Illinois Condo Act Amended

SB 3014 has been signed into law by Illinois Governor Pat Quinn.  This bill amends the Illinois Condominium Property Act (Act) to change the insurance requirements that condo associations are required to carry.  The law take effect on policies renewing after June 1st, 2015.

These changes are meant to bring greater protection to those who live in condo buildings.  The areas SB 3014 updates in the Act have not been changed for many years.  This also means that many policies and insurance companies are not compliant with the new law and will have to adjust their policies.  This will most likely impact premium and it is important to work with an insurance broker who can access multiple markets on your behalf.

The first area that the law impacts is “Ordinance & Law” coverage.  Ordinance & Law coverage refers to the extra expense associated with rebuilding a damaged building up to code.  Most condo buildings were built before many new city and state codes have been enacted.  Ordinance & Law coverage provided money to the association to meet those new codes.  It is important to realize that once this Ordinance & Law limit is exhausted, the regular policy limits do NOT Kick in – it is up to the association to pay the extra costs.  SB 3014 increased the required minimum to 10% of the building value, to a maximum of $500,000.

The second area the bill changes is Directors and Officers insurance.  Condo associations are required by the Act to maintain Directors and Officers insurance.  This insurance protects the condo board members from lawsuits against actions they take and decisions they make while on the board.  While prudent and necessary, all directors and officers policies contain different policy language and exclusions.  Actions covered under one policy may not be covered under another.  SB 3014 makes it clear by stating that all Directors and Officers policies need to have coverage for the following:

  • Defense of non-monetary actions
  • Defense of breach of contract
  • Defense of decisions related to the placement or adequacy of insurance
  • Defines who is to be covered under the policy as all past, present and future board members as well as a third party building manager and their employees

The final insurance-related section the law changes is that of condo unit insurance.  The HO-6 insurance policy is the standard homeowners insurance purchased by a condo owner.  The bill removes the ability of the condo association to purchase an HO-6 policy on a unit whose owner refuses to buy themselves.  This means that the board will need to convince the unit owner to purchase this coverage or else have the interior of the unit uninsured.

These changes impact whether the insurance a condo association carries is adequate or not.  It is important to work with a broker who is knowledgeable about the policies and also able to work with multiple insurance companies on your behalf.

Contact us today for a complimentary review of your association’s insurance.

FL Association Hit With $300,000 Settlement

Sabal Palm Condominiums in Davie Florida’s Pine Island Ridge neighborhood does not allow dogs over twenty pounds. Deborah Fischer, a resident with multiple sclerosis, brought her heavier dog with her when she moved in November 2011. Fischer is wheelchair bound and uses her service dog to assist in daily activities.

The condo board requested documentation on the need for the dog and after allegedly not receiving it sued for removal of the dog.Fisher counter sued the board and the case went to trial. The judge called the condo board absurd” and “unreasonable”, allowing Fisher to keep the animal at the complex. On top of that, the association was fined $300,000 for violations of the Fair Housing Act.

The case is a reminder for boards to show restraint in enforcing regulations, especially when it involves a potential disability. Any bylaw changes or increases in enforcement should be handled by a competent lawyer.

Ensuring that association Director’s and Officer’s insurance is in place is also important. Not all policies are created equal, cheaper “packaged” coverage often exclude claims for injunctive relief (which would be a suit to be allowed to own a dog) and allegations of discrimination. The pricing of D&O policies pales in comparison to property insurance, for a few hundred dollars more an association can have full protection for it’s board members. Contact an expert directors and officers insurance broker to discuss better protecting your association.

Managing Contractor Risk

Contingent liability, claims from the negligence of a third party, are rising and one of the most important current issues in insurance. Determining that a contractor is properly insured will protect your condo association from unexpected costs and headaches if damage is caused on your property or that of a neighboring association.

Contractors are heavily regulated, with most jurisdictions requiring insurance and bonding to become licensed. Because of the administrative burden and cost some contractors choose to work illegally – these laborers can cause extreme liability for their clients.

