulate them from dramatic changes to their policies.
With respect to the increasing Wind/Hail deductibles, there are a couple of solutions to consider. Depending on the by-laws of the association, there may be little to no flexibility in moving to a percentage deductible. Deductible buy down policies can be put in place to cover the difference in the deductible offered by the insurance carrier and what is required by the associations by-laws. With more flexibility in the by-laws, the tenant’s policies can possibly be structured in a way to offset the assessment to the owners for their share of the Wind/Hail deductible.
Educating the board of directors of local fire codes and communicating them to residents is a proactive way to soften the blow that many who have had grills on their balconies for 20+ years will no longer have that option. Additionally, most insurance carriers will allow for electric grills on balconies as a substitute to their open flame counterparts.
Network Insurance Services has been partnering with property managers and the communities they represent for nearly 20 years. In a chaotic and rapidly changing insurance market, experience makes the difference. Our office is certified by DORA to offer CE Credits to Community Association Managers through our education on these topics in further depth. As one of the Denver Business Journals Top 25 rated Colorado Insurance Brokers and a member of CAI-RMC, we have the resources and expertise to help our customers weather the storm of today’s rapidly changing property insurance market.
By Derek O’Driscoll, CPPA, SPPA, AIC, Impact Claim Services
Colorado ranks #2 in hailstorm property losses, with estimated losses exceeding $2.286 billion over the last five years. Subsequently, the dynamics and requirements for proper recovery after a hail and/or windstorm have evolved. It has never been more challenging for Colorado Community Associations to fully recover all amounts owed under an insurance policy following a damaging hail or wind storm.
The goal of every insured, in the event of a loss, is to recover all money properly owed under its insurance policy as quickly and painlessly as possible, so damaged property can be repaired. When explaining the anatomy of a hail claim to policyholders, I use a simple analogy of the two “hurdles” that must be jumped in order to fully recover after suffering a hail and/or wind storm loss. Those two hurdles are the “Coverage” hurdle and the “Amount of Loss” hurdle. Both hurdles uniquely affect the claims investigation and adjustment processes, as well as the settlement or dispute resolution methods available to an insured community in the event of a disagreement with their insurance carrier.
The Coverage Hurdle
Simply explained, overcoming the coverage hurdle is accomplished upon the acknowledgement by an insurance carrier that a loss has occurred and caused damage to property, that the damage occurred during the insurance company’s policy period, and that the loss was caused by a peril that the applicable insurance policy insures against.
The coverage hurdle is overcome when the carrier acknowledges a single dollar is compensable under the policy for the given loss, even if the dollar value of that damage is below the deductible. Overcoming the coverage hurdle can be as simple as an adjuster inspecting the property and confirming there is coverage due under the policy, or it can require an exhaustive investigation by the policyholder and experts to corroborate the cause and extent of the loss and that coverage is due under the policy. For a policyholder, establishing the cause of loss and overcoming the coverage hurdle frequently requires a comprehensive investigation utilizing the services of specialized experts such as Forensic Meteorologists, Forensic Engineers, Building Consultants, Roofing Consultants, Contractors, and scientific laboratory testing.
One of the most common defenses of insurance companies in a hail claim investigation is what the industry refers to as “post loss underwriting”. That is to evaluate and take into consideration the condition of the property only after a notification of loss is provided, rather than at the inception of the policy and the acceptance of the policyholder’s premium and the promise of coverage in the event of a loss. This generally goes hand in hand with the company’s assertion that any observable hail damage to a building predated the inception of their company’s policy period. This defense is common with insurance companies in hail claims, specifically in Colorado, due to the frequency of hail storms and the overwhelming amount of hail caused damage that goes unidentified by policyholder’s on a year over year basis. This commonly leads to an insurance company identifying a historic weather event that they assert was more severe than that of the pending claim, and the subsequent attempt to place the cause of the damage on that other storm and the insurance company whose policy was in effect at that time, seemingly without limitation. Our firm has personally experienced insurance companies attempt to attribute hail damage to a storm 30 years prior to the inception of their policy.
What is important to understand is the impact of the specific type of insuring agreement in your insurance policy, on the burden of proof that must be met in order to assert any exclusion under a property insurance policy. Specifically, does the policy provide coverage on a “Named Peril” or “Open/All Peril” basis. This distinction has a direct and significant impact on who bears the burden of proof in establishing its claim and corresponding position on the loss and subsequently has a profound impact on an insurance company’s attempt to “Post Loss Underwrite” a loss. It is important that an insured understand the nature of its coverage, so we encourage community associations to consult its agent, attorney or a licensed public adjuster.
