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  • 08/01/2018 10:39 AM | Anonymous member (Administrator)

    By Pat Wilderotter, CIRMS, VP, CCIG

    Moving into a community association can be perplexing for new unit owners. What insurance do they need to purchase? Although only a small percentage of people ever read the governing documents (CC&Rs) of the association they are moving into, those declarations will let each owner know what coverage they need to purchase under their personal HO6 policy. The association’s insurance responsibility on the interior of each unit can range from bare walls coverage where the association is only responsible to replace the dry wall and sub-floors, to “all in” coverage where the association has to replace the unit as it was at the time of the loss. From that wide range of options, throw in replacement to original construction, add in exclusions/inclusions for items such as floor coverings, appliances, cabinets and countertops, and what’s covered can be very confusing. Without reviewing your declarations with your personal insurance agent, you could be found devastated after a property loss with what is and is not your responsibility to insure and what is replaced in your unit. 

    When you see insurance as part of your monthly assessments, that only means that portion of the community that the association is required to insure according to the declarations. When it comes to personal property, the association cannot insure what it does not own or is legally responsible to cover. Additionally, make sure you have adequate liability coverage. When someone enters your home, you become liable, so a slip and fall on your throw rug can result in a law suit against you personally. 

    Also, review the association’s deductible policy. Some associations can assess the property deductible back to the individual unit owner or owners involved in a property claim. In this case, make sure you have added enough property coverage under your building/property coverage (typically section A) of your HO6 policy to cover this deductible. 

    In a situation where the entire community is assessed for a deductible, coverage is generally available under the loss assessment portion of the HO6 policy. Confirm with your personal agent that there is not a sub-limit if going to pay for an association’s deductible or that the coverage is offered under a special endorsement. This coverage is essential under your personal insurance. Due to the number of hail claims over the past several years, with May 8th of last year coming in as our most severe with over $1.4 billion in damages, we have seen many carriers non-renewing or leaving the habitational marketplace. Those companies remaining are typically going to a percentage deductible, with 5% of the property value becoming the norm although we still have carriers offering 2% or a specific dollar amount. Adding adequate loss assessment coverage is relatively inexpensive under your HO6 policy, so just make sure your limit is adequate to cover your potential assessment. Simply take the building limit times the percentage and divide by the number of units in your community to determine your potential assessment. For example, a $10,000,000 building with a 5% deductible has a $500,000 wind/hail deductible. If you have 50 units in the building, each owner could be assessed $10,000. If you have a 2% deductible, the association has a $200,000 wind/hail deductible and each owner could be assessed $4,000.

    Again, check with your personal agent to make sure there are no sub-limits or special endorsements needed to insure the association’s wind/hail deductible. 

    There are some policies, generally through Lloyds of London, that offer a buy down product that will cover the wind/hail deductible down to a deductible like $50,000. These policies however are very expensive, have gone up significantly in cost over the past two years, and often cost as much as the package policy for the association. If the association does not want to have to raise monthly assessments to cover these buy down policies, the Board often wants to make sure each member is informed of the their potential portion of the wind/hail deductible so they can purchase adequate insurance through their HO6. 

    CCIG is a Denver-Based insurance brokerage firm. Pat Wilderotter, past president of the Rocky Mountain Chapter of CAI and one of approximately one hundred in the country to hold the designation of CIRMS (Community Insurance and Risk Management Specialist) heads their HOA team.

  • 08/01/2018 10:37 AM | Anonymous member (Administrator)

    By Janet Watts, Association and Community Management

    I have had the pleasure of participating in CAI designation courses, continuous education classes, and have 10 plus years of experience as a community association manager (CAM). I introduce myself this way to give you a little of my background when working with Boards of Directors in homeowners’ associations. With that said, I have witnessed many strategies upon entering budget season. 

    In my opinion, there are two primary types of Boards.  There are Boards that are intimately involved with every step of the budget planning process and there are Boards that rely on their community manager to draft a proposed budget.  Let’s dive a little deeper:

    Boards that are intimately involved:

    The Board will review proposals/bids for budget planning next year’s “wish list” projects, analyze the current year financials, review service contracts, research utility rate increases, possibly survey the community for input, and review the governing documents, primarily to confirm any increase “caps” that may be imposed. 

    Boards that rely on management to draft a proposed budget:

    The Board will request a proposed drafted budget from the manager, review the line items, review the service contracts, discuss what goals they may have the community for the coming year, vote to make minor adjustments, elect to raise the dues or not, and approve the budget.

    From a community association manager’s (CAM) perspective, I have found that the best practice is to help guide the Boards in planning future budgets using a variety of tasks and action items. There are so many tools for a CAM to rely upon such as the HOA’s monthly expense reports, reserve studies, reserve fund balances, and investments.  We also rely upon any upcoming laws that may affect future expenditures.  Industry professionals and contractors are also resources as they provide information about any increases in costs (i.e. insurance policy premiums, green roof requirements, bench marking, etc.)

    Monthly Expenses:  Monitoring the monthly expenses is a fantastic way to begin the annual forecast for year end expenditures and what to expect for the upcoming year. This also gives you the ability to ensure service contract costs are within line and discuss present trends and future needs for the community with the contractors.  This also insures that the costs the HOA is paying is in line with the agreed amounts in the service contracts.