Issues of Properly Completing Work

Contractor (also called Performance and Surety) Bonds protect the client against faulty or unfinished work. If a plumber disappears mid-job or is unable to finish a project to satisfaction, the bond he is required to carry will pay to complete the work. Most licensed professions are required to carry a bond in each city they are licensed. Asking for a performance bond on a small job is infeasible; however they are standard on larger jobs. If a contractor is requiring payment upfront for a sizable portion of the end bill a bond should be required.

Issues of Damage to Property

Contractors can cause damage to condominium building under construction, the contents of an individual unit, neighboring buildings and nearby automobiles. General Liability Insurance provides coverage for these types of events.

Issues of Bodily Injury

Injury from construction debris or faulty work can be expensive to litigate and settle, a contractors General Liability Insurance will cover these claims. The association should request to be named as an additional insured on the general liability policy. As an addition insured the association will be provided coverage if they are sued over something the contractor did, protecting your assets and insurance policy.

Injury to Workers

Injuries on the job are costly and common in construction. Because of this, workers compensation insurance can be extremely expensive. Workers compensation laws assign liability for uninsured contractors. If the association hires an uninsured contractor and someone is hurt on the job, the association can be held liable. If the association does not carry it’s own workers compensation the claim will likely be uninsured.

Suggested Coverage

All carriers should be AM Best A- VII or better, those below this threshold are at serious risk of not paying claims.

General Liability – $1M with Association Named as Additional Insured
Automobile Liability – $1M
Workers Compensation – Statutory Limits with $1M/$1M/$1M Employers Liability
Surety Bonds – Specific to Job Value

Condo Owner Claim for Exploding Body Denied

A Jupiter FL condo unit owner has had their claim for damages from the decomposing body of a neighbor denied by their insurer, State Farm.

Judy Rodrigo’s damage occurred in October 2007 when a neighbor died and liquids from the corpse leaked into her unit. Rodrigo filed a claim, State Farm offered a small settlement but denied paying the full claim.

The issue at hand was the wording of the “named perils” policy the insured purchased. Property policies are generally written one of two ways –

-“All Risk” which covers any property damage subject to specific exclusions

-“Named Peril” which only covers specifically listed events from the policy

The named peril policy at hand included coverage for “explosion”. It was unsuccessfully argued at court that the decomposing body “exploding” was a covered event.

The incident highlights the need to understand what you are buying. Not all insurance policies are written equally, condo owners should understand what terms are being restricted when purchasing cheaper policies. Contact us today to discuss coverage differences in condo association and unit owner policies.

Deadline for Condo Bed Bug Plans

The City of Chicago’s March 24th 2014 bed bug plan deadline has passed. The regulation requires all associations to implement a written plan on how to prevent, monitor and rid the building on the pests.

The penalty for non-compliance is unclear but there are benefits for associations to implement rules. The new city laws give associations greater leverage in forcing unit owners to deal with infestation issues. A sample plan is available from the City here.

The new duties of associations include:

  • Giving each unit owner an official Chicago bed bug fact sheet (available here)
  • Associations are required to hire and pay for professional exterminators once bed bugs once reported
  • Informing unit owners of treatment plans

The new duties of unit owners include:

  • Reporting suspected beg bug infestations
  • Cooperating with association, including letting board members into your home to confirm that there are beg bugs

Unit owners can be fined $2,000 by associations for noncompliance.

Contact today to ensure your association is adequately protected against increasing regulations and associated legal costs for alleged noncompliance.

NY Co-Op Awarded Legal Fees Against Shareholder

A Manhattan Lower East side Co-Op, East River Housing, was awarded over $30,000 in legal fees after a shareholder unsuccessfully sued after their dog was ordered removed. This is second dog related lawsuit the board has won, although they are facing a third that is still working its way through the courts.

After Steven Gilbert was ordered to remove his dog, which was in violation of a no pets policy, he claimed the dog was for a disability. When the Co-Op moved to evict he got rid of the pet but continued his disability accommodation claim with the New York Division of Human Rights. The court found that this pending claim did not stop the Co-Op from recouping the legal fees amassed during their eviction proceedings.

The case demonstrates the value of securing legal counsel anytime a lawsuit or potential discrimination claim is faced, without it the board could have found itself with a much different outcome.