There are several steps an insured can take to prepare for a possible claim due to hail and/or wind damages that can be instrumental to overcoming the coverage hurdle as painlessly and expeditiously as possible. The most critical steps are:
Obtain Proper Documentation of Property Conditions NOW
Having a full analysis of your property done by a well-trained insurance claims professional will ensure that all facts and evidence that can become of material significance are fully and properly preserved into evidence. This should include some baseline testing of the building envelope such as moisture surveys, leak mapping, and complete photo documentation. Having such an evaluation done by typical contractors and/or maintenance professionals will not suffice.
Obtain Prior Insurance Inspection Reports
Request a copy of any property inspection reports and underwriting reports that have been performed by your insurance company, agent or broker, to include photos. These reports can provide crucial evidence in support of a community association’s claim, however they can be nearly impossible to obtain following a notification of loss, so be proactive and get them now.
The inability to overcome the coverage hurdle relegates a policyholder to resolving a claim dispute in a Court of proper jurisdiction, as coverage disputes cannot be adjudicated in any other venue. Subsequently, the coverage hurdle is the most important to overcome in the pursuit for a fair and complete settlement by an policyholder in the most painless manner possible.
The Amount of Loss Hurdle
Overcoming the amount of loss hurdle is the process of identifying and agreeing to the scope of the covered damage and the corresponding costs associated with completing those repairs. In my experience, this is where the majority of claims encounter disagreements, and conflicting positions between policyholders and insurance companies arise, for two prevailing reasons; The first is failure by an insurance company to fully investigate a loss with a view to identifying all damage potentially covered, sometimes combined with employment of outcome-oriented experts, consultants and contractors, who whether intentionally or unintentionally, undervalue the extent of damage and the amount of loss.
Quite apparently, insurance companies have a financial interest to minimize the amount of a claim payment, which may lead to a practice of failing to investigate and identify all damage that is compensable under a policy issued. Their investigations are frequently abbreviated and superficial when compared to that of a policyholder who has retained professionals to conduct a complete and thorough investigation of their own. These complete and thorough investigations frequently expose extensive omissions and oversights on the part of an insurance company. I cannot begin to quantify the amount of time our firm spends overcoming these types of superficial or misleading investigation results and expert analyses, but it is without question the overwhelming majority of our time spent in most hail and/or wind claims.
In addition to incomplete and truncated investigations, insurance companies are the faucet by which many contractors, engineers and construction consultants rely for a steady stream of business. The service providers are commonly beholden to these insurance companies and will do what they must to keep insurance companies happy. This usually means investigation results, scopes of repairs, and estimates that serve an insurance company’s needs, but are rarely congruent with the coverages purchased by a policyholder or compliant with the general best construction practices in the industry. This factor also frequently contributes to suppressed claims payments and disputes regarding the extent of damage and the amount of loss.
Unlike a coverage dispute, which again can only be put before a Court, a dispute regarding the amount of loss can be resolved in several alternative fashions. Most policies of insurance outline an alternative dispute resolution method called Appraisal. In an appraisal, both the Insured and Insurer select and retain an appraiser, who will take a fresh look at the claim and come to their own independent conclusions of the “Amount of Loss”. Both the chosen appraisers will also select an Umpire, who will be the tiebreaker in any disputes that the Appraisers cannot resolve amongst themselves. The Appraisal process is a powerful alternative dispute resolution method, which is intended to be a faster and less costly remedy when compared to litigation. An appraisal also puts an “amount of loss” determination into the hands of industry professionals – Insurance Adjusters, Public Adjusters, Engineers, Contractors, Lawyers and Judges – which generally leads to a more accurate determination of the amount of loss, when compared to that of a jury of civilians unfamiliar with insurance principles and construction requirements.
In addition to appraisal, disputes regarding the amount of loss can be resolved through mediations or arbitrations, which can also be a more expedient, inexpensive, and accurate remedy when compared to litigation. This is why the Coverage hurdle is so important to cross over when dealing with a hail and/or wind claim.
Insurance policies are complicated, as are their provisions and how they impact the claims investigation and adjustment process, the duties and obligations of the insured in the event of a hail and/or wind loss and the methods for resolving disputes.
Most community associations do not appreciate that under an insurance policy it is incumbent upon you to present a claim for damages to your insurance company in the event of a loss; that is to say, it is your responsibility to tell your insurance company how much it owes you and why. Understanding how varying types of insuring agreements and forms affect the burden of proof, how a community association’s governing docs and insurance policy integrate with coverage, and how principles of insurance drive the amounts that are due to a community in the event of a hail and wind loss requires extensive experience and specialized training. It is imperative to proper recovery and ensuring both claim hurdles are overcome, that policyholders secure independent evaluations from specialized professionals following a hail or wind storm, rather than relying solely on your insurance company to tell you what they owe you.
