Not Your Grandfather's Policy Changing Times Require a New Look at Condo Insurance

Recent developments, legislatively, environmentally and technologically have led to considerable changes in the New York insurance marketplace. And such changes, as managers know, often lead to added paperwork, confusing requirements, and tricky legal questions for condo boards. While many new insurance products—such as the heavily-hyped “terrorism coverage”—have failed to catch on for the condo market, modifications in traditional coverage have altered the insurance picture in ways previously unseen.

Many insurance insiders now see condos as liabilities in the wake of the Great Recession. And that, in turn, presents problems for management. Although unit owners pay reserve fees on an ongoing basis, insurers fear some managers may defer maintenance in a bad economy. When that happens, say experts, condo properties become a bad risk, producing losses that are passed on to condo associations.

“We’re starting to see some of the companies’ loss ratios become unprofitable, and when that happens you usually start seeing the big premiums,” says Luke Sevigney, Elite Condominium Program manager at Massachusetts-based Sevigney-Lyons Insurance. “They’re being a lot stricter on claims. When you’re marketing a condo association, they’re really scrutinizing the loss runs and they’re doing a lot of engineering on sprinkler systems and stuff to make sure everything’s up to par.”

Insurance professionals say the recent housing bubble has led to confusion for managers and agents alike. “I think the concern for insurance companies is that often times condo associations may feel that the value of those condominiums have come down in price,” says Loretta Worters, vice president of communications at the Insurance Information Institute (I.I.I.). “So a lot of associations tend to think they can reduce their amount of insurance because it’s based on the value, when, in fact, the cost of insurance is based on rebuilding costs.” And the confusion doesn’t end there, explains Sevigney, whose firm has guided many associations through additional costs and increased scrutiny in the wake of the housing crisis. “It’s made it a nightmare, to be quite honest. In the past we would get requests for certificates and a normal certificate would do it. Now they’re really scrutinizing everything—especially in terms of the employee dishonesty coverage. That was a coverage they were never concerned about up until about a year ago. Now we’re getting requests from some of these companies to have fidelity bonds or employee dishonesty coverage in amounts in excess of $500,000. It’s an additional cost to these condo associations.”

Everything's Not Covered

Everyone thinks that D & O insurance is protecting your co-op or condo from financial crime, but that's not necessarily the case according to Kevin Davis, president of Kevin Davis Insurance Services, based in California.


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  • The D&O section of this article is confusing. Employee Dishonesty is not covered under any D&O policy I have seen. This is the subject of a Crime/Fidelity policy. Agreement 1 covers Employee Dishonesty. Purchasing a rider with agreements 2-5 would protect the association from the example with the Super's daughter.