There has been quite a bit of chatter about how insurance premiums for common interest developments have increased dramatically over the last year. Communities that are in wildfire hazard areas are faced with non-renewals and in many cases are having to turn to the excess and surplus insurance markets. If they can find coverage, it is often at an astronomical cost.

Most governing documents require that the association maintain certain types of insurance. So what happens when the types of insurance that are required are unobtainable, either due to cost or availability? This is the reality that some associations are currently facing – stuck between the proverbial rock and hard place.

It has been suggested that associations faced with this dilemma put their D&O carrier on notice for potential claims. As crazy as it sounds, some members may sue their association and their board of directors because they can’t find coverage, or because they require a special assessment just to pay the insurance premiums.

One way that communities are finding coverage is to drastically increase their deductible. I’ve heard of one large community that has a $1 million deductible because that was the only way the carrier would write coverage.

The most important thing a community can do when faced with these types of situations is to communicate with the membership. Host a town hall meeting and have your insurance professional there to explain what is happening and why. The insurance professional can also share changes an individual owner should consider when reviewing their own insurance policy. Be as transparent as possible. Insurance premiums will not be going down in the foreseeable future, so it is best to start preparing now.

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