Bonding and Insurance

Our deed reads as "The Treasurer of the Association shall be bonded with the expense of such a fidelity bond for said officer to be borne by the Association"

Discussed with our insurance agent and we have a policy for "Employee Dishonesty" which he mentioned does the same thing as the bond.

Would we be voliating things if we just utilized the insurance policy? Is it up to the community to deicde?

JimC,

Are you in a Home Owner Association of stand alone houses, or a Condominium Association?

Jim,

Perhaps this may help reassure you that crime insurance will serve as a fidelity bond:

From the Fairfax County Community Association Manual see chapter 6:

An association is adequately protected against theft or embezzlement of funds only if the fidelity policy is correctly written to specifically include every person
having access to association funds. There is no standard language that covers all situations; therefore, an association must ensure that all positions in the organization having access to association funds are specifically named or otherwise identified

From the sba.gov website

Common bond-types are: Fidelity bonds that provide insurance against loss from employee misconduct, such as theft or embezzlement, which is not otherwise covered by a company's regular insurance coverage. A bond can provide blanket coverage for the actions of all employees or can be tailored to cover one or more specific employees (as is the case with a pension fidelity bond discussed below).

From business dictionary.com

fidelity bond: Type of insurance bought by an employer to protect against losses (such as embezzlement or theft by employees) that are not generally covered under normal theft or burglary policies. It may either be a blanket bond (applying to all employees) or for each employee on an individual basis. The insurance company may set certain guidelines to be followed in the insured firm's hiring practices, and the protection continues only so long as the duties of the covered employees remain the same (unless arranged otherwise).

From davis-stirling.com

Employee dishonesty insurance is also referred to a fidelity bond, crime coverage, employee dishonesty bond and crime fidelity insurance. This coverage protects against losses resulting from dishonest acts by an association's officers, directors and employees.

From an insurance companies site

What is the difference between Crime Insurance/Fidelity Bond?

Fidelity Bonds typically only cover losses from employee dishonesty such as money and securities. Crime Insurance provides a broader form of coverage which will extend to the following classes:
• Computer fraud and theft
• Employee dishonesty and theft
• Forgery or alteration
• Robbery
• Safe burglary
• Theft, disappearance and destruction of property

John,

VA law, specifically § 55-514.2, specifies the minimum amount of a fidelity bond.

B. Any association collecting assessments for common expenses shall obtain and maintain a blanket fidelity bond or employee dishonesty insurance policy insuring the association against losses resulting from theft or dishonesty committed by the officers, directors, or persons employed by the association, or committed by any managing agent or employees of the managing agent. Such bond or insurance policy shall provide coverage in an amount equal to the lesser of $1 million or the amount of the reserve balances of the association plus one-fourth of the aggregate annual assessment income of such association. The minimum coverage amount shall be $10,000. The board of directors or managing agent may obtain such bond or insurance on behalf of the association.

Just thought I'd weigh in with the latest requirement in FL.....while it was in effect for Condos in the past, just last year the following requirement was passed for HOAs.
720.3033 (5)
(5) The association shall maintain insurance or a fidelity bond for all persons who control or disburse funds of the association. The insurance policy or fidelity bond must cover the maximum funds that will be in the custody of the association or its management agent at any one time. As used in this subsection, the term “persons who control or disburse funds of the association” includes, but is not limited to, persons authorized to sign checks on behalf of the association, and the president, secretary, and treasurer of the association. The association shall bear the cost of any insurance or bond. If annually approved by a majority of the voting interests present at a properly called meeting of the association, an association may waive the requirement of obtaining an insurance policy or fidelity bond for all persons who control or disburse funds of the association.

David,

Although the law is a higher controlling document, I don't see how your CC&Rs would be in conflict with the CC&Rs unless (or until) the amount of reserves becomes less than 1 million.

The Law says that the Association shall have $x amount. The CC&Rs specify that the Association shall have $y amount. As long as Y is greater than X there is no conflict to resolve and the Association is in compliance with both documents. However, once Y is less than X, there is a conflict and you will need to comply with the amount established by VA law (I know you know this, I'm just trying to explain it for others who might not).

That said, I understand your desire and the only suggestion I can offer is to work out the savings per home by have an insurance coverage to match VA law as I suspect the only way to get the CC&Rs amended is to show an actual financial savings per home that would motivate the membership to vote.

'food for thought'

employee dishonesty covers EMPLOYEES (DOH)

? does it cover volunteers (directors) ?

I would BOTH ask my agent AND read the actual policy carefully

Yes, it is easy enough to call the agent and ask a question, however you will do yourself a big favor by reading the declaration of the policy. They are not that complicated to understand, and then you call the agent for any clarification etc. I will also suggest that if you are on the board, having your Rep come explain it all at a board meeting.

Just as a FYI since we are in different states: Our policy is written in my shorter sentences: Under the D&O Liability, under Exclusions, coverage does not apply to A. Criminal Acts. Since stealing money is a crime, it would not cover the loss of money. They also spell out quite simply just who the "insured" is since there are many people involved in the HOA. Under that same section it excludes wrongful acts regarding supervision of contractors.