While attending one of the “Zoom Rooms” at this year’s Legal Forum, a story was told about how a homeowner’s association had its insurance cancelled due to a claim. This association could no longer find coverage in preferred markets (admitted carriers, such as Farmers and Travelers) and was forced to get its insurance from a surplus lines carrier. Not only was this coverage three times the price, the added insult was that the claim was a result of an out of control car speeding down a street adjacent to the association and crashing into an association building – something impossible for the HOA to control.

The question then came up – what now? Once you have entered what we call the “surplus and excess” market – the carriers that folks go to when they can’t get coverage elsewhere – are you stuck? What can an association do, especially when the claim that landed them there originated outside the HOA’s boundaries?

The bad news is that the association will likely be using a surplus or excess lines carrier for a minimum of one or two years. The good news is that, yes, there are positive steps your association can take right now. The better news is that these steps can potentially help HOAs’ already with preferred carriers keep their premiums down.

1. Increase your deductible: Most of us understand that as deductibles go up, premiums go down. Additionally, if your association has a clear protocol that states unit owners are responsible for deductibles for claims relating to their units, they are less likely to file frivolous claims and are more likely to have personal homeowners insurance that may provide coverage for the HOA’s deductible. Bottom line – higher deductibles lead to cleaner loss histories.

2. Clean up your loss history: Order a current loss history for at least the last 5 years (longer if you know there are claims there). If claims are still open, see what needs to happen to get them closed. If you see that there are still reserves listed for a closed claim, contact the adjustor or agent to get those reserves removed. To get back into the preferred market, you will likely need a few years with no new losses and the old claims to be closed.

3. Learn from your loss history: Looking at that loss history report, do you see a pattern? Are there multiple water losses? Have there been fires with similar causes? If so, then your board of directors needs to be proactive. What steps can you take to prevent future claims? Hydro flushing or sealing the plumbing lines might help. You can also add a separate, higher deductible for water losses. Run stories in your newsletter about fire safety. Install fire extinguishers in the common areas. Share what you have done with your insurance agent so they can make the case for you at renewal time.

4. Manage what you can’t control: Looking back to that runaway car, what can the HOA do about that? Have the board of directors communicate with the city if there is a speed problem on surrounding roads. Maybe the city can install a radar sign that shows the speed cars are traveling at or install speed bumps or round-abouts if speed is a dangerous issue. Again, share this information with your insurance agent (even if the city didn’t act on your suggestions) to show that the board is being pro-active.

When you approach your renewal date, be sure to have all this information communicated with your insurance agent so they can try and get coverage back in the preferred markets. Depending on your loss history, it may take a few years; but it is better to start now with these preventative measures.

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