Contact to discuss better protecting your condominium association or cooperative.

New Chicago Condo Association Regulations

On January 15th the City of Chicago passed a new ordinance, effective February 5th, concerning the examination of Association records by unit owners. The new city ordinance requires all requests for records to be completed within 10 days instead of 30. The law also limits the years of records that can be requested to 10, it had been unlimited prior. Thirdly, the law clarifies the wording around what records can be requested to better match that of the Illinois Business Corporation Act, the Illinois Not for Profit Corporation Act and the Illinois Condominium Property Act.

New laws bring new liabilities to board members. Although the scope of this law is limited and the additional burden limit, it’s passing is a good reminder to contact an expert broker to discuss better protecting your board members from personal liability. Directors & Officers insurance is a nonstandard coverage, many claims that could be brought for violating this ordinance would not be covered under many insurance companies policies.

The new regulation is available here.

Understanding Your Insurance Policy’s Fine Print

The following article was published in the August 2013 edition of the Chicagoloand Cooperator and was written by W.B. King. Broker Jon Schildt was quoted in the article. Jon can be reached at or 312.241.1706.

The catastrophic and tragic effects of the tornadoes that ripped through Oklahoma this past May resulted in 23 deaths and nearly $2 billion in damage. Natural disasters like these are on the rise, and serve to underscore the importance of having appropriate insurance policies in place—for both individual homeowners and homeowners associations alike. And while board members have a good grasp of common insurance coverage such as homeowners, liability and umbrella, there are other specialty insurance policies to consider.

“The biggest issue we see, especially in Chicago, is the underinsurance of older unique buildings. Insurance companies can generally penalize an association when the building is underinsured which is referred to as coinsurance,” says Jon Schildt, managing principal of Chicago based Calculated Risk Advisors, LLC, a boutique risk consulting firm and professional liability insurance brokerage. “If a building is underinsured and property damage occurs, owners are often shocked when they find out that the damage will not be fully reimbursed.”

When looking into specialty insurance policies, it is often recommended to revisit existing policies to guarantee that all the proverbial ducks are in a row.
“Often when we take over buildings, we notice that the legal name of the condo building is not the same name as the insured party. If it’s not the exact legal name, insurance companies may have a way out of covering a loss which would obviously be a big problem to the board and the owners,” says Keith Hales, president of Hales Property Management, Inc. in Chicago. “The board should review the policy with an insurance consultant and their property manager to ensure that they are covered properly.”

Going Green?

In recent years there has been a growing trend towards buying “green” specialty insurance. More and more boards are looking into these policies; however, not all industry professionals agree with this approach.

“The green insurance products are more of a marketing ploy than anything else. If a building has solar panels or high efficiency windows they should be taken into account when calculating the replacement cost of the building, just like any other improvement,” says Schildt. “There is nothing in a standard insurance policy excluding damage to a solar panel.”

Schildt explains that insurance companies are starting to offer endorsements, for an added cost, that will rebuild damage to the building to LEED specifications, but he added a caveat. “Claims where enough damage is done to require that level of construction are extremely rare and the coverage is likely to never come into play.” What is more important, he adds, is “ordinance or law,” which will cover the cost of rebuilding to current (often greener) building codes.

Hales notes that there are generally two types of insurance policies offered for green buildings. The first translates into a two to three percent increase in premiums, which covers higher upfront costs of green materials but guarantees that, in case of a loss, a conventional building will be rebuilt to green standards. The second policy type is offered to associations that are already considered a green building. The policy insures existing green modifications against loss.

Martin Stone, vice president of homeowner association management for HSR Property Services in Tinley Park, says that not one of the properties his company represents currently has a ‘green’ insurance policy. He added though that the movement is growing. “I would guess this is something that will grow in popularity in the next few years,” he says.

In a Flood Zone

The rise in natural disasters has caused significant changes in the way insurance policies are written and/or interpreted. This is perhaps best underscored by 2012’s Superstorm Sandy. The impacted Jersey Shore, for example, has been remapped in relation to flood zones. To this end, FEMA’s Flood Hazard Mapping Program identifies flood hazards, assesses flood risks and partners with states and communities to provide accurate flood hazard and risk data to guide mitigation actions.

