In an ever-present litigious environment, homeowners associations (HOAs) must prioritize layered liability protection to safeguard financial stability. Layered liability protection involves using multiple types of insurance — such as primary policies, HOA umbrella insurance, and excess liability insurance — to ensure comprehensive coverage against a wide range of potential risks.
While HOA umbrella insurance is a vital safety net, many HOAs overlook the value of excess liability coverage. Excess liability insurance provides essential protection for catastrophic situations, ensuring associations are not forced to assess members to cover significant losses. As insurance agents, your guidance can help HOA boards understand the nuances between these policies and close any gaps in their coverage.
Understanding HOA Umbrella Insurance
HOA umbrella insurance provides liability protection that extends beyond standard policy limits, such as general liability or directors and officers (D&O) insurance. Designed to address a wide range of risks faced by HOAs, umbrella insurance can cover costly claims related to slip-and-fall accidents, lawsuits, and property damage caused by community activities.
For instance, if a resident sues the HOA for negligence after sustaining an injury on community property, umbrella insurance can step in once the primary policy’s limits are exhausted. However, it’s important to note that umbrella policies typically come with exclusions and may not address every potential risk.
What Is Excess Liability Coverage?
Excess liability coverage differs from HOA umbrella insurance in its purpose and application. While umbrella policies offer broad coverage that can apply to multiple underlying policies, excess liability focuses on providing additional coverage for a single, specified policy. It acts as a financial buffer, ensuring that HOAs are protected in scenarios where the limits of their primary or umbrella policies are reached.
For example, if a condo association experiences a $5 million loss but has only $1 million in liability coverage under its general liability and D&O policies, an excess liability policy with a $5 million limit would cover the additional $4 million. Without this coverage, the HOA might have to specially assess members to cover legal fees or judgments that exceed their policy limits.
Excess liability insurance also extends coverage for specific exposures, such as employment practices liability, if included under a D&O policy. Tailored options are available for high-rise associations up to 35 stories, with higher buildings eligible by referral.
When Is Excess Liability Necessary?
Even with umbrella insurance in place, there are circumstances where excess liability coverage becomes crucial for HOAs. These situations often arise due to:
- Catastrophic losses: There’s protection against significant claims that exceed both primary and umbrella policy limits.
- Coverage gaps: Umbrella policies may have exclusions or fail to cover certain risks, leaving HOAs vulnerable.
- High-risk activities: Events such as large-scale renovations, community festivals, or other high-exposure activities can lead to costly claims.
- Legal or jurisdictional requirements: Some HOAs may be required to carry additional coverage to meet local or lender-mandated insurance thresholds.
By offering tailored solutions, you can help HOA boards assess these risks and determine whether excess liability coverage is a necessary safeguard.
Ensuring Comprehensive HOA Protection
Combining HOA umbrella insurance with excess liability coverage allows HOAs to address a wider range of risks while protecting their financial assets from severe claims. As insurance agents, you play a pivotal role in educating HOA boards about these options and ensuring they make informed decisions. The right coverage strategy can provide peace of mind and financial security for the communities your clients serve.
Contact us today to learn how Kevin Davis Insurance Services can help you craft comprehensive insurance solutions for HOAs. Visit our website or call us at (855) 790-7393 to speak with our experts.
About Kevin Davis Insurance Services
For over 35 years, Kevin Davis Insurance Services has built a reputation as a trusted wholesale broker for the community association industry. Offering high-quality coverage, competitive premiums, and exceptional customer service, we are dedicated to meeting the unique needs of HOAs. Contact us today for more information.