There is no reason to sugar coat this, the special assessments for maintenance-related issues are not covered by an owner’s insurance policy. The owner may have Loss Assessment insurance, but that applies to covered events. Maintenance-related issues are not covered by insurance.

That does not mean the special assessment isn’t vital to maintaining a positive insurance history for the community. An insurance policy is a portion of the risk management program the association has in place to address exposure to expenses for the repair and maintenance of community property. Other risk management activity includes avoiding risk, like removing trees threatening property; and maintaining risk, like wood repair, painting, and asphalt repair projects.

Ultimately, appropriate and timely property maintenance reduces the risk of major property losses that would potentially be expensive to the association or covered by the HOA insurance carrier. For example:

• Re-piping improves a plumbing condition known to be an issue in the area. Failure to address the known issue could lead to frequent pipe bursts, which lead to water damage claims, which could eventually increase the cost of insurance for the HOA, making it more difficult for owners to purchase their own insurance policy, and potentially threatening the availability of insurance for the community.

• Improving drainage conditions throughout the community protects the community from costly and unnecessary liability claims for failure to properly care for the common area. More insurance claims lead to questions from the carrier on how much insurance should cost, or whether the risk is too great to carry forward.

• Deferred maintenance plagues communities. Without necessary, regular maintenance and property improvements, buildings deteriorate at an accelerated rate. A building in disrepair lets water in. Water leads to property and liability claims, which lead to higher insurance costs and the potential to be uninsurable.

The HOA insurance carrier evaluates the risk it is accepting when it chooses to insure the community. The expectation is that the association actively maintains the property, and the insurance carrier is in place to address unexpected and/or catastrophic events. Together the association has an excellent start on a robust risk management program.

Michael Berg, MBA, CIRMS, CMCA, is President and CEO of Berg Insurance Agency and may be reached at Michael@berginsurance.com