While beneficial in certain respects, the Flood Hazard Mapping, part of the National Flood Insurance Program, is changing flood insurance requirements. According to FEMA’s website, Flood Insurance Rate Maps (FIRMs) include statistical information such as data for river flow, storm tides, hydrologic/hydraulic analyses and rainfall and topographic surveys.

“It’s my understanding that flood insurance is a separate policy and not included in any package. I am also relived to say that none of HSR’s properties lie within a flood zone or have to carry said policy.” says Stone. “Though over the years, we have had a number of our properties get erroneously tagged in a flood zone and had to fight with FEMA to have their maps and designations corrected.”

Schildt explains that many flood prone rivers in northern Illinois are surrounded by flood zones but several areas of the city are not. “Most people forget that Chicago was originally a marshland and has been built on what is in essence, a drained swamp.” he continues. “Because of the flat geography and abundance of concrete that prevents adequate runoff, flooding does happen well away from rivers. This means that a condominium association should carefully assess whether they should carry flood insurance for their property, even if they live outside a mandatory flood zone.”

And flood insurance doesn’t always relate directly to common, logical associations (e.g., heavy rains and rising rivers, etc.). “We’ve had an issue within a couple buildings now where a loss was experienced as a result of a sewer backup. Depending on the policy, some of the buildings were not covered as a result,” says Hales. “The Board of Directors is tasked with the responsibility of providing adequate insurance coverage pursuant to the Illinois Condo Act and their specific governing documents such as the declaration and bylaws for the building. This responsibility would typically include providing adequate flood insurance protection for all common property especially located in special flood hazard areas.”

Misunderstood Policies

One common, but often misunderstood insurance policy is known as directors and officers liability coverage, or D&O. This policy insures directors and officers of businesses, corporations and other entities against a legal judgment.

“It is essential a board of directors know the difference between the Directors & Officers coverage that comes with their commercial liability package, versus the more comprehensive D&O they have to purchase as its own policy,” says Stone. “You would be surprised how few boards know this.”

Stone explains that he is currently working with an association located in Homer Glen, IL. The board tried saving the $1,500 annual cost by dropping the additional D&O policy. Eight months later the board was sued and the D&O included in their commercial liability policy didn’t cover the defense. “So the $1,500 they saved has ended up costing them almost $90,000 in less than two years,” says Stone “And the lawsuit is still in the discovery stages,” he says.

Another misunderstood or overlooked insurance policy is workers compensation. While many boards believe that using insured contractors removes the need to spend the approximate $800 per year for a worker’s compensation policy, it is flawed logic. “What they fail to realize is the coverage is if your insured contractors’ insurance policy isn’t adequate to cover a claim or if an owner uses a noninsured contractor who gets injured while working on the property. The cost to avoid such risk is minimal,” says Stone.

While the Illinois Condo Act requires every association to purchase property, liability, and D&O insurance, associations with more than six units are also required to carry fidelity/crime insurance. In addition to the standard policies, Schildt notes that network security is a “hot button” issue. “If an association takes online payment of dues and does not use an outsourced property manager for this, or stores sensitive information electronically,” he says they should consider some form of cyber insurance.

Other Coverages

Stone adds that another relatively cheap specialty insurance policy is nonowned auto coverage. “It is lesser known or utilized, but important coverage that we recommend to our boards,” says Stone. “It protects the association in case a board member runs over someone while performing association business.” There also exists special insurance coverage for expensive building equipment. “Associations can get special endorsements for specific building equipment such as a boiler system, pool or HVAC equipment,” notes Hales.

When it comes to understanding what a board insurance policy covers as opposed to coverages held by a unit owner, a gray area often can exist. Sometimes it comes down to the amount of the deductible. Associations are required to insure the inside of the units up to original construction grade or to the original shell of the unit. However, unit owners should also carry a homeowner’s policy, says Stone. “The main reason is that the owner’s deductible is probably between $250 to $750 and the association’s deductible is likely between $1,000 and $10,000 or sometimes as much as $20,000.”

