One of the all too frequent occurrences in homeowner associations (HOA) occurs when a gap exists between insurance carried by the HOA and insurance carried by each homeowner. This is not a small problem. According to Murphy’s Law: If there is a loophole, insurance adjusters will find it and refuse to pay a claim on it. So, when different insurance carriers define coverages differently, a gap in coverage results. This gap too often plays out in common wall homeowner associations.

One way to eliminate the possibility of insurance gaps is to have both the HOA and all owners insured by the same carrier. It makes sense to go one step further and all use the same agent. When the same carrier is used, where one policy stops, the other begins. No gaps.

Another way of solving the gap problem is for the board to adopt a Maintenance and Insurance Areas of Responsibility Policy which includes a list of grounds and building components and which party, HOA or owner, is responsible to maintain and insure them. The list should be definitive and consistent with maintenance responsibilities found in the governing documents. For example, if the governing documents state that the HOA is responsible for decks, the board cannot make it an owner responsibility.

In the typical common wall scenario, the HOA maintains and insures the common elements and unit owners are expected to maintain and insure from the unfinished interior surfaces in plus all personal property. An example of how the gap can occur involves utilities like plumbing. Plumbing supply and sewer lines often run through HOA common areas to connect to units. The question is, where is the dividing line between common and unit? For a water supply line, is the dividing line at the water meter or where the actual line enters the unit? For a sewer line is the dividing line where a unit’s sewer line meets a common sewer line or where it exits from the unit? The Maintenance and Insurance Areas of Responsibility Policy needs to address specific issues like these.

Once the list and policy is approved by the board, a copy should be provided to each owner with instructions that a copy be sent to the owner’s insurance carrier. All agents are then put on constructive notice what level of coverage is expected by the insureds. The written notice should request from the agent any exceptions to the coverage to make doubly sure there are no gaps. If there are gaps, there will be an opportunity to close them.

Many insurance claim gapposis disputes can be avoided by closing the gap between coverages and clarifying the maintenance and insurance responsibilities of the parties. If your homeowner association has not gone through this exercise and enacted a policy, now is a good time to get started. A sample Areas of Responsibility Policy is available at www.Regenesis.net

For more innovative homeowner association management strategies, seeRegenesis.net.