Master Condominium Insurance: Insurance Needs of Massachusetts Condo Associations

Who’s making the insurance decisions for your Massachusetts condo association? As a member of the Board of Directors for a condominium association you’re called on to make a wide variety of decisions regarding maintaining the property, keeping residents safe, hiring vendors, and more. You have a fiduciary responsibility to protect yourself, your fellow board members, the business itself as well as the individual condo unit owners. When it comes to Master Condominium Insurance for your condominium association, how do you know what you need? The commercial insurance specialists at McSweeney & Ricci can help you determine which coverages your association should maintain and advise you on the proper levels of those coverages. The insurance professionals at McSweeney & Ricci have helped protect condo associations and trusts as well as individual condo unit owners, for over fifty years from the South Shore to Boston, across Massachusetts and all-over New England.  

What is a Master Condo Insurance Policy? 

Accidents and weather events happen every day. If a unit owner, guest or employee becomes injured on your property or if your property is damaged by unforeseen circumstances such as a Nor’ Easter, you need the proper insurance coverage in place. A master condo policy is a type of insurance policy COA’s purchase “to ensure coverage in case of liability expenses or repairs to common areas.” (1) A master policy protects the building(s) as well as, the liability of the condo association or trust and can pay for legal fees and settlements. The bylaws or governing documents of the condominium association or trust define the amount and type of insurance coverage the association must maintain.  

Inspecting the Bylaws 

The first step in ensuring the proper protection of your condo association and property is to consult your association’s governing documents, deed and/or bylaws. Properly drafted condo docs will clearly define which areas are the responsibility of the association as a whole and which are tasked to the individual unit owners. Typically, the condominium association is responsible for commonly owned property and common areas that are not considered the sole property of the tenants, as well as common liability exposures.  

Common areas can include: 

  • exterior of the buildings themselves,  
  • roofs, 
  • club houses,  
  • courtyards, 
  • business centers,  
  • gymnasiums/fitness centers,  
  • swimming pools,  
  • driveways, 
  • playgrounds,  
  • BBQ or picnic areas,  
  • parking lots, 
  • walkways, etc.  

A member of McSweeney & Ricci’s Commercial Insurance Division can inspect the deed and bylaws of your Condo Association or trust and will help determine which areas are the responsibility of the board of trustees to protect and the proper levels of coverage.  

What’s Common Liability?  

Any accidents and injuries occurring in common spaces are considered common liability exposures/risks and are the responsibility of the condo association or trust. For instance, if a unit owner gets injured using a faulty piece of equipment in the fitness center or slips and falls in the icy parking lot, the responsibility falls on the condo trust/association. Whereas, if one of the condo owners is injured within the walls of their individual unit, the responsibility rests with the unit owner’s individual condominium insurance policy.  

Master Condominium Insurance vs. Condo Insurance  

In condominium complexes, there are often shared walls, ceilings and floors between the various unit owners so it’s important to distinguish between master condo docs or condo association insurance, and condo insurance and what is covered by each.  

Each individual condo unit owner needs to purchase their own condo insurance policy, known as an HO-6 policy. The unit owner’s HO-6 policy protects the “walls in” or interior of their individual unit, as well as the personal property within their condo, and their liability exposure. The individual home insurance policy complements the association’s master insurance policy, which provides protection for the common areas. (2) 

In general, condo association insurance or the master condo docs can be one of two types, “bare walls coverage” or “all-in coverage.” If the condo association policy is bare walls, the policy covers the structure of the condo building as well as wiring, insulation and plumbing found within the walls. Items inside the interior walls of the unit, such as cabinets, floor coverings, appliances and furniture are not covered and are left up to each individual condo owner to insure. More comprehensive is all-in coverage, which may provide protection for features such as appliances and countertops in addition to the bare walls coverage.  

Master Condominium Insurance

Typical Components of a Master Condo Insurance Policy & What They Cover 

McSweeney & Ricci understands that each condo association faces its own set of risks and has unique insurance needs. Our team helps condo boards select the proper amount and type of coverage for their specific situation. In general, the list below contains common coverages that should be considered by the Directors & Officers of any condominium association and a description of what they provide.  