Never assume that your insurance company has conducted a thorough, complete and fair investigation. No matter how long their investigation takes, how many consultants or experts they retain, how polished their expert’s reports are, or how well thought out their position appears to be - CONDUCT YOUR OWN INVESTIGATION!
About the Author
Derek O’Driscoll is a Licensed Public Insurance Adjuster, and the President of Impact Claim Services, LLC, a Colorado based public adjusting, claims management and roof consulting firm. Derek and his firm specialize in securing fair and complete recoveries for property owners on large complex losses caused by hail and wind, specifically to commercial and multi-family properties throughout the country. Learn more about them at www.impactclaimservices.com
By Joel W. Meskin, Esq., CIRMS, CCAL Fellow, MLIS, McGowan Program Administrators
Volunteer board members are often baffled and incredulous when someone challenges or complains about a decision that they have made, a rule that they have been changed, or a special assessment that they have issued. I have touched in one way or another between five and six thousand claims and/or lawsuits against community Associations and their volunteer board members. As I travel around the country, people ask me what I have been able to distill from all these claims. Without skipping a beat, I respond by telling them that "ignorance is not bliss"!
The "ignorance" I refer to is twofold. First, unit owners do not read the governing documents they have agreed to comply with prior to purchasing their home in a common interest association. In most cases, these unit owners probably do not read the governing documents until they have an issue with the board, the association or their neighbors.
Practice Pointer 1: read the governing documents before you buy; ignorance of the governing documents is not a defense and an association member is presumed to have read the documents he or she has agreed to when they purchased their unit.
Second, the volunteer board members turn their volunteer board position into something beyond its purpose and their authority. This is further exacerbated by the fact that these volunteer board members are often the same unit owners that have not read the governing documents.
Practice Pointer 2: Each association member who wants to join the board should be required to confirm that he or she has read the governing documents before agreeing to become a board member.
What comes to mind each time this twofold dilemma comes up is a pearl of wisdom my father used to share with me. He would say "why do people never have time to do things right in the first place, but always have time to fix them"?
Practice Pointer 3: Each board should have an annual board training, even those who have been on the board. The value of an annual training far outweighs the cost, if any, as well as the effort. Both items will lead to both monetary and time savings when the board knows how to operate the board. The National CAI has great resources as well as on demand video courses on training. There is no excuse for not taking the time to prepare for a board position.
I tell boards and managers that in the normal course a board meeting should not take more than an hour. Yes, certain issues create exceptions, but that should in fact be an "exception." In response, I often hear "yah, right." The key is for board members to understand their obligation, responsibility and treat the management of the association as the business it is.
The board is a body comprised of individuals that is charged to manage the association pursuant to the by-laws and relevant statutes. The board is a body that makes decisions and policies and delegates to the individual who will carry out the delegated matter. When a board member exits the properly noticed board meeting, they have NO authority to act in their capacity as a board member except pursuant to the delegated authority expressly given them by the board during a properly noticed board meeting, or proper consent to act without a meeting. Remember, each board member has "one" vote whether he or she is also an officer of the association such as the president, Vice President or other.
Most delegated tasks by the board are given to the community association manager if there is one, or employees. Sometimes, there is no CAM or employee, and the action is delegated to a volunteer board member or other association member volunteer. In that case, the board member is carrying out the delegated action as a "volunteer" and not in his or her capacity as a board member.
Practice Pointer 4: Remember, a board member is not an employee, and apathy is not a defense. If the board member says I have to do it, because no one else will. However, if no one else will, there is a deeper issue that must be addressed, because again the "volunteer board member or "other volunteer" is not an employee. If no one will step up, the board should hire a management company or an employee. If the board is not willing to do that, then the board should go to court and seek a receiver which will end up costing the board and the association the money they did not otherwise want to spend. At the end of the day, the board is charged with protecting the association's assets and must take the steps to do so.
In addition to understanding the role as a board member, the following are additional practice pointers that will help simplify and shorten a board meeting and mitigate claims.
Understanding the board's duties and obligations and making sure unit owners receive, read and ask questions about governing documents is the best risk management tool the association can use.
By Joel Sebern, Lallier Construction, Inc.
A roof system is the most vulnerable part of a building's exterior. Extreme Colorado temperature changes, along with wind, rain, hail, and snow all affect a roof system's performance.
Performance of a roof is based on good design, quality materials, proper installation, and a preventive maintenance program. Roof maintenance is critical to preventing roof problems and keeping the roof in watertight condition. Early identification and repair of roof problems will help provide a long lasting roof system.
