Being a member of the board of directors for a homeowner association is often a thankless job. You are often harassed by community members who don’t want their assessments raised, you are responsible for a corporation that is potentially worth millions of dollars, and you aren’t even getting paid.

We love it when volunteer board members get creative and try to think outside the box, but we must remember that not every idea is a good idea.

Take, for example, a board of directors that was trying to come up with creative ways to increase their community’s reserve fund. They were very excited to tell me they were going to start throwing “Monday Night Football” parties in the clubhouse, and profits from beer sales would go directly to their reserves. While that was definitely “outside the box” thinking, they didn’t consider the potential risks associated with beer sales. While most community association insurance policies include host liquor liability, it doesn’t apply when you are selling alcohol. A different, much more expensive policy would have to be purchased and would likely wipe out any profit for the reserve fund.

Another board was upset at having to pay their $10,000 deductible for a property claim. They did not have rules in place to assign that deductible to the owner whose property was damaged, so the money would have to come from HOA funds. They realized that the liability policy had no deductible, so they closed the property claim and had the owner sue the association for the damage instead.

While they didn’t have to worry about that $10,000 deductible, they had a lot more to worry about upon renewal. Instead of having a closed $40,000 property claim, their loss history showed an open liability claim that was already over $100,000 in legal expenses and would likely go much higher before being settled. This resulted in a premium increase that left the board members saying, “well it seemed like a good idea at the time.”

The bottom line is this – creativity is a wonderful thing and we encourage homeowner leaders to come up with ideas to build community and conserve association resources. When doing so, we highly recommend discussing these ideas with their community managers, insurance agents and legal counsel to be certain there are no unintended outcomes.

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