    Reserve Studies: When discussing budget planning with your Boards, it is important to review the HOA’s reserve study. The study is such a great tool to use in guiding Boards for the purposes of reviewing and assessing the needs of needed major capital repairs, preventative maintenance, and improvements. The reserve study also gives the Board an opportunity to plan goals one, three, and/or five years out when considering major repairs, replacements, and preventative maintenance (i.e. roof replacements, painting, balcony upgrades.)

    Reserve Fund Balances and Investments: Whether you are managing an aging community or a community that is freshly turned over from the developer, a CAM should ensure the Board is budgeting to contribute to the reserve funds annually.  The Board and CAM should work together in vetting the best investment options to help the reserve funds increase.  If an HOA has a 60% - 100% funded reserve balance, it is much easier to fund for planned preventative maintenance, repairs, and planned improvements.

    Industry Professionals, Contractors, and Utility Service Providers:  CAMs and members of the Board should solicit advice from industry professionals on: anticipated service contract rate increases (if applicable), annual consumer price index (CPI), insurance policy premiums, utility rates, etc.

    While CAMs do not have a crystal ball that can see into the future, utilizing the tools and resources mentioned above will help a CAM guide and direct their Boards with confidence.  Remember, a budget is a guide and a tool.  Educate your Boards in anticipating unexpected expenses and plan accordingly.  Evaluating past and current performances, as well as identifying successful spending will set a successful budgeting strategy with your associations.

    Janet Watts, CMCA, CAM

  • 08/01/2018 10:32 AM | Anonymous member (Administrator)

    By Ashley M. Nichols, Cornerstone Law Firm, P.C.

    Assessments are the cornerstone of an association, and the necessity of an association to collect delinquent assessments is of utmost importance – an association cannot be run without assessments being paid!  According to a study conducted by CAI in 2016 (released in October 2017), 5% of owners in community associations were delinquent on their accounts.  With 21.3% of the populations residing in community associations (approximately 69 million people), that means that nearly 3.5 million owners are delinquent at any given time.

    Leading into summer, many associations could bet on many delinquent owners bringing their accounts current.  Why?  No cash, no splash.  However, as we near the end of our pool days, how can an association ensure that it is efficiently, and effectively, collecting from its delinquent homeowners?  Speaking of restricting access to amenities, does your community have a clubhouse, fitness center, or sport court?  While it may not bring in as much cash as pool access might, restricting access to other community amenities (if provided for in your governing documents) can be a potential solution to collecting past due assessments once pool season is over.

    So, what are some tools that a Board can use to collect from delinquent owners?  First, collect early and often.  The sooner an association takes action to collect, the more likely it is to be successful.  If delinquent accounts are allowed to linger and grow, continuing to incur late fees and interest, it is less likely that owners will be able to resolve the debt without legal action.  Ensure that your association has a collection policy in place (it is required by law!) and that it follows the policy.  Assess the time frames provided for in your documents.  Can they be altered to allow collection on past due accounts sooner?  

    And speaking of collecting early, acceleration is a great tool to consider when looking at collection options for past due accounts.  Acceleration allows a board to call due the entire fiscal year’s debt against the owner’s account, rather than just the current delinquency.  Consider those owners who may be chronically delinquent.  

    For example, John Doe (it’s not his first rodeo) has been consistently delinquent for years.  On January 10th, the association turns the account over to its attorney for collections.  The current balance due at that time is $1,000.  However, the Board, due to the owner’s continued delinquency, has reviewed its documents and decided to accelerate Mr. Doe’s assessments for the year.  At $100 per month, an additional $1,100 would be added to the balance, making the total amount due $2,100.  Rather than proceeding to collect on the $1,000, the attorney can now attempt to collect on the $2,100.  If it takes six months to collect, once complete, the association will still be paid in full through the end of the fiscal year.  You only hope that the owner will pick up paying regular assessments at the start of the next fiscal year!  

    As we head into the latter part of the year, assess your documents to ensure that your community has the ability to use this tool.

    So, what is the process?  Every case is different based on its own set of facts and circumstances, but generally, the process goes something like the following:  The first thing that must be done once an account is turned over to the attorney for collections is compliance with the Fair Debt Collection Practices Act (FDCPA), both state and federal.  A demand letter must be sent to the delinquent owner.  If an owner fails to respond to the demand letter, the attorney will generally move the process to the lawsuit stage.  Most cases are brought in county court, where the jurisdictional limit for the court is under $15,000.  Note that the legislature recently passed a bill that will increase this limit to $25,000 (effective January 1, 2019).

    Once an owner is served with the lawsuit, he or she is required to appear in court on the specified date.  If the owner fails to appear in court (which happens the majority of the time) and/or file an answer, the association’s attorney will request that judgment enter against that owner.  Once a judgment is obtained, further collection efforts such as bank and wage garnishments can be pursued.

