Earlier this month, one of our insured communities had an interesting experience. They hired a contractor to do some fence repairs, and in the process of fixing said fence, the crew hit an irrigation line. This caused a considerable leak and one of the units suffered water damage.

The unit owner immediately filed a claim with his HO6 carrier. However, the damage was not created by a covered cause of loss, so it was declined. The homeowner association policy did include unit interiors but has a $25,000 deductible. Since the repair estimate was under $4,000, no claim was filed on the association’s policy.

Obviously, the repairs need to be made, but where will the money come from to pay for these repairs? This is a great example of why associations should be named as additional insureds on the insurance policies for their contractors!

When named as an additional insured, you should receive not only a certificate of insurance, but also a copy of an endorsement, both naming the association (and management company if applicable) as an insured on the policy. This will allow the association to open a claim on this policy if needed.

In the case of the aforementioned fence flood, the manager is currently working to have the contractor pay for the repairs. If the contractor were not cooperative, the manager could go straight to the insurance carrier to open a liability claim.

There are a few examples of when an association should be named as additional insured on an insurance policy – on all vendors and subcontractors working on the property, on event policies when a clubhouse is being rented by a unit owner, as well as on policies for the management companies providing services.

If you have questions about how additional insured endorsements work, let us know. We would be happy to help.

Terri Guest, CIRMS, CMCA is the Northern California Sales & Marketing Representative for Berg Insurance Agency and can be reached at Terri@berginsurance.com.