Insurance

We are a 130 home single family HOA in Florida

Our insurance agent is recommending a $10 million umbrella policy

We do not own any property other than streets and sidewalks. No structures.

Homeowner responsible for sidewalks.

I am thinking $10 million seems excessive and was recommending $5 million.

Am interested in others thoughts.

Thanks

We carry that much umbrella insurance for a 74-unit condo community, no amenities other than green space, streets and sidewalks.

Where you can really rack up claims:

* liability - someone is injured on common areas and sues the association - or the association decides to fight and the plaintiff ratchets up the amount they're asking for as a result. (This happened to an HOA somewhere out west: a kid was injured on some play equipment, parents sued, HOA fought, final settlement amount was well over the amount that the parents initially sued for. Our attorney said that many insurance settlements are over $1 million now, so we boosted our regular liability coverage as well as the umbrella coverage.)

* D&O - someone sues the board as well as the HOA.

* Property damage - a sink hole opens up in one of the streets.

* Multiple things go wrong at the same time.

Insurance isn't there for normal occurrences - it's there to protect an association from catastrophic and unforeseeable losses.

Really, please share.

I don't think so - if that were true, every board member in the country should resign immediately.

The whole point of incorporating HOAs/COAs and having D&O insurance is protect board members' personal assets if they are sued for actions taken in good faith as board members. The corporate status should also protect individual homeowners' personal assets.

What would happen if the HOA didn't have enough insurance to cover losses is that it would likely declare bankruptcy and there should be language in the governing documents about what happens in such a case. You still don't want it to happen, but you won't be penniless afterwards.

(Disclaimer: I am not a lawyer or an insurance pro. Talk to your own professionals.)

Also don't get lost in the $10 million dollar amount. Once you dig into the facts, a payout is no where near 10 Million dollars payout. The insurance has to cover it's legal expenses. That comes out of that amount.

Our HOA we have to have a 1 Million dollar policy. If someone was to sue, they would never see 1 million dollars. The actual payout? $80K. This is after all the expenses and paying the deductible. So if the person or persons suing is awarded over that 80K, the rest of the membership has to make up the difference. So if someone won 100K, the HOA is on the hook for $20K. (Not counting the deductible).

So $10 million may sound huge but in reality what it has to cover is preventing a large special assessment.