    Bank and wage garnishments are reasonably typical means of collection, and can be very successful.  However, if an owner’s bank account cannot be located (or the owner banks with a bank that does not have ties to Colorado), or the owner works out of state (with a company that does not have ties to Colorado), you’ll often find your community out of luck with those avenues of collection.  Receiverships are a great solution in this case.  A receivership is a court-ordered appointment of a rental manager for a property.  The receiver must be a disinterested person (i.e., not the property manager or management company) and the property must not be owner-occupied.  While some county courts do not recognize it as a legal remedy, it is explicitly allowed in the rules of civil procedure, so can always be pursued in district court.  Once the court has approved a receivership, the receiver will step into the shoes of the owner in the management of the property.  The receiver will collect rents, apply the money to the receiver’s fee first, and then to the satisfaction of the debt.  Receiverships are effective ways to collect delinquent accounts when the property is not owner-occupied.  Additionally, although we are discussing post-judgment collection options here, the remedy of receivership is also available pre-judgment.  So, if your association has an owner that cannot be located for service and to obtain a judgment, discuss pursuing receivership with your attorney.

    What about settling accounts?  George Herbert, a British poet, said: “A lean compromise is better than a fat lawsuit.”  In order to decrease delinquencies, and when the circumstances warrant, a Board may consider waiving soft costs (such as late fees and interest) to settle an account.  When doing so on an individual basis, make sure that your Board is reviewing the facts and circumstances surrounding the request, as well as implementing the policy of waiving fees, in a consistent manner.  A Board certainly would not want a claim of selective enforcement brought against it due to the perception of unequal treatment of owners.  

    As you well know, a few delinquent owners can wreak havoc on an association’s budget and potentially affect property values.  If the association cannot collect enough to maintain, repair, and replace items in the common areas or items that are its responsibility, conditions of the association may cause property values to decline.  Additionally, for a condominium community to be eligible for FHA approval, no more than 15% of units can be delinquent in their assessments more than sixty (60) days.  If your community is not FHA approved, the pool of potential buyers into your community will be significantly decreased, thereby leading to declining property values in the community.  Board members have a fiduciary duty to maintain property values, and keeping delinquent accounts to a minimum (and taking steps to collect on delinquent accounts) support that goal.

    As Board members, facing collection issues can sometimes be challenging.  These owners are your neighbors.  Collection of community association assessments is not “faceless” like credit card, medical, or student loan debt.  These owners live in the community, (maybe) show up to your board meetings, and will (maybe) end up on your board.  Be respectful and treat each case as an individual matter, with its own facts and circumstances.  As the saying goes, everyone is fighting a battle you know nothing about.  Be kind.  Always.

    Ashley Nichols is the principal and founder of Cornerstone Law Firm, P.C.  She has been in the community association industry for ten years, providing associations with debt recovery solutions for their communities.  Cornerstone Law Firm represents Colorado communities in all areas of common interest community law. You may find out more at  

  • 08/01/2018 10:29 AM | Anonymous member (Administrator)

    By Stephane Dupont, The Dupont Law Firm, LLC

    Budget season is still far away for most community associations, however, it is never too early to address how an association can improve its ability to meet current and future financial needs. While regular assessment fees account for most of an association’s annual revenue, the financial health of an association can be improved if it thinks ‘outside of the box’ and considers non-traditional means of obtaining additional income to keep annual assessment fees low and ensure that maintenance and improvement projects are completed.


    Before considering alternative methods for raising association funds, it is not a bad idea for an association to look at how it can maximize its current income stream. First, an association should ensure that collection of assessments are diligently pursued against delinquent owners.  To that extent an association should ask whether it is timely following the process in its collection policy and turning matters over, as necessary, to legal counsel or a collection agency.

    Next, if an association has a clubhouse, meeting room or other area that can be utilized by its owners, an association may consider actively promoting the space for rental by its members and their guests for a reasonable charge.  A rental agreement should be drawn up so that there is no confusion surrounding the rights, responsibilities, and liabilities of the association and owners.

    Finally, an association may determine if it can save resources by renegotiating existing vendor contracts. This not only involves locating high quality and reputable, lower cost vendors but also cutting back on services that an association may not be utilizing or realizing much benefit. For example, an association could consider cutting back web hosting services if it rarely updates its website and communicates primarily to owners by newsletter or written correspondence.


    One of the most common ways that a common interest community can generate additional revenue for their membership is through advertisements.  An association can start a monthly, electronic or paper newsletter or newspaper that is disseminated to all residents in the community and offer advertisement space for sale to both residents and local businesses. Especially in a larger community, many local businesses are readily enticed to reach out to a wide audience at a fraction of the cost of traditional marketing. If these options sound too time consuming, an association can consider selling ad space on community bulletin boards, common areas, or on its website. 

    If a community does not mind the potential eyesore and there is available space, many telecommunication providers demonstrate interest in installing cellular towers in communities. The amount of income generated is contingent on the location of the towers. Typically, a lease agreement is executed with the provider for a specified number of years and an easement may also need to be drafted and provided.  Given the potential complexity of the agreement, it is important that it be drafted and/or reviewed by legal counsel. It is also recommended that the proposed lease be first discussed with the membership as health and property value concerns are frequently voiced when this income option is proposed.  Most of these concerns can be overcome by pointing out the financial benefit to homeowners and further pointing out the potential improved cellular service in the community.

