Homeowners insurance compliance

We are a smaller 40 unit town home association.

We require that owners have regular homeowners insurance as they are responsible for both inside and outside of unit in case of an incident such as fire.

For years we struggle to come up with a good system to track and enforce compliance.
Even if we had a perfect system where we could track, somebody still could cancel policy.

I am looking for ideas and best practices on how to deal with this situation. Ideally, we woudl be notified by insurance that policy got canceled or altered. But I don't know whether this is possible.

Any ideas are appreciated.

I’m confused ...

FirstL said their townhouse HOA requires insurance, but Shelia says folks cannot be required to have insurance?

My COA has a similar provision to the OP's community. Our Declaration says that "any unit owner or occupant shall carry such insurance in addition to that provided by the Association..." There is no exception for those without a mortgage.

But the provision doesn't give our board any ability to enforce it, such as allowing the association to require proof of insurance from owners. I suppose we could do so even though this isn't spelled out, since the section of our CC&Rs that deals with enforcement gives the board somewhat broad powers. And our association is required to carry "all included" insurance, so that in the event a unit is completely destroyed, it would be rebuilt/restored to its original condition (this would exclude any owner-installed improvements).

We're condos, though, and it sounds like the OP's community is very different, so there could be an issue if a unit was destroyed and the owner didn't have enough funds to rebuild. Maybe look in the CC&Rs to see if there is a provision that deals with rebuilding or condemnation of property - that may give you some leverage to enforce.

And maybe talk with your HOA's insurance agent to see if he/she has any helpful advice.

As Sheila noted, lenders require such insurance, and the lender's name and the association's name will usually appear as "interested parties" on the insurance documents, so both should be notified if the homeowner cancels the policy. I'm pretty sure this doesn't happen 100% of the time, though.

So, to sum up... check your CC&Rs, specifically those sections dealing with enforcement in general and rebuilding/condemnation of property. Check with the HOA's insurance agent.

In the end, if your governing docs don't give your association the ability to enforce a provision, you can only do the best you can.

Never been in a townhouse HOA ... but, the danger to other units close to a fire, their inhabitants and their belongings is pretty clear.

Just set administrative proof policy at the Board level, based on the requirements, and uphold the policy that connects to the declaration. Consider exchanging, via mail or email, with the insurance agency, confirmation regarding each property, annually ... trust but verify.

Find some examples of townhouses being destroyed and/or damaged to make your point.

If you have a recalcitrant owner who refuses to provide documentation, or who refuses to obtain insurance, follow an audit trail of warnings, then take them to court - set the precedent early.

Most homeowners will end up with the right insurance and renew.
I tend to see the following 3 challenges:

1.) new owners moving in - oftentimes there is confusion what is required. Insurance agents oftentimes advice owners incorrectly
2.) arguments about amount required. i.e. rebuilding is more than the property value - or what is insurance base coverage and how it extends (percentage)
3.) homeowners that cancel or modify insurance

3.) is most difficult to track.

We are also having a discussion on whether or not to mandate minimal coverage $

I wonder if we could require adding "HOA as an additional interest" to policy.

I found this:
https://baytownewest.com/documents/rules/2020/01/30/have-you-sent-proof-of-insurance-yet/

interesting.

There seem to be two options:
1.) "HOA as additional interest"
2.) "HOA as additional insured"

https://www.reddit.com/r/Insurance/comments/alpm5z/hoa_as_additional_insured/

Seems like 1.) is a bit easier.

To the OP,

Unless your CCRs are clearly defined, you are overstepping your authority, if there is any.

Insurance requirement, both for homeowners and the association, more so for the association.

If the homeowners are truly responsible for their home's insurance, then the HOA is not involved, UNLESS the homeowner is using some part of the common area for a party, then the HOA can require that the homeowner provide a Certificate of Insurance for a specific date named the HOA as additional insured.

The insurance for the homeowner's dwelling is between the homeowner, an insurance company and the mortgagee. All mortgages require at least fire, and depending on the location of the property, wind and flood.

You might you have struggled to track and enforce compliance. For what exactly. Does your governing documents require that you track insurance documents for each and every homeowners. You are dealing with multiple mortgage companies, servicers of the loans, multiple insurance companies and agencies, multiple start and end dates, some policy are paid directly by homeowners, most all are impounded.

My advice, stick to what the governing documents allow you and no more.

Do you have a property management company? If so, ask them for help.

Unless someone sees all your docs, we are shooting blanks in the wind.

yes, we have an attorney on retainer. She helped us before with changes and the usual business

Our management company was unable to provide help.

I am trying to figure basic strategy to propose which likely could require a dec change.

I think it includes 3 elements:
1.) a method for HOA to know people have insurance, and we get notified if canceled or not.
2.) a decision on mandating minimal insurance coverage
3.) "Somebody" to read policy and actually understand it to make sure it is right type and right coverage
4.) Clarity on worst case scenario. - Although 4.) becomes a lesser issue with 1-3 in place.

I am sure we are not the only HOA in this situation....