What Every Board Should Ask
Their Insurance Agent
Written by Attorney Michael T. Chulak
In December of 1993, I was asked to attend a meeting of the board of directors of a large condominium association in Woodland Hills. Coincidentally, the insurance agent for the association was in attendance. I asked the agent two questions that turned out to be critically important:
- Does the association have all of the coverages that are available to associations, and if not, do you recommend that the association add them to their policy? And
- If the association was subjected to a disaster, are the current limits of coverage adequate to fully protect the association and its members?
The agent stated that the association had all of the coverages available and the limits of coverage were more than adequate. The questions and answers were recorded in the minutes and there were at least twenty homeowner witnesses in attendance.
Less than one month later the property was totally destroyed by the Northridge Earthquake. It didn’t take long to determine that the coverages were not sufficient to fully protect the association, and that the amount of coverage was also inadequate.
After a lengthy period of time, the insurance company wrote a check for $18,399,000 which was the limit of liability under the policy. It was less than what the association needed to fully compensate its members for their losses. A written demand was made for additional funds. It was refused.
The association filed suit against the association making the claims of negligence and bad faith.
The insurance company agreed to settle with the association for $4,350,000 in excess of the policy limits.
The lesson is clear. Every board should review its insurance policy with the insurance agent once each year for its protection. You now have at least two important questions to ask the agent.
The law firm of Michael T. Chulak & Associates represents clients who have disputes with their insurance companies and who need assistance in settling large claims. Initial consultations are provided at no cost.
Call attorney Michael T. Chulak at 818-991-9019 for a no cost initial consultation regarding any legal matter.
Permission to reprint our HOA Questions and Answers is granted provided Michael T. Chulak & Associates (MTCLaw.com) is credited as the source.