Bruce Sackrison's Insurance Matters: HOA Insurance Mistake #1: Not understanding the CC&Rs
Insurance Matters

Bruce Sackrison's Insurance Matters: HOA Insurance Mistake #1: Not understanding the CC&Rs

Bruce Sackrison

Bruce Sackrison is a Napa Valley Register columnist who will write about property and casualty insurance matters.

In my last article, I talked about several ways your Homeowners Association (HOA) insurance policy could be inadequate. This week, I’d like to start a series about specific mistakes to watch out for in your Homeowners Association Policy.

What are CC&Rs?

Covenants, Conditions and Restrictions (CC&Rs) are the documents that govern your shared neighborhood, such as a condominium association, a townhome association, a mobile home park and even some neighborhoods with single-family detached homes.

Here in our immediate area (Napa, Calistoga, St. Helena, Yountville, American Canyon, Sonoma) we have dozens of neighborhoods that have CC&Rs.

These documents have legal authority, and the agreements are entered into willingly so that everyone knows what they can and can’t do in the neighborhood.

They also state the responsibilities of the association, and the responsibilities of the individual condo or homeowner.

What’s this got to do with insurance? A lot.

There is usually a section within the CC&Rs that deals specifically with insurance.

Sometimes, if you are lucky, it’s been carefully drawn up and reviewed by an attorney.

The insurance section is clear, simple, and lets you know where the association’s responsibilities end, and the homeowner’s begins.

An agent should be able to read the CC&Rs and understand exactly what type of coverage to write for the association.

That’s the way it’s supposed to work. And it usually does.

Usually, but not always.

How can misunderstanding CC&Rs cause a problem?

Several ways. For instance, under civil law in the State of California, an HOA “master” policy is not required to be “primary” before other coverage pays.

That sounds like “no big deal.” But it is a big deal, and though normally the HOA policy should be primary, it isn’t always.

This can happen because of poorly written CC&Rs, or a misunderstanding by the board or the agent. Claim time is not when you want two insurance companies fighting over who is the first-payor on the claim.

Another more common error is an accidental gap in coverage. We talk about HOA insurance policies as “walls-out” coverage.

That means the master policy that is usually required by the CC&Rs should cover everything from the exterior walls outward. The condo owner is then required to insure the “inside” of the unit.

That sounds simple.

But CC&Rs are unique. If the documents are not read closely and carefully, an accidental gap in coverage between the association’s master policy, and the condo owner’s personal policy can happen at claim time.

Finally, overlapping coverage can be a problem. Most people would think... “How can having too much coverage be a problem?”

That’s common sense, but not “insurance sense.”

Insurance companies always use an “other insurance clause.” It means... “If there’s other coverage, we don’t pay.”

Sounds fair enough.

But the way it sometimes plays out, if the CC&Rs are poorly written, or are misunderstood when the HOA policy was sold, you can have a claim denied by both companies, each claiming the other was responsible.

Having overlapping coverage could mean you have no coverage.

My advice

When purchasing an HOA policy, you should always work closely with an agent who knows the importance of understanding your particular CC&Rs.

A good agent will read the CC&Rs and review them carefully with the underwriting department that is preparing the quote and the policy.

If you are an HOA board member, a lot is riding on getting this correct.

If you have questions, call an agent today.

Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates. He is at 707-931-0186 or


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