Running a condo association is no small task, especially when balancing governance responsibilities, compliance obligations, and financial risk. Understanding how to run a condo association is essential for insurance agents to provide strategic risk guidance. When board leadership falters, insurance becomes a crucial buffer, making agents key partners in protecting association operations and member assets.
Key Governance Responsibilities
A well-functioning condo association relies on a board that fulfills its governance obligations. These responsibilities include financial oversight, policy enforcement, maintenance of common areas, and compliance with applicable laws. For agents advising clients on how to run a condo association, recognizing these duties and their implications is crucial to recommending the right insurance solutions.
Board members must meet their fiduciary responsibilities — the duty of care, loyalty, and obedience — by making transparent decisions, maintaining accurate records, and following the association’s bylaws. Poor governance can erode community trust and lead to lawsuits that expose board members to personal liability. Insurance agents who understand these risks can guide boards toward essential protections like directors and officers (D&O) insurance.
Compliance Risks and Liabilities
Condo associations must comply with federal, state, and local legal standards, including Fair Housing regulations and financial reporting requirements.
Common compliance pitfalls include discrimination allegations, improper election processes, mismanagement of funds, and conflicts of interest. Each can trigger claims against the board or association. Insurance agents who understand these exposures can help clients mitigate liability and select appropriate policy limits.
Insurance Solutions for Risk Management
Insurance serves as the financial safety net when governance or compliance issues arise.
- D&O insurance: Covers defense costs and settlements tied to wrongful acts allegations, such as breaches of fiduciary duty or bylaw violations. It typically excludes intentional or fraudulent acts.
- Crime insurance: Protects association funds from theft, embezzlement, forgery, or fraud committed by employees or third parties, depending on the policy language.
- General liability insurance: Addresses bodily injury or property damage occurring in common areas.
For high-dollar claims, excess liability insurance provides additional protection above the limits of primary policies like general liability or D&O. For instance, if a D&O claim exceeds $1 million in coverage, a $5 million excess policy could cover the remaining loss, helping prevent special assessments on unit owners.
Excess liability policies often follow the form of underlying coverage and may extend to employment practices liability (EPLI) when included under D&O. Kevin Davis Insurance Services understands the unique risks facing condo associations, including high-rise exposures and evolving EPLI claims, and offers tailored excess liability solutions that align with those needs. Agents can work with KDIS to evaluate appropriate limits and build layered risk strategies that protect their clients from complex, high-cost claims.
Supporting Effective Board Leadership
Sound governance starts with strong leadership. Board members who lead transparently, prioritize education, and communicate clearly reduce their exposure to legal and financial disputes. When advising clients on how to run a small condo association, it’s important to emphasize these best practices, especially because smaller associations often lack dedicated staff or third-party management support.
Agents add value by:
- Recommending legal counsel reviews of governing documents
- Providing claims trend data
- Promoting board training on fiduciary duties and governance protocols
Strengthening Governance to Reduce Risks
Strong leadership and proactive compliance are foundational to minimizing liability and ensuring the long-term health of condo communities, which represent 35% to 40% of all U.S. community associations. Insurance agents who offer governance insights alongside layered insurance recommendations position themselves as indispensable risk advisors.
If your clients need help reinforcing their leadership and liability protection, contact Kevin Davis Insurance Services today to learn how our tailored programs support over 40,000 community associations across the country.
About Kevin Davis Insurance Services
For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (855)-790-7393 to speak with one of our representatives.