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Bruce Sackrison

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

Small Homeowners Association (HOA) insurance coverage can be cheaper. But that can cost high assessments later.

The easiest mistake to make when reviewing your HOA insurance policy is to think too small.

After all, many of the condo and homeowners associations in Napa, Calistoga, St. Helena, Yountville, American Canyon and Sonoma are small.

And small associations don’t need big policies, do they?

Yes, they do.

It’s a myth that a small association needs a small policy

Everything Perfect Condos (fictional but sounds wonderful, doesn’t it!) had just 36 units.

The board members were friends with most of the owners, and as owners themselves, they tried to keep insurance premiums as low as possible each year.

They thought their risks were low. They were in a safe area of town, and had no pool, no employees, and new common grounds... no cracked sidewalks here!

So, they bought the lowest liability limits under California law (the Davis-Stirling Act): $2 million of liability coverage. Surely, that was enough.

But it wasn’t enough when a little boy was seriously injured in a freak accident on the common grounds.

He was in and out of the hospital for over a year. The total judgment, including pain and suffering, was for $3 million. Each member was on the hook for future assessments to cover the difference.

Everything Perfect Condos was small. But they had a big insurance need.

Don’t settle for small liability coverage

A slip-and-fall injury is one of the most common risks that homeowners associations face... and one of the most expensive. Hazards show up out of nowhere, even in the best-maintained properties.

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Wet, snowy, or icy sidewalks are accidents waiting to happen, and magnets for large claims.

Every HOA is just one slip away from a large claim. Large judgments are awarded on emotion, suffering, and “what should have been done.”

They never seem logical to the defendant. They are all about the victim.

It costs less than you’d think to increase your liability limits (per occurrence and aggregate) to meet modern realities.

And adding an umbrella policy to fill in gaps and increase limits is also a good thing to consider (more about that in my next article).

Don’t risk a future association assessment to save a little premium today.

Don’t settle for small coverage on your buildings

I’ve been an agent for more than 20 years, and I’ve rarely seen a property rebuilt for what it was thought it would cost at the time an insurance policy was purchased.

New building codes get passed, and appraisals don’t get revisited. No one plans to not have enough coverage. It just sort of happens over time.

If you haven’t had your association’s buildings appraised in the last couple of years, it’s a good idea to consider doing that.

It’s also a good idea to check and see that you have Building Ordinance Coverage.

Building Ordinance Coverage has three parts:

  • Coverage A, which covers rebuilding an undamaged part of a building that authorities required be torn down due to adjacent damage.
  • Coverage B, which pays for the mess of demolition and cleanup.
  • Coverage C, which pays for new building code requirements like updated sprinkler systems, hard-wired smoke detectors, handicapped accessibility, and other code upgrades.

My advice

Don’t settle for small coverage at the risk of a large claim later. Call your agent today.

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

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