I received a great question last week from Jenny at Cornerstone Management: “I’ve been told when an HOA requires a homeowner to provide proof of insurance, it is done to protect the owner and HOA from any damages that may occur during the clubhouse event. In the case of substantial damage to the clubhouse from party guests, would the owner’s insurance cover the damages? Is a copy, or proof of, homeowner’s insurance needed from owners who are renting the club-house?”

This is a great question that actually comes up a lot. When an association rents out the clubhouse to members, they should always request not just proof of the owner’s insurance, but to be named as additional insured on the policy. This is to protect the association should there be a liability claim resulting from the clubhouse event.

For example, let’s say there was a party, and someone got a little crazy dancing on the tables. They fell, hit their head and were injured. They sue the party-thrower and the association for the injuries sustained in the fall. If the association is named as additional insured on the clubhouse renter’s insurance policy, then that carrier will provide the defense for the association.

That said, not all HO6 carriers will add associations as additional insured for clubhouse events, and some that do charge an outrageous fee. Single day event policies can be purchased online from several different agencies.

In the case of property damage to the clubhouse, the renter’s property insurance would not provide coverage for damages because it isn’t their property (the association owns it and insures it, not the renter). However, as long as there is a proper rental agreement in place, the renter could be liable for the damage if it happened during their event. The association would charge the renter for all damages incurred and the renter could file a liability claim on their homeowner’s insurance for the property damage.

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