One of the biggest traps for common wall homeowner associations like condominiums is that their insurance coverage often permits payment of claims that rightly belong to homeowners. This is due to the broad or "blanket" coverage nature of the policy. In effect, the insurance carrier looks to the board to determine whether it should pay a claim or not. If given no direction, the carrier usually errs on the side of the homeowner.

The problem is that if the board allows all insurance claims regardless of their source or cause, soon the premium would skyrocket or worse, the policy would be canceled. To protect the HOA insurability, the board should develop and enact a policy concerning insurance claims and put the HOA's insurance carrier on notice. Each owner would then be responsible for notifying his own insurance carrier of the HOA's policy.

Barring conflicting insurance requirements in the governing documents or state statute, here are reasonable guidelines for the HOA to follow in developing a policy for handling insurance claims:

1. The HOA is responsible for repairing only those things for which it has maintenance responsibility.

2. If the HOA is negligent in performing maintenance that results in unit damage, like failing to repair a leaking roof in a timely manner when notified, the HOA is responsible to repair the unit damage.

3. Each unit owner is responsible for insuring his own unit and personal property. For example: If a washer hose breaks in Unit A on the 3rd floor, damaging that unit and its two downstairs neighbors, each unit owner would be responsible for insuring damage suffered within his unit. The HOA's insurance would not be involved.

4. If HOA common area property is damaged by an event that originates within a unit as described in Item 3, the HOA may hold the unit owner liable for the damage and seek recovery under the liability portion of the unit owner's insurance. This is based on the principle that the HOA has the authority to define who is responsible for repairing common area damage according to the source of the damage. If the damage originates from an HOA maintained source, the HOA is responsible. If it originates from an owner maintained source, the owner is responsible. Owners do not have the same policy making authority as the HOA and can only make claim against a neighbor's policy if negligence can be proven.

5. To help clarify these principles, the board should adopt a Maintenance and Insurance Areas of Responsibility Policy. This policy eliminates gray areas in maintenance and insurance. It provides a quick reference for the board, property manager, owners and insurance carriers. It also expedites maintenance requests and insurance claims. A sample Insurance & Maintenance Areas of Responsibilities Policy is available to Gold Subscribers of www.Regenesis.net

Since insurance is such an important element of the HOA's well being, it behooves the board to formalize a comprehensive policy. Why wait for an accident to happen? An HOA policy on insurance claims is proaction in action.

For more innovative homeowner association management strategies, see www.Regenesis.net