    Some common interest communities may also be fortunate enough to be able to sell or lease oil, gas, mineral, or water rights to generate additional revenue.  While it is unlikely that an association is ‘sitting on a gold mine,’ thousands of dollars can be earned annually from these valuable resources if a proper agreement is put in place.

    Finally, an association should consider either hosting or sponsoring events in their community. Many associations host annual barbecues. Consider making the event more attractive for residents to attend by providing live music or activities for children such as a bounce house or face painting. The event can be promoted as a fundraising activity for the community with a reasonable admission fee.  Obtaining sponsorships for events can also lead to additional revenue generation in a community. For example, a community located on a golf course could consider hosting a golf tournament and obtaining sponsorships. If you live in a rural community with stocked fishing ponds, how about hosting a fishing tournament? The ideas are endless and limited only by the ingenuity and creativity of an association.

    As there may be potential tax implications or insurance related issues with some of the suggestions above, it is a good idea for an association to conduct its due diligence before implementing any potential new income streams. 

    Stephane Dupont is the managing member of The Dupont Law Firm, LLC and has been practicing community association law since 1999. 

  • 06/01/2018 1:48 PM | Anonymous member (Administrator)

    By Mike Barclay, Reconstruction Experts

    The spring months of May and June typically bring severe weather to Colorado. Hail can cause catastrophic damage to an HOA community. Often after a storm, many community association managers are left wondering how to handle a claim. The common thought is to "get 3 bids." Getting 3 bids is fine for a conventional HOA construction project, but NOT for an insurance claim. Bidding out insurance work is a disservice to your HOA. 

    When an HOA suffers an insurance loss- such as fire, flood, or storm damage- the best solution for the community association manager is to help the HOA select a qualified general contractor and forego the bidding procedure. By requesting 2 or 3 bids from different contractors, the manager runs the risk of undercutting the scope of work to which they are entitled. Scope of work is a crucial element when describing how insurance companies compensate policy holders to restore their property to pre-loss condition, as stated in most policies. Most people don't understand or aren't aware that insurance companies all use the same software to determine pricing. It’s called Xactimate. Xactimate has a predetermined agreed upon price for every aspect of restoration, dictated per region, which is updated regularly to reflect current market value of labor and materials. What this means is price doesn’t matter when it comes to your claim. Scope of work, however, does. When it comes to price, the HOA only needs to cover their deductible. Sometimes HOAs think they can bid out their insurance work and pocket the “extra” money. This is fraud. 

    A good general contractor will focus on creating the most comprehensive repair plan, while the competitive bid process focuses on price and quickly becomes a race to the “bottom-of-the-barrel.” When contractors know they will be placed in a competitive bidding situation, they will tend to keep their scopes to a bare minimum to keep the price low and win the job. The most frequent means of keeping a scope lean is by repairing items that would normally be replaced, and these items should have been included in the comprehensive scope of work. Scope gap and/or scope lean could easily cause premature failure and construction defect issues in the future. 

    When selecting your contractor, ask 2-3 general contractors to present/interview with your HOA Board of Directors. Simply ask the contractors the following questions: 

    1. What’s your experience with HOA hail claims?

    2. What’s your insurance coverage? 

    3. How would you approach our project?

     4. Do you have HOA references?

    These simple questions will help your board choose the most qualified contractor. 

    The storm on May 8, 2017 caused $1.4 billion in damages in Colorado according to the Denver Post. An estimated 200,000 claims were filed. This made it Colorado’s costliest storm ever. Be wary of out-of-state “storm chasers” looking to get a piece of the pie.  When a large hail event hits Colorado, many contractors from surrounding states head our way. Often these contractors are not qualified to handle large HOA insurance claims and perform subpar work that leads to roof leaks. And once they get their money, they are gone. Often they do not honor their promised warranties and HOAs are left footing the bill to fix their shoddy work. Bottom line, your best bet is to keep it local. 

    Community association managers need to be aware that insurance fraud has many faces. Common types of fraud are: 

    1.            The contractor offers to pay for the HOA’s deductible

    2.            The contractor offers to trade advertising for the cost of deductible

    3.            The contractor offers a coupon or voucher towards the HOA’s deductible

    4.            The contractor offers to split their profit with HOA

    5.            Contractor promises kickbacks 

    6.            HOA bids out project and pockets the rest of the money

    Beyond finding the right contractor, focusing on a comprehensive scope and not falling victim to fraud, community association managers also have juggle helping their HOAs fund their deductibles. Most insurance companies that offer insurance to HOAs no longer offer flat fee deductibles of $10K, $20K, etc. Instead, the deductibles are percentage based. They can be 2%, 5% and even 10% of the insurance company’s estimated replacement value of the entire property. This is not to be confused with the amount of the claim or the market value of the property. Many times a homeowner’s HO6 Policy will cover their portion of the deductible. Many community association managers regularly urge homeowners to purchase HO6 coverage. 

    Insurance loss- such as fire, flood, or storm damage is a certainly a reality for Colorado association managers and HOAs.  The next time one of your communities is dealing with a claim, remember- qualify and select your contractor and focus on a comprehensive scope and not 3 bids. In a time when deductibles are high, your HOA will thank you for getting them everything they deserve. 

