Buyer’s Lender wants increase to Master Policy Coverage

Started by PatJ1 • 9 replies • 419 views

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PatJ1 (North Carolina)
Posts: 568

Posted:

Good evening everyone,

We are condos. We are required to contract an MC per our CCR’s. Which we do.

A prospective buyer’s lender is requiring that we increase the limits of our Master Policy for Employee Theft. Our present limit is $25,000. The change in premium is over $350.00/yr. We do not have any employees.

This is a 1st for me after 9 years on the Board. Has anyone else ever had something like this required by a buyer’s lender before?

JohnT38 (South Carolina)
Posts: 1,631

Posted:

The prospective buyers lender can't make you do anything. As for the appropriate coverage that is needed you should be asking your insurance agent.

SheliaH (Indiana)
Posts: 6,964

Posted:

Yup. Explain to the lender that you don't have employees - it will have to decide to approve the loan without it or the buyer will have to get financing elsewhere.

And if the issue hasn't come in 9 years, I also agree this would be a good question for your agent. In fact, why not review the entire policy to see where you may be over or under insured and then you can make adjustments as needed. Maybe even shop around for another company that will give you more coverage at a better price.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

PatJ1 (North Carolina)
Posts: 568

Posted:

Quote:

Posted By SheliaH on 07/09/2022 5:15 PM
Yup. Explain to the lender that you don't have employees - it will have to decide to approve the loan without it or the buyer will have to get financing elsewhere.

And if the issue hasn't come in 9 years, I also agree this would be a good question for your agent. In fact, why not review the entire policy to see where you may be over or under insured and then you can make adjustments as needed. Maybe even shop around for another company that will give you more coverage at a better price.

Our policy was carefully reviewed last year and adjustments were made. Our agent doesn't feel it's necessary to increase since we don't have any employees, but quoted it in case we wanted to increase it.

LetA (Nevada)
Posts: 2,679

Posted:

Different lenders have different guidelines. As to what your agent quoted last year is dead and gone. This is a new year and possibly new insurance guidelines to go with it.
I would hit up the insurance agent again just to make sure. If you are able to talk to this lender, see if you can get an exemption because you have no employees.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Also look at your CC&Rs/Declaration.

Ours have specific requirements for fidelity coverage that are tied to the amount of funds we have under association control at any time plus some amount of operating funds. Ohio law has also recently changed to the require a minimum of coverage to total amount of funds under control plus three months of operating funds.

The new law also states that coverage must apply to any individual with authority or access to sign checks, conduct electronic transfers, or otherwise withdraw funds from any association account or deposit, including the following:
(a) A management company's principals and employees;
(b) A bookkeeper;
(c) The president, secretary, treasurer, any other board member, or employee of the unit owners association.

In other words, you must insure not only the people who are handling money day to day, but all those with the authority or ability to handle money. They need not be employees.

agree with the others that a buyer's lender can't force the association to do anything. At most they can refuse to lend to the buyer. But you may want to take a look at your insurance coverage. Reserve accounts can increase in value without people paying much attention, and suddenly you're under-insured. I'd be curious what that lender thinks they're seeing.

PatJ1 (North Carolina)
Posts: 568

Posted:

Quote:

Posted By CathyA3 on 07/10/2022 5:06 AM
Also look at your CC&Rs/Declaration.

Ours have specific requirements for fidelity coverage that are tied to the amount of funds we have under association control at any time plus some amount of operating funds. Ohio law has also recently changed to the require a minimum of coverage to total amount of funds under control plus three months of operating funds.

The new law also states that coverage must apply to any individual with authority or access to sign checks, conduct electronic transfers, or otherwise withdraw funds from any association account or deposit, including the following:
(a) A management company's principals and employees;
(b) A bookkeeper;
(c) The president, secretary, treasurer, any other board member, or employee of the unit owners association.

In other words, you must insure not only the people who are handling money day to day, but all those with the authority or ability to handle money. They need not be employees.

agree with the others that a buyer's lender can't force the association to do anything. At most they can refuse to lend to the buyer. But you may want to take a look at your insurance coverage. Reserve accounts can increase in value without people paying much attention, and suddenly you're under-insured. I'd be curious what that lender thinks they're seeing.

Thank you for your comments. I searched deeper into our CCR’s, circa 1980’s, and located this section. We contract with an MC.

4.Fidelity Coverage protecting against dishonest acts by Association officers, directors, trustees, and employees and all others who are responsible for handling funds of the Association in the amount of one year's operating budget, plus projected reserve balances during the budget year. If professional management is obtained by the Association and it has this coverage and it handles the funds, then this requirement will be satisfied.

I also searched if North Carolina has any new insurance requirements and didn’t locate any.

We have several different polices in our package. This is noted under our Umbrella Policy. Looks like we may already be covered.

EMPLOYERS LIABILITY
Limits of Liability
Carrier: Pennsylvania Lumbermens Mutual Insurance Company
Policy Number:
Each Accident: $1,000,000
Each Employee: $1,000,000
Aggregate: $1,000,000

This request came to the new Board of 4 months. I have been assisting with the transition and they mentioned the increase request. Started me hunting for information. I would hope that our insurance agent wouldn’t be quoting us for coverage we already have, but I’ve found that they don’t always know exactly what the insured has or needs. Personally, I WAY overpaid for years for my HO-6 policy because my agent for a huge insurer wasn’t educated in this type of policy.

I’m a nut for wanting to understand the details.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

For now the immediate concern is to reply to the buyer's lender. The answer should be that any insurance coverage needed will be determined by the Board and the HOA's insurance agent. Therefore the coverage will remain the same until such time as the agent advices differently. You can always research this later but you should flat out deny the lenders request for now.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By JohnT38 on 07/10/2022 7:13 AM
For now the immediate concern is to reply to the buyer's lender. The answer should be that any insurance coverage needed will be determined by the Board and the HOA's insurance agent. Therefore the coverage will remain the same until such time as the agent advices differently. You can always research this later but you should flat out deny the lenders request for now.

This.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

I agree.

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