If your roof has been impacted by hail or wind, below are a few tips to help you through the process of restoring your roof system.
• A permanent place of business
• Experience with many styles of roof systems
• Proof of insurance / license
• Quality company safety program
• Evidence of industry professionalism such as proof of training and manufacturer certifications
• Financial stability
• Submit a written, detailed proposal
• Valid warranties on labor and materials
• References in Colorado (Proceed with caution if the contractor only provides out-of-state references)
• Maintenance programs
**Please be aware of contractors who will only accept cash payments and “up-front payments” before materials are delivered to the site.
Lallier Construction, Inc. has been roofing in Colorado’s climate since 1989. We offer free consultations, inspections, and estimates at times that best fit your busy schedule. Lallier Construction provides its services in both the Residential and Commercial Sectors. Services we provide are New Construction, Re-Roof, Warranty Claims and Insurance Claims.
By Timothy M. Moeller, Esq. and Bujar Ahmeti, Esq., Moeller Graf, P.C.
As the snow begins to melt and people trade their ski poles for sunblock, community associations across Colorado will begin to turn their attention to opening their swimming pools. While everyone loves to have fun in the sun, maintaining and operating a swimming pool may present legal challenges for community managers and boards of directors. While some issues are unique, there are some questions that arise fairly regularly. Below you will find what a typical conversation may look like.
A local swim league approached the association and asked if it could use the pool to host its swim meets. Are there any legal issues of which we should be aware?
Typically, community association pools are private, and as such, are not subject to Title III of the Americans with Disabilities Act (“ADA”). Allowing a local swim league (and its supporters) to use the association’s swimming pool may transform the swimming pool from a “recreational facility” to a place of “public accommodation.” As a result, the association would have to ensure the swimming pool was compliant with Title III of the ADA. This was confirmed by the Department of Justice in a published Q&A regarding ADA accessibility where the DOJ stated that if a swimming pool/club located in a residential community is made available to the public for rental or use, then it is covered under Title III of the ADA. A pool categorized as a “public accommodation” would have to meet the ADA Standard for Accessible Design, which provides:
We have concerns about keeping the pool sanitary for all of our residents if we allow children in diapers to use the pool. Can we implement a rule that prohibits any person under the age of 4 from using the pool?
Even rules with the best intentions can find disfavor with the law. The Fair Housing Amendments Act (“FHAA”) prohibits discrimination in housing on the basis of race, color, religion, sex, national origin, familial status and disability. Familial status is defined, in pertinent part, as “one or more individuals (who have not attained the age of 18 years) being domiciled with a parent or another person having legal custody of such individual or individuals.” Some ask, “How can we be discriminating against families with children if we will allow children who are at least 5 years of age to use the pool?” When reviewing a rule or regulation for a potential fair housing discrimination claim, a reviewing court will look to whether there is a less restrictive measure to accomplish the association’s objective. Here, instead of enacting a rule adopting a complete ban on children under a certain age for sanitary reasons, an association is better served to promulgate a rule requiring an incontinent person or child who is not fully toilet trained to wear appropriate swim diapers or other appropriate waterproof sealing undergarments when entering the pool.
A homeowner who is disabled attended the board meeting last week and requested the pool be modified by installing a chair lift so that the homeowner can use the swimming pool. Does the board have to allow installation of the chair lift, and if so, who pays for it?
Under the FHAA, a community association may not discriminate against anyone with a disability by treating said person less favorably than those that are not disabled. The association must permit disabled persons to make reasonable modifications to existing dwellings or common areas that are necessary to afford the disabled person full enjoyment of the dwelling. A “reasonable modification” is a structural change made to existing premises, occupied or to be occupied by a person with a disability, in order to afford such person full enjoyment of the premises. However, an association can place reasonable conditions on the modifications. These conditions include requiring the disabled person to: (1) provide a reasonable description of the modifications; (2) provide reasonable assurances that the work will be done in a workmanlike manner; (3) make the modifications in accordance with the association’s reasonable aesthetic requirements that do not increase the cost of the modifications; and (4) obtain any required building permits. Generally, the requestor is responsible for the cost of the reasonable modification.
As is the case with operating any common area within a community association, a community swimming pool requires more than just proper chlorine levels to properly function. Of course, a community association can mitigate any potential risks by ensuring compliance with its governing documents and any federal or state laws.
Timothy M. Moeller is a founding partner of Moeller Graf, P.C. and has practiced community association law exclusively since 1999.
Bujar Ahmeti is an associate attorney at Moeller Graf, P.C. whose practice is dedicated solely to addressing the needs of Colorado community associations.
CONTACT US(303) 585-0367
Click here for email
Did you see us on HOA Line 9?Need more resources?