    Mike Barclay is the Colorado Regional Vice President for Reconstruction Experts, and has over 20 years of reconstruction and restoration experience.  Mike manages the overall success of the Colorado Branches by pushing Reconstruction Experts towards the highest level of professionalism and expertise.

  • 06/01/2018 1:45 PM | Anonymous member (Administrator)

    By Michael Daley, Allied Universal

    Lately, it has become unsettlingly common to wake up to stories of mass shootings, regular civil disobedience, violent robberies, and our nation’s ongoing opioid epidemic.

    In Colorado, we have been shielded from some of these national issues for many years. However, as our population continues to grow by leaps and bounds, these problems are hitting home much more often. According to an article from the Denver Post, our statewide population exceeded 5.6 million people in 2017—ranking Colorado on the top 10 list of fastest growing states. 

    Population growth and surges in crime are not limited to city dwellings and urban areas. In fact, they spill over to areas where you may least expect. For example, most associate the safety for their HOA with security at the entrance gate, periodic patrols by the local police or shared vehicle patrols provided by a common contract security company. But what about at HOA Meetings that may be held at an offsite location? 

    When was the last time you attended a large group function, such as a town hall meeting, campaign rally, city hall meeting, or school board meeting, and did not see a security or police presence? Violence and unrest behaviors are not subject to any one particular socioeconomic group, so it is inherent for leaders to also account for the safety and security of their attendees in these situations as well. After all, these meetings typically dictate policy or changes to individuals’ lives, property, or employment and they can get very intense.  

    From your owners to your association lawyers and all the way to your developers, a wide range of audiences have a vested personal interest in the meetings as well as their outcomes. A study of HOAs and Condo Associations over a 20-year span revealed that more than 40 percent of board members claim they have been threatened with physical violence at one time or another. When dealing in matters of property and finances with large groups of stakeholders, it is incumbent on the HOA board to provide adequate safety measures for board members, stakeholders, and owners.

    What can you do to strengthen your association’s security posture at gatherings?

    • Develop a relationship with your security company.  If you don’t have on-site security, engage a firm with an established understanding of residential security to discuss the security for your association and learn the process for requesting temporary coverage for your HOA events and meetings.  
    • Establish a safety and security committee to discuss security concerns and coordinate coverage for large public gatherings. Involve this committee with permit issuance and renting of common areas of your association (clubhouse, pool, etc.)
    • Strengthen your relationship with the local police department. Don’t allow calls and incidents to be the first and only times your partners in law enforcement are onsite.
    • Involve your residents and owners—make safety and security EVERYONE’s priority. Building a force multiplier effect in your community will make everything in it a harder target.
    • Educate your association by letting them know safety and security are a priority. Engage with your partners in security and law enforcement for educational materials, email information, safety tips and best practices to share with your association
    • Protect your meetings and association by implementing a proactive security policy for each meeting and establishing smart security measures.  

    Whether your community needs an off-duty police officer at meetings, a private security team at your entrance or a vehicle patrol service, make sure there is a plan in place and communicate it well. Give your stakeholders the tools and knowledge to participate in safety awareness so they too can become a part of the solution in ensuring an environment that is well protected beyond the gate. 

    About the Author: Michael Daley is Allied Universal’s Business Development Manager for Colorado, holding the Cultural Institution Protection Manager certification from the International Foundation for Cultural Property Protection (IFCPP) as well as the Terrorism Liaison Officer (TLO) designation from the Department of Homeland Security (DHS). 

    In addition to being a national sponsor of CAI, Allied Universal Security Services is the largest provider of security services, systems and solutions in North America and serves hundreds of HOAs, Apartment Complexes and Condo Associations across the United States.

  • 06/01/2018 1:42 PM | Anonymous member (Administrator)

    By Michael Lowder, Esq. and Heidi Storz, Esq., Benson Kerrane Storz & Nelson

    As we head into the summer season, it is inevitable that Mother Nature will bring some wild Colorado weather to the Front Range.  These storms could result in damages that require Associations to make insurance claims.  Whether it is hail, wind, or some other weather-related Act of God, it is important to know some of the games that insurance carriers might play when you make a claim under your Association’s property insurance policy.

    1.  Multiple Causes of Loss

    Most Association insurance policies contain what is known as an “anti-concurrent causation clause.”  This is “insurance lingo” that means that if your loss is caused by multiple different causes, and one of those causes is not covered, the insurance company can deny your claim.  For example, if you have a sewer line back up in your basement (covered under the policy), and you also have water get into the basement from exterior flooding (not covered under the policy), your entire claim could be denied because of an anti-concurrent causation clause in your policy, even though some of the damage was caused by a covered loss.  Lesson: be careful about how you describe your claim when you submit it.