Depending on the amount of the association’s deductible versus the damage to the affected unit(s), the association may not even consider a claim. Stone offers an example. “I manage a property in Crystal Lake that had a building, which experienced a sewer backup that affected four units and caused a total of $3,000 in damages in each, $12,000 total,” he continues. “The association’s deductible is $10,000. No claim. Further, in absence of a claim, the association is not obligated to pay out of pocket for repairs. It all falls back on the unit owner.”

Since board members often change periodically, it is important to seek guidance to ensure that the proper policies are in place to cover all possible insurance claims.
“It is best to build a team of professionals that an association can call on with matters. This includes an accountant, a lawyer and an insurance broker. It is best to consult with a specialist in any matter that is unique or could give rise to disputes,” says Schildt. “Property managers can often reach out to their team but many associations are self managed and having a team is often helpful.”

Operating a fair, open, and judicious board is the first line of defense against any lawsuit—and a good D&O policy and fidelity coverage can help provide the protection your community needs.

Article: Insuring Honest and Integrity

The following article was published in the August 2013 edition of the Chicagoloand Cooperator and was written by Danielle Braff. Broker Jon Schildt was quoted in the article. Jon can be reached at or 312.241.1706.

When you decide to run for a board, you’re usually thinking about all the great changes you’re going to make to your building, along with all the time and effort that you’re prepared to sacrifice for the good of your home.

Of the many thousands of dollars a large condominium, co-op, or home-owners association may spend each year on insurance, two policies that typically cost less than five percent of the total are two of the most vital: crime insurance (often called fidelity coverage) and directors and officers liability insurance (often called simply D&O).

It sounds confusing and complicated—but boards must understand what each type of policy covers and what they don’t cover.

First Things First

First, there’s general liability coverage, which protects the association if someone is hurt on the property. This one is straightforward. But fidelity bond insurance and D&O insurance can seem more complicated to understand. Essentially, they are there to protect the board against lawsuits.

Fidelity bond insurance or crime insurance is typically a stand-alone policy or is included within a package policy that protects an association from any theft or misappropriation of funds by people entrusted to handle them.

“Your choice of D&O and fidelity are significant,” says Jon Schildt, a managing principal of Calculated Risk Advisors, LLC in Chicago. “Since the Illinois Condominium [Property] Act requires associations to carry D&O and fidelity insurance, many associations buy without knowing what it covers, or else do not even realize they need to purchase it.”

That’s not a good idea. These are two of the most important insurance policies purchased for your building association so it’s incredibly worth-while to spend time researching them beforehand.

Fidelity bond insurance protects boards and other building administrators from malfeasance carried out by building or homeowner association staff members. New Federal Housing Administration (FHA) requirements now provide that condos must have this insurance—so not only must boards consider it—but they must re-search it, purchase it and renew it.

“Fidelity coverage is one of the most neglected and misunderstood areas of insurance for an association, says Karyl Dicker Foray, CIRMS, CISR, an insurance broker for Rosenthal Brothers, Inc. in Deerfield. “This type of coverage is also known as employee dishonesty coverage or crime cover-age. Having three different names doesn’t help the matter, and often, insurance agents use fidelity, crime and employee dishonesty interchangeably, just to confuse the matter further.”

It’s Required

The first thing to understand is which buildings in Illinois are required to carry fidelity bond insurance. “As for fidelity, buildings with six or more units are required to carry crime/fidelity equal to the amount of funds under their control at any one time plus reserves,” Schildt says. “The policy must cover the building manager if there is one.”

If you take that one step further, the rule of thumb as to how much fidelity coverage to buy is three times an association’s monthly assessments plus the amount in your reserve fund, Foray says.

Even if fidelity coverage isn’t required for your condo or townhome, it’s strongly advised.

“Just like any other business, your assets need to be protected from un-expected loss the same way you protect yourself from fire or a slip and fall loss,” Foray says.

For example, in 2007, $2.2 million of board funds went missing from a management firm’s bank accounts in Virginia, and they heavily relied on their fidelity insurance to bail them out.

