Homeowners’ associations must have commercial general liability insurance to protect the owners from exposure to liability from accidents or injuries that occur in the common areas of common interest developments, such as a slip and fall on a wet driveway, an injury sustained on playground equipment, etc.
Commercial general liability insurance covers four types of claims: bodily injury resulting in actual physical damage or loss; property damage or loss from the operation, maintenance or use of common areas; personal injury, such as false arrest, libel, slander, defamation of character and invasion of privacy; and advertising injury, such as infringement of copyright. It does not protect board members from claims that their actions have damaged the association or its members – this would require Directors and Office Liability insurance.
California Law requires associations to carry a minimum level of insurance. If the association has 100 or fewer separate interests, the association must carry $2,000,000 of coverage per occurrence. If the association has more than 100 separate interests, the minimum level of insurance is $3,000,000 per occurrence. Of course, these coverage limits are just minimums and your association may require more than the minimum amount of coverage. Many associations obtain an Umbrella Liability policy that would kick in after the commercial general liability amount up to the actual value of the property.
Liability claims have no limits other than those imposed by the courts, so it is very important for board members to evaluate the need for your particular community. Some factors that should be taken into consideration are the number of units in the association, the amenities you offer (pools, hot tubs, gyms, playgrounds, etc.), what percentage of units are rented, the condition of the premises, and your history of claims and losses.
Let us help you determine what coverage limits are right for your association. Loris Moradian Insurance Agency is an expert in common interest development insurance.