    2.  Policy Sub-Limits

    Some policies will contain “sub-limits” for certain types of insurance coverage.  While your overall coverage under the policy may have a $1,000,000 limit, certain components of that coverage may be limited to a smaller “sub-limit.”  An example of this is coverage for debris removal.  Your Association’s policy may have a sub-limit for debris removal, which limits coverage for costs to remove debris to $10,000 or some percentage of the overall limit.  Practically, this means that even though you have $1,000,000 in coverage, if your debris removal sub-limit is $10,000, but the actual debris removal costs $15,000, your Association could only get $10,000 for that work (the sub-limit for debris removal).  Lesson: make sure you know the sub-limits when you buy your policy.

    3.  Cosmetic v. Functional Losses

    Some insurance policies contain limitations on the types of damage they will cover relating to whether or not the damage or loss is “cosmetic” or “functional.”  Some policies do not cover “cosmetic” losses.  Figuring out what is “cosmetic” versus “functional” is something that Associations and their insurers often fight about, but it’s important to realize that if your Association’s policy has a cosmetic loss exclusion, this could be an issue that the insurance company raises.  For example, if hails dents your Association’s metal roof but does not cause leaks through the roof, that may be a “cosmetic” loss.  If you have a cosmetic loss exclusion, that damage may not be covered and you’ll be stuck with the unattractive dented roof, even though there’s no dispute that the hail caused the dents.  Lesson: if you want to ensure that cosmetic damages are fixed, make sure you don’t have a cosmetic loss exclusion in your policy when you buy it.

    4.  Code Upgrades

    When an older building suffers a loss, the repairs made are required to comply with the building code that is in effect when the repairs are made.  In this example, let’s assume the building was up to code when it was originally built.  However, due to changes in the building code since then, if the building suffers an insurance loss, it may not be code-compliant.  Although the building is grandfathered in as it stands, any repairs made after the loss have to bring the building into compliance with the new building code requirements.  Some insurance policies contain coverage for these additional repairs and required upgrades.  This coverage is called “code upgrade” coverage.  However, if the building was never built up to code at the time of its original construction, you are not entitled to code upgrade coverage if you suffer a loss that’s otherwise covered under the policy.  Lesson: if your building is older, make sure you have coverage for code upgrades.

    5.  Actual Cash Value v. Replacement Cost Value Policies

    Another thing that is crucial to determine is whether your Association has an “Actual Cash Value” policy or a “Replacement Cost Value” policy.  With a Replacement Cost Value policy, the insurer must pay the full cost to replace the damaged components, i.e., it must pay the full cost to replace a roof damaged by hail.  However, with an Actual Cash Value policy, the insurer can deduct depreciation, which is essentially the “value” that the insured has received of the damaged component over time.  In the example of the roof above, let’s assume that, at the time of the hail storm, the roof had an expected life of 20 years, and had already been on the building for 10 years.  Then, the hail storm happens and the roof has to be replaced.  The insurer calculates the amount it owes to the Association by taking the “replacement cost value” (the full replacement cost for the roof), and then deducts the depreciation (the value the Association has gotten out of the roof for the last 10 years), and then pays whatever is left.  Lesson: if the insured component (i.e., roof) is older, an actual cash value policy may not provide much coverage, if any, for a loss.

    Dealing with storm damage and the resulting insurance claims can be confusing and frustrating, but hopefully these tips can help you with some of the insurance lingo that you might hear when dealing with insurance claims.  If you ever feel like something doesn’t seem fair, or doesn’t make sense, it’s best to bring in a professional to assist you in negotiating a claim with the insurance company.


    Michael Lowder is a senior associate attorney with Benson, Kerrane, Storz & Nelson, P.C., where Heidi Storz is a partner.  Mr. Lowder and Ms. Storz practice insurance and construction defect law, serving homeowners and homeowners’ associations throughout Colorado.  

  • 06/01/2018 1:30 PM | Anonymous member (Administrator)

    By Tressa Bishop, MBA, CIC, CB Insurance

    A community association manager’s job is rewarding, but it’s not without risk. Today’s management professionals do much more than just focus on taking good care of the properties. They also act as accountant, human resource manager, complaint mediator, law enforcer, property inspector, real estate guru, insurance consultant, and much more. With such a wide array of responsibilities, many community managers worry about whether they’re protected against mistakes or oversights that could come back to haunt them in the form of lawsuits. Errors and Omissions (E&O) and Commercial General Liability (CGL) insurance help protect against financial losses that are directly related to mistakes made by managers. 

    How can I be sued even if an error was truly a mistake?

    Let’s be honest, anyone can be sued for just about anything. Even though you do the best for the associations you serve, there may be situations where you find yourself in a bit of hot water whether you did what is alleged or not.  This is why the liability policies all include defense language similar to "the insurer will defend whether the allegations are frivolous, false or fraudulent.”  Imagine each of the following scenarios:

    • Manager had a vehicle towed at an association they manage. Owner sued claiming that the vehicle was towed in violation of the declarations.  They also added that you discriminated against them, because they were a minority, old or disabled.
    • A tenant fell and was injured on an uneven walkway. The investigation revealed that the manager hired an unlicensed contractor to install it. The tenant sued the manager to cover medical costs and lost wages associated with the injury.
    • The same scenario as above, but the unlicensed contractor was also uninsured and the subcontractor was injured on the job.
    • A manager is accused of mismanaging an association’s funds following a construction defect lawsuit settlement. The HOA is currently wrapping up an accounting audit and is planning to sue the management company.
    • A manager didn’t handle an eviction notice properly, resulting in a wrongful eviction lawsuit.
    • The manager's employee walked away with a laptop that included the personal data of all its managed associations.

