Community Association Insurance Coverages

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Property Insurance insures against physical loss or damage by fire or other risks to buildings or other common area improvements. The amount of insurance should equal the actual replacement cost of the buildings. Boards and managers should discuss this with the Association's insurance broker to ensure that the property is adequately insured.

Commercial General Liability (CGL) insurance protects members for damages sustained in the common areas, such as slips and falls.  California requires a minimum of $2,000,000 per occurrence for Associations with 100 or fewer units and $3,000,000 per occurrence for Associations with more than 100 units.  These minimums may not be enough to properly protect your Association, so Boards and managers should discuss this with the Association's insurance broker. 

 Directors and Officers (D&O) Insurance protects volunteers from personal liability for decisions they make while on the board. D&O insurance is in addition to the association's general liability policy and covers board negligence, breach of fiduciary duties, etc.  California requires a minimum of $500,000 for Associations with 100 or fewer units and $1,000,000 for Associations with more than 100 units. 

 An umbrella policy is an additional layer of insurance above the primary policy. It provides excess coverage once the underlying policy has been exhausted. For example, if an association has a $2 million general liability policy and settles a claim for $3 million, the primary policy pays $2 million and the umbrella pays the remaining $1 million.  In addition to providing excess coverage, umbrellas often fill gaps that may exist in the underlying policy. They are usually broader in their coverage and in most cases, but not all, extend to D&O issues as well as the employer's liability portion of the association's worker's compensation coverage. 

 Workers' Compensation insurance provides wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue their employer for the tort of negligence.  Associations that have employees are required by law to carry this coverage, and even Associations with no employees should consider it, as vendors hired to perform services at the property who are not properly insured can be considered "employees" of the Association in the event of an injury.  Boards and managers should discuss the necessity of this coverage with their insurance broker.

 Beginning January 1, 2019, associations are required to carry a fidelity bond in an amount equal to the reserve account balance plus three months operating income. This is an insurance policy that covers employee dishonesty (fidelity) plus non-employee theft.  Employee dishonesty coverage protects an association against dishonest acts such as embezzlement committed by an employee as defined by the policy. In a common interest development, the definition of “employee” must be broadened to include the board of directors as non-compensated employees of the association, as well as the community manager and management company.