Insurance dilemma...

I know every situation is different and it is impossible to know the nuances of every situation up front, but the newly established Board is in the process of obtaining liability insurance for the first time. We have gotten half a dozen quotes, all pretty much the same for around $1000 which include Directors & Officers liability up to $1,000,000. Now a quote has come in that is $700 dollars higher than the others but it has an extremely comprehensive D & O rider that broadens the definition of the insured amongst other things, below is partial explanation of higher cost:

"they have the DUTY to defend the officers against a suit, and the defense costs are OUTSIDE of the coverage limits of the policy which is good because court costs can run high and consume the limit that can be attributed to any judgments.

Also, Citizens offers protection against non-monetary suits which Auto-Owners does not and I am 99% sure that State Farm doesn’t as well. This is very important for you. A very good number of association lawsuits take place over non-monetary suits. For example, if suit is brought against the board for not enforcing the association rules, or for non fairness of enforcement, etc this would be an example of a non-monetary suit. Being that your association was there but adminitstered by the builder since 2003, he could have let some rules be violated then when you and the board go about correcting the issues, you never know what could happen when you have 115 families that have been living with an “apparent standard” of living that varies from the rules.

Bottom line is that, yes, it is $700 more than the other two quotes but saving that $700 now might just cost the association a lot more in the long run"

I am of two minds.

1) That is alot of extra premium for what we are getting - if we do our job correctly shouldn't need it.

2) We are inviting trouble if we reject the comprehensive coverage.

Also, there is a $5,000 deductible with the comprehensive plan.

Anyone else have experience or opinions on this optional, extended coverage?

Why not go back to the other guys and ask them if they will quote the same coverage?

It's a good idea to go back and ask the other bidders if they can offer the same/similar coverage. That may help with making a decision. However, I am for forgoing this coverage for the $700 because that money could go into savings instead to cover some of things that insurance policy is wanting to payout on. Plus the 5K you have to pay for the claim seems a bit stiff.

I'd go for the 1K a month Million dollar policy for a year and see how litigous your HOA may be. Plus to see what the costs are in the HOA are going to be. You may find having the money in savings is a better option.

Melissa and Janet thank you for the sound advice - both your thoughts have merit and I will be mulling it over before final vote Tuesday. I'm sure there will be regrets either way we choose, the question that is impossible to answer is which will we regret more? My problem is I am always so reluctant to spend money that does not seem absolutely necessary. Part of me hates to inflate this expense so the Board is better protected from the homeowners. That just doesn't seem right. But as you pointed out Janet, until we know which way the wind is blowing it might be prudent. Again, thanks to you both.

Hi Valerie:

You are most welcome … I am a penny pincher also which is why I listed the reasons regarding my choice along with the thought that in a year or two it could be reduced if everything is going well.

Good luck!!!