    No matter how well trained, experienced, and meticulous managers strive to be, there’s a good chance that one day they could still be sued. Mistakes happen. Not only do mistakes happen, but challenging association members happen.  There’s no way to guarantee that you’ll ever be fully protected from risk.

    I have an “indemnity agreement” or “hold harmless provision” in my management agreement with the association. Doesn’t that mean I’m already covered?

    No. Indemnity agreements and hold harmless provisions under general liability policies typically only cover bodily injury, property damage, personal injury, and advertising injury claims. Further, they generally require the manager to spend his or her own money to defend a lawsuit or a claim, then apply for reimbursement later. There’s no guarantee that the reimbursement will ever be received. If this should happen to you, you could drain your bank accounts with no promise of recouping the costs. The less considered unintended consequence is that not only will you be seeking indemnity to recover your costs, but you will be seeking it for "your" mistake from "your" client.

    I’m already covered through the community association’s Directors and Officers (D&O) liability policy. Do I really need E&O insurance?

    In Colorado, Community Association Managers (CAMs) are licensed.  All licensed professionals require E&O insurance and, if you do not have it, it is imperative that you disclose that to your client or prospective client in the management agreement or other notice.  

    Many management professionals don’t realize that D&O policies don’t provide coverage if the community association itself sues them. You would need to purchase a separate E&O policy to protect yourself against this circumstance. 

    You should keep in mind that not all D&O policies are the same with respect to coverage for management professionals.  Some do not provide any coverage for the CAMs, some only provide coverage pursuant to the express services stated in a written management agreement, and some provide coverage as long as there is an agreement, whether written or not.

    If you own a management company that has employees, you should be aware that there is no D&O policy on the market that will provide coverage for a management professional when their employee brings a claim against the management professional or company.  Employment practices liability coverage is needed to protect against this type of exposure (this can be added to an E&O policy).

    Why do I need CGL coverage? Isn’t E&O coverage enough protection?

    Managers need both Commercial General Liability (CGL) and professional liability (E&O) coverage. The CGL policies that the associations carry naming the manager/management company as an additional insured have exclusions that may prevent the manager from being covered. Specifically, most CGL policies include a professional services exclusion.  

    The association CGL is there to protect the management professional if its services or lack of services caused a third party bodily injury (BI) and/or property damage (PD). Most E&O policies will expressly exclude BI and/or PD, although there are a few policies that provide "contingent BI/PD” when the damage arises out of the management professional’s act, error, or omission.

    Are all E&O policies the same? Can’t I just purchase the cheapest policy?

    Errors and Omissions insurance is designed to protect managers against claims such as discrimination, wrongful eviction, class action suits, hiring unlicensed contractors, and other actions. Just like all insurance, the cheapest policy is often the cheapest policy. Not all policies are created equal, so below are some questions to ask when shopping for an E&O policy:


    • Does the policy include non-monetary relief, investigations, or regulatory proceedings?
    • How long do I have to report a potential claim? 30 days, 60 days, 90 days?
    • Does the definition of loss in the policy include punitive damages?
    • Does the policy include class action lawsuits?
    • Does the policy include tenant discrimination claims?  Is this included or extra?
    • Does the policy include independent contractors?
    • Does the policy include employment practices coverage and if so, is it included or is it extra?
    • Does the policy include contingent bodily injury and or property damage coverage?

    Unfortunately, we live and work in a society that’s increasingly susceptible to legal complaints. And, like other service professionals, managers must wear multiple hats, with no room for mistakes. Therefore, managers should view Commercial General Liability and Errors & Omissions insurance the same as any other cost of doing business. These policies should give you comfort in knowing that you have protection against claims of wrongdoing - no matter how careful you are in trying to prevent them.

    Our team at CB Insurance is solely dedicated to Colorado’s unique association insurance marketplace. When you work with one of our qualified insurance professionals, you can be assured that you’re getting the coverage you need - so you can focus on caring for your associations, satisfying your current clients, and attracting new ones. Call us today to begin your insurance review!

    Sources include:

    The information in this article does not change or amend any actual policies. The terms, conditions, exclusions and endorsements of policies will apply. Every policy and every claim is different. 

  • 06/01/2018 1:28 PM | Anonymous member (Administrator)

    By April Ahrendsen, VP Regional Account Executive, Mutual of Omaha Bank

    Stories of cybercrime continue to make front-page news, and companies of all sizes are consistently impacted by cyber theft and data security breaches. According to the Breach Level Index, over 5 million data records are lost or stolen every day

    Each theft causes headaches for consumers and businesses alike, as well as reputational damage for businesses, and often times, financial loss. Cybersecurity Ventures estimates that cybercrime will cost the world $6 trillion annually by 2021.  

