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Community Living
Self-insurance has trade-offs
By RICHARD WHITE
Published December 10, 2005
Q. Our insurance agent has informed us that our association's policy will be canceled. We have had only a few small claims in the nine years this company has insured us, but our premiums have doubled. Several agents tell us now that we can expect our premiums to double again. How realistic is it for us to consider self-insurance?
A. This is a very timely question. First review your documents to see what insurance they require. Then review FS 718.111 and other related areas about the state's insurance requirements.
Rather than set up a self-insurance program, I suggest other measures to reduce the coverage but retain a safe level of insurance. For example, you can increase the deductible and set up a special account to cover it. I once managed a building that had an insured value of $75-million. The association had a $1-million deductible. They created a special reserve item in their budget to build up an account to cover this deductible. Once they had a reserve account collected, they took a second step to reduce coverage. They changed from a replacement policy to a flat amount of total loss. This action would create a gap of coverage at the top in case of a disaster in which the building was a total loss. Eventually they covered only 80 percent of the value and had a $1-million deductible.
Look at the figures they needed to maintain in a special fund. The top 20 percent of the value amounted to $15-million, plus $1-million for the deductible.
The problem with this system is: What happens if you have several major claims in a short time? My advice is to obtain the insurance with a higher deductible and insure for the replacement cost. The board has a fiduciary duty to the members to protect the assets. To self-insure, you need more than the legal right. You need the owners' full understanding and approval.
Emergency votes and overrides
Q. Can a condominium board vote on an item that was not listed on the agenda posted for an emergency board meeting? If a previous board of directors voted on an issue, can the present board override the previous board's motion and take action that is contrary to the past motion?
A. If an action or motion is taken and the item is not on the agenda, the matter must be listed as an agenda item, discussed at the next meeting and ratified. In other words, the matter needs to be voted on again. This gives anyone who wants to be heard on the issue a chance to appear.
As to changing policies of past boards, nothing is written in stone. The policies approved by past boards don't prevail forever. About the only obligation a past board can enforce is a contractual obligation, but contracts expire or can be canceled.
Hire professionals to help
Q. The treasurer of our homeowners association just resigned. Can the board outsource this work, or do we need permission from the membership at the annual meeting?
A. It's the board's responsibility to operate the association and make business decisions. Boards typically have the right to engage professionals to assist in the operation of the association. Those professionals often include lawyers, managers, CPAs, engineers, insurance agents and other vendor services (lighting, pool, landscaping). You don't need member approval to name someone to fill this position.
- Richard White is a licensed community associations manager. Write to him c/o Community Living, St. Petersburg Times, P.O. Box 1121, St. Petersburg, FL 33731. Sorry, he can't take phone calls or provide personal replies by mail, but you can e-mail him at CAMquestions@cfl.rr.com Please include your name and city. Questions should concern association operations; legal opinions cannot be offered. For specific legal advice, contact an association attorney.
Readers may call the state Division of Condominiums Bureau of Customer Service at 800 226-9101 with questions or requests for materials. Access the Bureau of Condominiums Web site at www.state.fl.us/dbpr/lsc/index.shtml or write to Bureau of Customer Service, 1940 N Monroe St., Northwood Centre, Tallahassee, FL 32399-1032.
Please note that this office provides no information about homeowners' associations. The state has no bureau or department covering those associations.
[Last modified December 9, 2005, 08:25:05]
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