INSURANCE
The United States property insurance market has hardened significantly over the past decade.
A "hardening" market means two things: 1) insuring property is more expensive and 2) generally fewer carriers available to insure property.
FOUR PRIMARY drivers of increased property insurance premiums:
Catastrophic and non-catastrophic losses due to climate change | Construction costs | Excessive litigation | Reinsurance rates
<Click to Expand for articles>
Insurance companies have discovered devious new ways to rip you off, Citizens Insurance customer says depopulation notice contained 430% rate increase, Four more home insurance brands leave California, Ravaged Florida Town Becomes a Magnet for Risk-Taking Homebuyers, Florida Insurers Imposing New Limits on Amounts Spent to Match Appearance
Managing Expectations: Why Florida Homeowners Insurance Premiums Are Not Likely to Go Down, Home Insurance Is So High in This Florida Town, Residents Are Leaving, Rising Insurance Costs Start to Hit Home Sales, Citrus homeowner could lose insurance for being too far away from fire hydrant, Looking for a lower insurance rate? In Miami, you have tough options…, Your insurance company dropped your coverage? It could be doing you a favor in Florida
Hurricane Ian - One Year later: Bonita condo owners face steep bills no access to units, Citizens Insurance rolls out new wave of depopulation letters, more expected soon, Progressive to send non-renewals to some Florida policyholders, Homeowners Flock to Last-Resort Insurance Policies, Colorado Insurance: Why It's Getting so Expensive for Homeowners
Q3 2023: The 9th National Risk Assessment: The Insurance Issue, Millions of U.S. properties are overvalued. Climate risk is one reason., What to know about California's new proposed rules for insurance companies, Citizens Insurance customers could see double-digit hikes, Stunned by a Citizens Insurance 'depopulation' letter? Here's what you need to know., Florida Citizens customers: Check mail or face costly insurance switch, High insurance rates are creating a crisis for Louisiana affordable housing development, How wildfire risk scoring puts WA homeowners in insurance jeopardy, Rates climbing for Louisiana's insurer of last resort
We Left Florida Because Our Homeowners Insurance Ballooned to $12,000, Florida Condo Association’s property insurance spiked nearly 1,000%,
Senators take up looming insurance crisis as policy issuers flee Florida and California, Inside the rising costs of homeowners insurance policies in California,
The sinking of California's insurance industry, Global Insured Losses from Natural Disasters Exceeded $130 Billion in 2022, Driven by Second-Costliest Event on Record Idalia's effect on rising insurance rates, Home insurers cut natural disasters from policies over climate risk,
Largest U.S. Insurance Companies Now Claim ‘Climate Change’ is Behind Ending Coverage, Increase In Homeowner's Insurance Rates In Oklahoma,
Ultra Rich Pay $620,000 to Shield Mega Mansions From Disaster Risk
Make No Mistake, Insurance is Not Optional for Many Community Associations, Property insurance hyper-inflation is driving people from their homes,
Americans Are Bailing on Their Home Insurance, Protest broke out at a 55+ Florida community over skyrocketing home insurance premiums,
How Florida let a top insurer abandon homeowners in their time of greatest need, California couple loses homeowners' insurance: they drained their swimming pool…
Soaring home insurance costs are pushing these families out of Florida, Getting canceled: Key Biscayne is in the eye of the insurance crisis
Why California and Florida Have Become Almost Uninsurable, Americans Are Moving Toward Climate Danger in Search of Cheaper Homes
Migration to Flood-Prone Areas Has More Than Doubled Since 2020, Florida Citizens policyholders may have to switch coverage
Florida homeowners insurance market shows signs of rebound amid market reforms, Ray of Sunshine: Florida Insurers Show Profit as Citizens Takeouts Rise
3 new Florida laws aim to mitigate homeowners' rising property insurance costs, Home Insurers Are Charging More and Insuring Less
Homeowners insurance in Colorado skyrockets, Louisville condo owners see sevenfold increase, California senate committee addresses condominium insurance crisis, Florida Condo Association’s property insurance spiked nearly 1,000%, AAA Insurance set to drop ‘small percentage’ of FL homeowners
What Happens when Insurers Can't Get Insurance?
Q2 2023: Insurers Curb New Policies in Risky Areas Nationally, California is Becoming Uninsurable, Receivership is Expensive
Florida high-rise condo owners feel financial pinch with rising assessments and insurance costs, Municipal $upport
Florida lawmakers aim to ease condo confusion, but money questions remain
What Insurance Coverage Does my Association Carry?