  • General Liability Coverage- In today’s litigious society, liability coverage is critical. The liability portion of your master condominium insurance pays for legal fees and the cost of lawsuits arising from accidents or bodily injury within the building and/or damage to the property. If your contractor falls off a ladder while making a repair to the property or if a unit owner is injured after slipping on the pool deck, they could sue the association, and without liability coverage, your condo board would be left paying out of pocket.  
  • Building or Property Coverage- Property insurance protects against property losses to the building itself, can include building equipment such as boilers, as well as the common areas (mentioned above) like hallways, courtyards, roofs, etc. Consult your master condo insurance policy for the specific types of losses your property coverage protects against, but common losses can include theft/vandalism, wind and fire.  
  • Ordinance & Law Coverage-This coverage protects your building from changes in laws and ordinances or building codes, in the town or city where you live. This coverage is particularly important for older buildings. If you experience a loss, ordinance and law ensures there will be coverage for things that need to be upgraded to conform to current building codes and laws of the city.  

Additional Recommended Coverage Options: 

  • Workers’ Compensation- Workers’ Compensation protects employees from the costs of work-related injuries or illnesses. This vital coverage also protects the association if an uninsured worker becomes injured while working on the property.  
  • Directors & Officers Coverage-If a member of the Condo Board of Directors makes a mistake while performing their duties or responsibilities, you and the other members could be sued. Few individuals have the personal assets to pay the defense costs or judgments from a large oversight by the board of a large condo association. D&O insurance typically protects both the association as well as the individual board members. But D&O insurance can also exclude certain people if needed, such as a policy that excludes non-owners. D&O is usually added as an endorsement onto your existing master condo policy for an additional premium.  
  • Crime & Fidelity Coverage- Also known as Employee Dishonesty Coverage, this coverage addresses common threats to an organization such as theft of association funds, financial misconduct, credit card forgery, disappearance or destruction of property and computer fraud and theft, that could be made by a board member.  
  • Flood Coverage & Hurricane Coverage- Anywhere it rains it can flood. Flood insurance is not covered by a typical master condo policy. For condo complexes located in areas prone to flood and/or hurricane these coverages should be purchased separately as part of a well-rounded business insurance program.  
  • Employment Practices Liability- EPLI coverage provides protection against claims of discrimination, sexual harassment, wage complaints, and wrongful termination or misbehavior. Complaints can be filed from one employee to another, from a member of the board of directors or an owner to a renter, and more.  
  • Sewer and Drain Backup- This coverage provides reimbursement (up to a specified limit) for any damage incurred as a result of a sewer or drain backing up.  
  • Equipment breakdown/boiler and machinery- If the steam boiler, air conditioning or other covered equipment for your building breaks down this coverage provides reimbursement for loss by mechanical or electrical breakdowns. 
  • Business Income and Extra Expense- This coverage provides reimbursement if a covered loss and the resulting damage to your building/s, causes loss of income. For instance, if a storm damages your laundry room or fitness center preventing them from generating income, Business Income and Extra Expense coverage would help.  
  • Excess Liability/Umbrella- If a lawsuit exceeds the limits of your existing General Liability and/or Directors & Officers coverage, an umbrella helps to pay for the defense costs and judgments.  

Let Us Help Protect Your Condo Association 

As a Condo Association Board Member, you’re tasked with helping protect the property, your fellow board members and the residents. The insurance needs of a condo association are complex and it’s critical to have the proper coverage in place to protect your investment in the event of a loss. The smallest gap in coverage could mean financial trouble for the board as a whole or individual members.  

McSweeney & Ricci’s Commercial Insurance Division knows the needs of Massachusetts Condo Associations and will work with you to ensure the proper levels of insurance for your unique situation. We’ve partnered with numerous top-rated insurance carriers which allows us to select the best combination of coverage at affordable prices.  

Our risk control services help minimize your likelihood of having a claim. Our dedicated in-house claims department helps resolve claims as quickly as possible while providing you with personalized support. We’ll perform annual reviews of your master condominium insurance and will modify your insurance program as your needs change. For over fifty years, McSweeney & Ricci has provided home, auto, condo, umbrella, life and business insurance to thousands of Massachusetts residents. 

We partner with you providing guidance and the extraordinary service you deserve. For more information on protecting your Massachusetts Condo Association, submit a free quote here on our website or call us at (844) 501-1359.  

Sources:
  1. HOA Insurance 101: Why Does Your HOA Need It? | HOA Management 
  2. What you need to know about Condo association insurance (condocontrolcentral.com) 

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