“Locally, Chicago has certainly seen their share of fidelity bond claims over the last five years,” Foray says.

Of course it’s possible to figure out who took the cash in the first place, to hire lawyers at that point and to hope that the money hasn’t been spent yet so your building could get it back. But in the meantime, the association’s bills will have gone unpaid and the entire building may go into foreclosure. Getting a good insurance plan is much easier and could be less costly in the end.

Once you determine if you want or need coverage, it’s important to ask the insurance agencies for their definition of an insured employee, since this varies from one company to another. Some define this as a person who is paid a salary, while others may include people who are committee members. This is obviously a very important distinction since you’ll want your board members to be covered under your fidelity coverage, in addition to your manager or management firm, Foray says.

The costs of the insurance—as with any insurance—are variable.

“Costs depend on the limit needed and the deductible chosen by the association,” Foray says.

Having said that, fidelity coverage is relatively inexpensive.

“It all depends, but a typical premium is about $100 a year for a small limit—say $5,000—added to an existing policy,” says Michael Doering II, CISR, a commercial lines agent manager/producer for Lakeview Insurance Agency, Ltd. in Chicago. “For stand-alone policies with limits of $500,000 or higher, it will likely be at least $1,000.”

While adding on coverage usually costs less, it is also almost always more restrictive, Doering says. “You usually cannot enhance add-on cover-age much either, while standalone policies offer many options,” he says.

But there are other ways to cut costs. Choose a higher deductible and your annual cost may go down, but you’ll end up paying more out of pock-et if there is a lawsuit or legal action. Make sure that the limit for the management firm is the same amount that the association is purchasing.

“A property management firm’s own fidelity bond covers the management firm’s personal corporate assets—not association assets that they are handling for you,” Foray says.

In theory, every type of insurance does the same thing: protects its buyer from unexpected, unanticipated future tosses. But even though D&O insurance sounds and looks similar to fidelity bond insurance—and often gets commingled together in the same sentence, they are two separate entities.

Directors & Officers Protection

D&O coverage is necessary to protect boards from legal actions and dam-ages resulting from their own good-faith decisions. It essentially protects the board from any liability related to alleged errors in judgment or other wrongful acts while doing their job in good faith on the board, Foray says.

The Illinois Condominium Property Act also requires that every condominium association purchase D&O insurance—but this state-mandated requirement doesn’t extend to townhome, homeowner or master associations.

Depending on your particular build-ing’s coverage, the D&O policy can protect against libel, slander, discrimination and other decisions the board makes regarding the operation of the association.

Some more specific scenarios it may cover could include: failing to pay the HOA debts on time, improperly managing the board’s money resulting in monetary loss, continuing a wrongful practice even after discovering that it is wrong, making poor decisions based on advised judgment, being ignorant of HOA records and books, conflicts of interest, aiding and abetting in illegal actions of others, careless wrongdoing, poor oversight of employees and even willful wrongdoing.

Thus, D&O insurance is incredibly important—and having poor coverage can result in the loss of thousands—if not hundreds of thousands of dollars should something go wrong.

And while D&O insurance is required by the state, Foray says, “It is important to keep in mind that not all Directors’ & Officers liability policies are created equal.”

While some of the policies may include coverage for libel, slander, discrimination, non-monetary damages and coverage for the building’s property manager, others don’t. Some include exclusions for claims resulting from insufficient or improper insurance purchases while other insurance policies don’t have this exclusion.

Some D&O coverage policies are made on a claims-made basis, and still others—though rarer—are made on an occurrence-basis, says Foray, who prefers a claims-made basis.

Questions to Ask

If no details are offered beyond the name of the type of coverage and the coverage limit, Foray suggests the board asks the insurance agent the following questions:

Does this policy include coverage for volunteers, committee members and prior D&O members? Is coverage included for the management team? If not, how much would it cost to add the extra coverage?

Is the policy occurrence or claims made, is there a retroactive date?

What exclusions are on the policy, and is there an insurance exclusion that can be deleted?

Before agreeing to the policy, always ask to review a sample policy so you can go over the details and make sure this will include what’s necessary for your particular building.