Your association's insurance varies based on your declaration of covenants, conditions and restrictions (CC&Rs) and your state statutes. Washington and many other states require specific scope for property insurance that serves as primary in the event of a loss and for other types of insurance such as director and officer's (D&O) coverage. Notably, regardless of your state, individual units / homes are often responsible for paying in-unit claim deductibles.
The Damage / Loss Flow Chart below is one example applicable condominium communities. Your governing documents may have different requirements.
MULTI-FAMILY PROPERTY INSURANCE REMINDERS
1) unit owners/homeowners are almost always responsible for in-unit/home losses up to the association's primary insurance deductible
> IF something in Unix X causes a loss, Unit X is probably responsible for costs up to the association's primary insurance deductible
2) except for #1, responsible parties for losses within a deductible limit are generally in proportion to the areas damaged
3) governing documents typically require owners to carry insurance that covers any potential deductibles and loss assessments for ANY insurance coverage held by the Association including optional coverage such as earthquake and earth movement
4) While a Board often has discretion to file claim, the responsibility to restore a loss is governed by statute and your declaration.
Unit owners / homeowners are generally NOT required to wait for their association to "manage" losses within their unit.
>>> Does your association MONITOR and ENFORCE owners' insurance requirements? This is a commonly overlooked risk. <<<
H06 "WALLS-IN" COVERAGE BREAKDOWN
<Click to Expand>
Want to know more? VIEW INSURANCE EXPLAINER
DWELLING
Covers permanent improvements within the unit boundaries generally delineated by outside wall studs, the sub-floor and the ceiling
DRAIN / SEWER / WATER BACKUP
Damage resulting from drain / sewer / water backups is almost always excluded from standard dwelling coverage
Owners can add a specific rider for these types of losses
EARTH MOVEMENT & EARTHQUAKE
This is always an additional type of coverage rider that can add significant additional expense
If major earth movement and/or earthquake damage occurs, units/homes are typically assessed a portion of of the association's primary EM and/or EQ deductible which is often a percentage of the building value (e.g. 2%, etc.)
PERSONAL PROPERTY
Covers items that are not permanently attached to your Unit ceiling, floor and/or walls
Certain types of personal property (e.g. fine art, jewelry, etc.) require a rider
LOSS OF USE
Covers expenses such as hotel rooms and moving costs during a period of time when your Unit is uninhabitable
LOSS ASSESSMENT
Covers amounts specially assessed to individual Units based on a loss covered by a property's master insurance policy.
Search loss assessment coverage to understand more. This coverage DOES NOT pay for dwelling and other aforementioned coverage types.
EXPLAINER:
ONE: The common roof is in disrepair. The cost to repair it is beyond the available reserve funds. The association issues a special assessment to pay for the repairs. There is no insurance for "we failed to contribute adequately to our reserve fund" except selling your property before the assessment.
TWO: The common roof gets blown off (this is called a loss). Your association's insurance pays for part, but not all of the roof repair and replacement. The association issues a special assessment. Your H06 policy loss assessment coverage pays up to your loss assessment limit.
LIABILITY
Covers losses incurred by others resulting from your Unit
Statutory provisions in some states extend owners' liability beyond insurance deductible limits.
Gross negligence is the failure to exercise slight care. It is negligence that is substantially greater than ordinary negligence. Failure to exercise slight care does not mean the total absence of care but care substantially less than ordinary care.
Negligence is the failure to exercise ordinary care. It is the doing of some act that a reasonably careful person would not do under the same or similar circumstances or the failure to do some act that a reasonably careful person would have done under the same or similar circumstances.
Reference RCW 64.90.480(6) and (7):
(6) To the extent that any expense of the association is caused by willful misconduct or gross negligence of any unit owner or that unit owner's tenant, guest, invitee, or occupant, the association may assess that expense against the unit owner's unit after notice and an opportunity to be heard, even if the association maintains insurance with respect to that damage or common expense.
(7) If the declaration so provides, to the extent that any expense of the association is caused by the negligence of any unit owner or that unit owner's tenant, guest, invitee, or occupant, the association may assess that expense against the unit owner's unit after notice and an opportunity to be heard, to the extent of the association's deductible and any expenses not covered under an insurance policy issued to the association.
(8) In the event of a loss or damage to a unit that would be covered by the association's property insurance policy, excluding policies for earthquake, flood, or similar losses that have higher than standard deductibles, but that is within the deductible under that policy and if the declaration so provides, the association may assess the amount of the loss up to the deductible against that unit. This subsection does not prevent a unit owner from asserting a claim against another person for the amount assessed if that other person would be liable for the damages under general legal principles.
