Reader Questions - Individual Insurance Policies

Dear Kelly,

When it comes to an owner choosing an insurance company for condominium insurance for the inside of the condo, would the best course be to choose the same company the association uses for the buildings and common area, or to choose a different company?

C.B., San Diego

Dear C.B.,

Your question called for insurance expertise, so I contacted some leading insurance broker experts. The individual condominium unit insurance policy is normally referred to as “HO6” or “personal lines” policy coverage. Here are excerpts of their responses.

Scott Litman, of the Scott Litman Insurance Agency, said: “I recommend owners have their policy with the HOA’s agent. Most agents insuring individual units do not read the CC&Rs, resulting in over-insuring or under-insuring the unit. With the same company insuring association and member, there is no ‘finger pointing’ as to which carrier is responsible. Also, an owner carries the clout of the HOA when they call the agency.”

Michael Berg (Berg Insurance Agency), agreed: “The HOA’s agent would know the HOA policy and could provide a personal policy corresponding with the HOA policy coverage. In the event of a loss, the agent representing both parties can be liaison between the HOA carrier and the unit owner carrier. However, even when the HOA policy and the personal lines policy are with the same carrier, this doesn’t mean that a loss will be settled more in favor or one party or another. The loss is settled per the contract.”

Timothy Cline (Cline Insurance Agency), differed: ”It might not be better to have a single adjuster coordinating both policies, because the individual owner has no one in their corner representing their interests. Also, the quality of HO6 policies can vary wildly from carrier to carrier. Carriers might have excellent HOA policies but lousy HO6 policies. At least 50% of carriers writing master policies in California do not offer HO6 policies. Unit owners should seek the best HO6 policy, competitively priced and suiting their specific needs, from a knowledgeable agent.”

Joel Meskin (McGowan Program Administrators) said: “Although you can get the HO-6 on-line, be very wary, because you may not know what the master policy covers and what the HO-6 should cover. The master policy may be an ‘all-in’ policy, a ‘bare walls’ policy or an ‘original specification’ policy. Find out if the unit is subject to FHA financing and requires deferent coverage. Determine if your association documents have requirements regarding responsibility for deductibles, which may dove-tail into the ‘loss assessment’ coverage from the HO-6 carrier. You may be able to purchase larger loss assessment coverage for a very small amount.”

Carol Fulton (Labarre/Oksnee Insurance Agency) responded: “Several carriers only write association policies, but they may be the best for the association’s insurance needs. The HO6 carrier should be ‘A’ rated and California admitted. Many good carriers issue personal insurance. The agent writing the association’s insurance might be able to give unit owners guidance.”

Readers, as you can see, HO6 policies are a good idea, but there are a number of factors to consider. Consult an insurance agent committed to the common interest community housing sector, hopefully one who has CAI’s “CIRMS” credential. Make sure you know what the HOA insurance will not cover.

Thanks for your question (and thanks insurance experts),
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.