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HOAs are run like a business, and it’s critical to have proper insurance coverage. Your association needs to be prepared and covered for situations such as potential accidents, legal action, and damages.

There are various types of HOA insurance – from business property insurance to D&O liability to business crime insurance, the list goes on and on. You may be wondering which type of coverage is used most commonly, and we’re here to answer that question!

Read on for four of the most common types of HOA insurance claims:

  • Breach of Fiduciary Duty
    When an HOA board fails to exercise a degree of care and loyalty required of their fiduciary duties, courts commonly apply a “reasonableness standard” to test the validity of the action(s) taken by the board in the management of the association.
  • Breach of Contract
    When a binding agreement is not honored by one or more parties in the contract, a breach of contract occurs. This typically happens due to repair or improvement of/on community property.
  • Employment Liability
    This liability coverage will typically include costs for defense and damages when employment-related claims are made in an HOA. This can include allegations of discrimination, harassment, wrongful termination, and other allegations.
  • CC&R Violations
    When the association and/or residents fail to operate within the rules of the governing documents, a violation occurs. The CC&Rs (Covenants, Conditions, and Restrictions) can include bylaws, rules, and regulations.

No board member, resident, or community is immune from being party to a lawsuit or wrongful allegation. HOA insurance is vital to the health of the community. The right coverage will protect the HOA and its members against damages.

To offset incurring costs, keep the community safe, and replace or repair damaged property, it’s imperative that the board conducts research and consults with legal counsel and their insurance professional before making any decisions regarding coverages.