KEY TERMS & COVERAGES
Business insurance is a general term that includes a gamut of different coverages.
General Liability insurance covers certain types of bodily injury and other liabilities. Many General Liability policies include $5,000 of no-fault liability coverage where the insurance carrier pays up to $5,000 without the need for litigation.
Workers' Compensation insurance often excludes volunteers. Five states (North Dakota, Ohio, Washington, West Virginia, and Wyoming) run their own programs for workers' comp coverage. Washington State Department of Labor & Industries (L&I) does not offer coverage for volunteers.
Many CICs do not realize that they possess little to no insurance coverage for bodily injuries incurred by their volunteers.
READ: What Is Not Covered by a D&O Insurance Policy?
READ: Does my Association Really Need D&O Liability Insurance?
___________________________________________
Washington State Administrative Code (WAC) clarifies statutes related to workers' compensation and risk classifications.
Condominium and HOA employees are generally included with either Classification 4904 (clerical) OR the much broader (more expensive) Classification 4910 (property management services).
2023 base rate and payroll deduction for Classification 4904
2023 base rate and payroll deduction for Classification 4910
WA State L&I also tracks hourly wage rates for specific risk classifications that may receive alternative forms of non cash-compensation. 2022's average wage for class 4910 = $33.50/hour.
Notably, according to WAC 296-17-31018(4), many classifications (incl. 4910) exclude coverage for alterations and new construction.
Alterations are changes made to a building during its remodeling, such as increasing or reducing floor area, making or closing openings, erecting or demolishing walls, etc.
Washington State: Workers' Compensation Coverage
<Click to Expand>
What type of job is the employee going to perform? [These are examples from Washington State]
If they are performing jobs that are maintaining or repairing the existing property, such as replacing windows, plumbing, flooring, or repainting, you would report them in 4905 or 4910. See examples below.
If they are performing jobs adding new construction or altering the interior of an existing building from an earlier condition (remodeling), or enlarging an existing structure by building and attaching rooms (new addition), you would report them in the applicable construction classification. See examples below.
EXAMPLES
Maintenance and repair: Bringing something back to its original state or functionality. An apartment complex has a set of stairs in need of repairs. Tearing out the old stairs and replacing them with new stairs would be considered maintenance and repair. This work would be reportable in risk classification 4910.
Windows: Replacing one or all windows in a building for weatherization purposes is considered general maintenance and repair, reportable in 4905 or 4910.
Painting: Repainting the interior or exterior of a building, whether it’s part or all of the building, is considered general maintenance and repair and is reportable in 4905 or 4910.
Flooring covering: Replacing flooring in a building, whether you are replacing the old flooring with the same type or a different type (changing from vinyl to hardwood), is considered general maintenance and repair, reportable in 4905 or 4910.
Roofing: Re-roofing a building, whether you’re replacing a small section of the roof or the entire roof, and regardless of whether you’re replacing with the same type of material, is considered general maintenance and repair, reportable in 4905 or 4910.
Improvements: An apartment complex decides to install a sprinkler system (inside or outside) on the premises. The installation of the sprinkler system would be considered an improvement to the property, and this work would be reportable in the applicable construction classifications. Repairing an existing sprinkler system is considered maintenance and reportable in 4910.
New Construction: An apartment complex owner wants to build an outbuilding on the property for their landscaping tools. They are building something that does not currently exist. This work would be reportable in the applicable construction classifications.
Alteration: A property management company wants to add some interior walls in an apartment of one of their complexes. The walls did not exist previously and they are changing something that currently exists into something different. This work would be reportable in the applicable construction classifications.
SPECIAL NOTE
Construction contractors who own and manage their own rental properties must report all construction, maintenance and repair activities in the applicable construction classification for workers preparing properties for initial occupancy or to sell. When properties are ready for occupancy, any future maintenance and ordinary repairs performed by the construction contractor’s workers may be reported in 4910, if applicable.
Preoccupancy clean-up may be reported in 6602.
Employees who only perform clerical duties are to be reported separately in classification 4904.
Employees who perform sales duties such as collecting rents, showing and advertising the facility, conducting auctions, or a combination of clerical and sales duties are to be reported separately in classification 6303.
Washington State: Insurance for Volunteers
Learn how Volunteers Are (NOT) Covered
Need some practical advice to understand insurance?
Want a jump start to reinvigorate your governing documents?
Interested in gauging owner and resident satisfaction or increasing engagement?
Does service delivery from your management company meet all your expectations?