    While not immune to the impacts and consequences of a data breach, multi-billion dollar organizations employ legal, security, and technical experts while utilizing vast resources to limit potential liability. Small businesses must also prepare for potential attacks from a growing number of cyber predators.  The impact of cybercrime on small businesses can be devastating. Trustwave® reported that 71% of attacks target small businesses.  Within 18 months of a breach, 80% of small businesses go out of business. 

    It is impossible to be 100% secure from cyberattacks, but businesses can take steps to minimize their risk.  Education is a great first step in protecting your business. 

    It is important that business owners educate their employees on the dangers and potentially serious consequences of cybercrime.  The knowledge that such theft can cripple a business, thereby affecting an employee’s own livelihood, is an added incentive to remain vigilant.  Involving the financial institutions of the business can also be beneficial.  Many banks are willing to provide in-house education seminars to companies as a way of keeping all levels of the organization well informed.  There are several online resources available to educate small companies on protecting their business from cyberattacks. The following are a few examples of resources available for small businesses.   

    In addition to education, business owners have the option of investing in cyber liability insurance as a way to proactively protect their business from potential cyberattacks. Cyber liability insurance often covers the cost of business interruption, client notification, and even hiring a public relations firm to repair damage to a company’s reputation as a result of the attack. Reputations are critical in the community association industry. The cost of cyber liability insurance is often far less than the potential monetary loss due to a tarnished image.  


    Cybercrime does not discriminate. All industries are effected, and no business is too big or too small to be targeted.  Advanced preparation and education are the two crucial tools to combat the growing problem.  

    The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of Mutual of Omaha Bank.  For any matters concerning your specific needs and objective, you should seek the professional advice of your own independent legal counsel, insurance advisors or other consultants.

  • 06/01/2018 1:24 PM | Anonymous member (Administrator)

    By Brad Henderson, Network Insurance Services

    It's no secret, the marketplace for habitational insurance is changing rapidly. What used to be a broad offering of insurance carriers and products has now been whittled down to a select few insurance carriers offering products that 10 years ago no one would have thought viable options. The marketplace for habitational insurance today is a hostile one. 

    Winds of change are driving the property insurance market in this new direction. Hurricane Harvey hit Texas in August of 2017. Harvey was followed by hurricane Irma in Florida, which was followed by hurricane Maria hitting Puerto Rico shortly after. The losses from these storms amount to over $100 billion dollars.  

    It’s not just hurricanes that are causing the disruption to the marketplace. Wildfires devastated over 1.2 million acres of land in California in 2017. And as we are familiar with here in the Rocky Mountains, hail storms are becoming more frequent and more damaging than ever. Colorado experienced the costliest hail storm in our history on May 8th of last year, with insured losses exceeding $1.4 billion dollars. 

    With natural disasters on the rise, insurance carriers are taking note (and losses) and adjusting their underwriting discipline to remain profitable. Over the last few years, carriers have introduced percentage deductibles for Wind & Hail losses as a method to insulate them from this catastrophe. The deductible is a percentage of the Total Insured Value of the property, not the value of the claim. 

    For example, a building with $10,000,000 in Total Insured Value may now be subject to a 2% Wind/Hail Deductible, or $200,000. Many insurance companies have recently announced that they are moving to a mandatory 5% Wind/Hail Deductible on all habitational accounts. That $200,000 deductible just increased to $500,000.  

    Insurance carriers are also becoming stricter on enforcing a ‘No Grills on Balconies’ underwriting guideline to protect themselves & their customers from life safety claims related to fires. The National Fire Protection Association (NFPA) indicated an average of 8,900 grill fires occur per year in the United States.  

    These 8,900 fires cause an annual average of 10 civilian deaths, 160 reported civilian injuries, and $118 million in direct property damage. While gas grills may seem safer than charcoal, 83% of grills involved in home fires are fueled by gas. State & local fire codes vary with respect to grilling on balconies, however many insurance carriers are following the standard adopted by the NFPA which prohibits grills within 10 feet of a frame multi-family structure. 

    While its clear that the tides are changing in the property insurance market nationwide, there are ways to prepare the associations you manage for these changes and insulate them from dramatic changes to their policies. 

    With respect to the increasing Wind/Hail deductibles, there are a couple of solutions to consider. Depending on the by-laws of the association, there may be little to no flexibility in moving to a percentage deductible. Deductible buy down policies can be put in place to cover the difference in the deductible offered by the insurance carrier and what is required by the associations by-laws. With more flexibility in the by-laws, the tenant’s policies can possibly be structured in a way to offset the assessment to the owners for their share of the Wind/Hail deductible. 

    Educating the board of directors of local fire codes and communicating them to residents is a proactive way to soften the blow that many who have had grills on their balconies for 20+ years will no longer have that option. Additionally, most insurance carriers will allow for electric grills on balconies as a substitute to their open flame counterparts. 

    Network Insurance Services has been partnering with property managers and the communities they represent for nearly 20 years. In a chaotic and rapidly changing insurance market, experience makes the difference. Our office is certified by DORA to offer CE Credits to Community Association Managers through our education on these topics in further depth. As one of the Denver Business Journals Top 25 rated Colorado Insurance Brokers and a member of CAI-RMC, we have the resources and expertise to help our customers weather the storm of today’s rapidly changing property insurance market. 

(303) 585-0367

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