Recently, the board of one of our insured community associations posed the question: “How many property claims can be filed in a year before [the carrier] either increases the annual premium or issues a letter of cancellation or non-renewal? [The board] feels the association should never allow owners to file, thus causing a reason for [the carrier] to issue a notice of cancellation. Your thoughts?”

In my experience there isn’t a specific number of claims that will result in a cancellation. Underwriting decisions are made based on type, frequency, and severity of claims. Underwriting also considers the actions, or pro-action, by the board to address claims history. We’ve been involved in the insurance for more than 650 communities in California. I can count on one hand the accounts that have been cancelled for claims in the past 10 years, and those were high-loss figures.

On the notion of never allowing a unit owner to file a claim, it can’t (well, shouldn’t) be done. The owner is an insured. Denying the owner access to an insurance policy that is, in part, theirs, would create more legal issues than would allowing the claim to be filed and investigated. We try to help our communities by guiding owners and their representatives to make a reasonable decision regarding pursuing the HOA carrier. Does the cost of repairs to covered property exceed the HOA deductible? If not, then we suggest they handle the matter without HOA insurance involvement, which may end up helping with the “frequency” consideration during underwriting for the policy renewal.

Michael Berg is President & CEO of Berg Insurance Agency and can be reached at michael@berginsurance.com.

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