In this next series titled, “Association Insurance” we will turn our focus to the homeowners and condo association worlds. In today’s post I really want to hone in on one the most important insurance coverage concerning your associations funds and those who are responsible for its spending and wellbeing. While these types of claims don’t happen near as often as other types, they are some of the most severe insurance claims an association can have. For example, a court case out of Arizona in 2008 found that one of their people with access to accounting information had forged many a company check over a 5-year period, totaling $500,000 is total losses. This was found to be covered by that companies Crime Insurance policy and the policy paid as was stated in the policy verbiage. Without this type of policy, the insured would have been responsible for all of the absconded money with no help from the insurance company.
There are a few questions every association should consider when thinking about this exposure:
- Who has access to association funds? Is it one or more people? Are they trustworthy?
- What is the maximum amount of funds in your associations banks accounts at any given time?
- Do you have safety/security measures in place to ensure the safekeeping of those accounts?
The answers to these questions will not only help each association better understand their exposure but also help your insurance professional in determining the best course of action for your insurance coverage.
One final – and BIG – note on this coverage is this… NEVER, and I truly mean NEVER, decrease your crime insurance limit. Only increase it if needed. For example, if in 2020 your association kept $500,000 at the most in its bank accounts, that would be your limit. Now, in 2021, due to COVID or other factors the maximum funds you expect to have at a given time is $400,000. DO NOT decrease your limit to $400,000 this year. Why? Because these types of claims are often not found out until years into the crime and if you adjust your limit down you might not be able to fully recover in the event of a covered loss.
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Written by Robbie Korth
If you have any questions, please feel free to contact Robbie Korth at firstname.lastname@example.org