How much insurance?

Our CC&Rs (written in 2006) require $3 million insurance coverage. We have always carried $10 million, primarily due to a former board member who was a litigation attorney and thought that $10 million was a good idea.

We are single family home community, public streets, with 5 parks and some steep slopes. Everything is in good maintenance right now and all playgrounds comply with current safety standards. My take on liability is that we have very little exposure to anything, and $10 million is a huge amount of insurance coverage for our situation.

Any suggestions on how high or low we should set our insurance coverage amount?

We don't have any pools so no slips/falls at the pools.

Just open space parks, playgrounds, and a couple basketball court. I know that anyone can sue for any reason, but I do have a very hard time fathoming a situation where a plantiff would be awarded more than $5 million in a lawsuit award. That's just an obscene amount for a very low risk community.

For example, I only carry $1 million umbrella in my personal life and we own multiple motor vehicles which has a much greater chance of a big insurance claim than a playground.

Observations and questions I would be asking:

-- Crude guesstimating observation: Inflation means $3 million in 2006 would be worth $4.3 million today. Not that this settles anything, since how much insurance a HOA needs is subject to other temporal factors.

-- I would want to see the annual cost for

$4 million coverage, with different amounts of deductible

$7 million coverage, with different amounts of deductible

and so on, as the board desires.

-- I like this overview: https://www.hoaleader.com/public/How-Determine-How-Much-Insurance-Your-HOA-Needs.cfm . Note the comments about how, the more intricate a HOA's ops are, the more insurance it needs. Note the chatter about using deductibles strategically (so to speak).

-- I believe hoatalk member LetA of Nevada rightly brings up the $20 million 2018 jury verdict against a certain Las Vegas HOA for a 2013 playground accident leaving a boy brain injured and severely disabled. At the time of the accident, the HOA had a $2 million insurance policy. The last reports I found (from 2018) say the HOA is now suing the insurer for bungling settlement talks. An appeal occurred or is in progress as we speak? Nevada online court records show Lamplight Village and the insurer have some action happening right now (May 2022) in the Supreme Court level. See:

https://www.floridahoalawyerblog.com/20-million-verdict-against-hoa-for-playground-injury-serves-as-industry-wake-up-call/

https://www.wral.com/hoa-will-not-pay-20-million-to-victim-of-collapsed-swing-set/17479634/?comment_order=forward

https://independentamericancommunities.com/2018/04/19/insurance-attorney-could-have-settled-for-less-than-2m-but-declined/

https://casetext.com/case/thompson-v-lamplight-villcentennial-springs-homeowners-assn (indicating

-- Nine years have passed since the accident. The attorneys are making out like bandits. To me, lots of playgrounds means lots and lots of insurance coverage.

I looked that up, and the Board was not properly maintaining the swingset. It had failed before and was end of life, and rather than replacing it with new, they made unauthorized repairs to try to extend the life a bit further. The particular issue had happened at least 4 times previously without injury and then finally an injury happened.

While interesting, our playgrounds are all well maintained and comply with safety standards. Our situation is definitely not theirs.

Boards come and go. What if the swing sets are not maintained in the future?

It sounds to me like you have pretty much decided $10 million is too high, regardless of responses from the audience.

That being the case, what is the actual annual dollar difference between $10 million and $5 million? If it is less than a couple of hundred dollars, you may be best off with $10 million, regardless of your belief you cannot conceive of a settlement which would reach that amount.

If the annual dollar difference is significant, then your point may be well taken.

Others have suggested a detailed discussion with the insurance agency and an insurance professional advisor with no skin in the game. I recommend you take that advice before taking any action.

Michael,

A qualified insurance broker well-versed in CIC coverage can provide you all the details you need to make an informed decision. If your association does not currently use a broker, you should consider retaining one. Brokerage fees are all baked into the cost of insurance and great brokers are one of the least expensive, most value-added resources you'll find.

Regards,
Steve

What does the Association insurance agent recommend?

This is a well written nonanswer to my question.

And yet you come to the internet asking people who don't live in your community how much your insurance should be? That makes a lot of sense.

Then again, you do what you always do - ask for opinions and dismiss most of them because it doesn't match what you're likely to do anyway. I don't know why doing a little research is such a problem for you - are you that concerned someone will say "that's really a crazy idea," explain why, but you don't understand it? Or are you one of those people who cover their ears yelling "LA, LA, LA, LA, I've made up my mind, don't confuse me with the facts!!!"

Whatever - go ahead, reduce the coverage if you like - hopefully it works out.

Michael never answered my question. Quote:

"How specific are your CC&Rs?

Ours list liability, fidelity/employee dishonesty, D&O, and workers comp (the latter is up to the board's discretion. It also addresses things like fire and other extended coverage, which can vary according to the part of the country you're in. The article does not list any dollar amounts, which makes good sense because of inflation, among other things. The only area where it gets vaguely into dollars is for fidelity insurance, since the minimum required is based on the dollars currently under the association's control (operating and reserve accounts plus current annual total assessments)."

Maybe I missed it but I didn't see anything that said this $10 million is for liability alone. Insurance doesn't just cover liability, it covers all of the insurable events for which the HOA may get stuck with the bill. Ten million dollars would be excessive for my community, but it would be reasonable for a large community with a lot of common area/amenities. That much coverage could be entirely appropriate or even too little for a large high-rise community in a high cost of living area.

By the by, last night I saw an article that said the settlement for the Surfside condo collapse is $995 million: https://www.npr.org/2022/05/11/1098429031/nearly-1-billion-settlement-surfside-condo-collapse-lawsuit. Not that most of us will have to face anything like that. But insurance is meant to keep you functional after things go badly wrong. An unreasonably high level of coverage looks pretty stupid until you need it.

“It's tough to make predictions, especially about the future.” -- Yogi Berra

$10 million sounds super high for what you have.

I would talk to your insurance agent to get a better idea of what you should have compared to similar HOAs in your area. Yes, I know it is in their interest to sell you more insurance but they also want to keep your business, so will probably work with you to lower your rates.

We have a 820 doors in our community, a mix of single-family, duplexes and condos. The condos are in sub-associations so this coverage is just for our common areas and amenities. We have quite a few amenities and private roads. Our biggest issues, of course, are slip and falls on the sidewalks and coconuts and royal palm fronds falling on cars and causing damage.

Our previous insurance carrier, before they went out of business, offered an all-in-one policy that covered all the parts. Our insurance broker had to cobble together the same coverage. Florida has a huge problem with property insurance and many companies are going out of business. We pay almost $50,000 per year for this coverage so it is not cheap.

We are carrying what our broker recommends, but it is almost time for renewal and we will sit with him and review coverage.

Let,
I can't help but respond to your suggestion that juxtaposes getting the "minimum coverage" and a jury award exceeding $2MM in liability for a playground incident that nearly cost a bunch of homeowners a place to live!

Based on our experience with a $100MM+ property policy, EQ and $50MM umbrella, I think many people might be surprised about how the combinations of deductible and total coverage limits combine to effect an overall policy cost that, in many cases, remains relatively unchanged in the grand scheme of annual budgets.

Regards,
Steve