One big issue would be third party liability, says Michael Rubin, president of The Rubin Group. a New York City-based insurance company. For example, if a minority vendor approaches your building and offers to clean it for 20 percent less than your current cleaning service—and your building declined his services, he could sue the building for discrimination.

Since he would be a third party, the D&O insurance policy may or may not cover your building, depending on your coverage.

“A typical policy may not cover that,” Rubin says. “An upgraded policy may cover that. Like anything in life, you get what you pay for.”

That doesn’t mean that you need to overpay, nor does it mean that spending a couple hundred dollars will do the job. Rubin suggests getting four or five quotes before deciding on the right policy for the building

Although you may have many different insurance policies, there’s nothing that requires you to buy the D&O insurance policy from the same insurance carrier that provides the rest of the policies, Foray says.

When the insurance company determines the cost of your building’s policy, they’re looking at two factors: the total number of units in the building and the number of prior claims. An association with a building that has 50 units would expect to pay about $800, while one with 50 units and one prior claim may have a premium of $1,000 plus a higher deductible (perhaps $2,500 per claim instead of $1,000 per claim), Foray says.

“The premiums are based on the number of units and are paid for by the association,” she explains.

The last step before signing on the dotted line should be checking out the insurance companies’ ratings. This can be done at If you’re looking for an insurance agency specializing in insuring associations, you can get more information from the following organizations, the Community Associations Institute’s Illinois chapter in Schaumburg at and the Association of Condominium, Townhouse and Homeowners Associations (ACTHA) at

Contact, the experts in insuring your association’s assets.

Directors and Officers Claim Denied

As far as insurance policies go, Directors and Officers (D&O) insurance is relatively new.  Directors and Officers insurance for condo associations is an even more recent – albeit necessary – policy.  Unlike property insurance or liability insurance, many condo owners do not fully understand what directors and officers insurance does or is for.

Condo associations are generally comfortable applying the same analytic process to Directors and Officers Liability Insurance as they do to other coverage lines – looking at limits, sub-limits and retentions.  However, this specialized insurance coverage is one that needs a line by line analysis to ensure there are limited coverage gaps.  Purchasing this coverage without such analysis – or using a broker who doesn’t understand it themselves – can lead to problems during a claim.

Recently, a Condo Association in Wisconsin found out just how problematic D&O insurance can be when they had a fairly common claim denied. The lawsuit Hunt v. Beach Club Condominium Association, Inc., No. 2012AP2197-FT (Wis. Ct. App. June 4, 2013) centered around a condo association voting to amend their declarations.  The clause that the association voted to change was inserted by the developer when the association was formed.  The developer – who lived in a house adjacent to the building – gave himself and his family the right to use the condo association’s beach.  The Association voted to remove beach access to the developer.  The developer then sued the association to restore his access to the beach.

The association sought coverage under the D&O policy they purchased from Auto-Owners Insurance Company. The policy included six exclusions that Auto-Owners likely could have used to exclude coverage but the case did not get past the definition of “damages”.  The association argued that the lawsuit asking was restored beach access was in fact “damages”.  Auto-Owners argued that this was not a damage as no money was being sought by the plaintiff – only restored access.  The Wisconsin court ruled that an injunction to restore access to the beach did not meet the definition of “damages” in the policy. The court’s opinion is available here.

The triggers for property coverage are generally fairly broad (covering direct physical loss) and General Liability is fairly straightforward as well (Bodily Injury or Property Damage the Association is liable for). Both will have a standard set of fairly predictable exclusions (War, Wear and Tear, Criminal Acts, Etc). These are the coverages that insurance agents are used to dealing with and negotiating.

Directors and Officers liability, however, is a newer coverage and every carrier has their own set of coverage triggers and exclusions. Comparing two policies is very rarely, if ever, apples to apples. Many states, including the state of Illinois, require condo associations to purchase D&O insurance regardless of their size, budget or felt need.  Since this type of insurance is both required and complex, boards often assess it on price rather than content.  It is important to obtain the best coverage for your association as possible for the dollars spent.  Contact today to discuss better protecting your organization from directors and officers claims.