CCAL Seminar — Insurance Audit

Joel W. Meskin, Esq., CIRMS presented a session today on auditing associations’ policies. In actuality, the discussion related more to a review of policies, but he covered many good points in the allotted hour.

Joel’s hypothetical began with a failure to provide timely notice of a potential claim and a resultant declination of reimbursement for initial defense case.

Joel reminded in a session yesterday, and again in his session today that associations should NOT distribute a list of delinquent unit owners. He frequently sees claims arising from those lists.

Joel recommends that all associations have reserve studies, and asserts that these reserve studies may be one of the most important risk management tools to an association.

Joel notes the difference between imbedded D & O policies and stand-alone policies. Several companies provide D & O coverage as an automatic endorsement; the imbedded policies generally, if not always, provide lesser coverages.

Many, if not most Directors and Officers (D & O) claims are not monetary claims; the imbedded coverages may exclude many of these types of claims. Imbedded policies also limit the class of those included within the category of insureds.

Respecting fidelity bond coverages, Joel is recommending the greater of:

1. the maximum funds that will be in the custody of the association or its management agent at any time the bond is in force;
2. any amount required by the association’s bylaws;
3. any amount required by statute; or
4. three months of assessments/fees plus current reserve funds as required by the lenders.

Crime coverage is a separate coverage from fidelity coverage, and covers theft and related losses resulting from acts of third parties.

Attorneys often represent their clients without giving notice to the carrier, and then the policy period passes. That will result in the loss of coverage.

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