Manager Perspective

By: Steve Walz, CMCA, AMS

Twelve years in the trenches of community association management has taught me one undeniable truth: insurance claims are not a matter of "if," but "when." From hailstorms to plumbing failures, the unpredictable nature of shared living necessitates a robust and efficient claims management strategy. For board members and fellow managers, understanding the intricacies of this process is paramount to protecting the association's assets and maintaining community harmony. Here are some important things to consider both before and during a claim.

Proactive Planning: Laying the Groundwork

The cornerstone of effective claims management is proactive planning. This begins long before any incident occurs.

1. Policy Comprehension is Non-Negotiable:

• Thoroughly review all insurance policies with the board, ensuring a clear understanding of coverage limits, deductibles, and exclusions.
• Document key policy details in a readily accessible format, including contact information for the insurer and agent.
• Regularly schedule policy reviews with your insurance professional to address any changes in legislation or association needs.

1. Establish a Robust Documentation System:

• Maintain meticulous records of all property maintenance, inspections, and repairs.
• Implement a standardized incident reporting form, ensuring consistent and detailed documentation of any damage.
• Utilize digital platforms for secure storage and easy retrieval of documents.

1. Develop an Emergency Response Plan:

• Outline clear procedures for responding to various emergencies, including water damage, fire, and natural disasters.
• Establish a communication protocol for notifying residents, board members, and relevant contractors.
• Identify preferred vendors for emergency repairs and mitigation services.

The Anatomy of a Claim: From Incident to Resolution

When an incident occurs, swift and decisive action is crucial.

1. Immediate Action and Mitigation:

• Prioritize the safety of residents and secure the affected area.
• Take immediate steps to mitigate further damage, such as water extraction or temporary roof repairs.
• Document all mitigation efforts with photographs and detailed notes.

1. Prompt Notification and Reporting:

• Notify the insurance company as soon as possible, adhering to policy timelines.
• Provide accurate and comprehensive information regarding the incident, including dates, times, and a description of the damage.
• Utilize the association's established incident reporting form.

1. Working with Adjusters and Contractors:

• Maintain open and consistent communication with the insurance adjuster.
• Identify the vendor that you want to work with the help build the scope based on the adjuster’s analysis of the damage or repair needed.
• Document all communication with adjusters and vendors in writing.

1. Navigating Deductibles and Assessments:

• Clearly communicate deductible responsibilities to affected homeowners, referencing governing documents.
• If necessary, work with the board to determine appropriate assessment strategies for shared expenses.
• Be aware of the governing documents regarding insurance and assessments as there are anomalies in those documents. Don’t assume!

1. Claims Documentation and Settlement:

• Maintain organized records of all expenses related to the claim, including invoices, receipts, and contractor estimates.
• Review the insurance settlement offer carefully, ensuring it adequately covers the cost of repairs.
• Work closely with legal counsel if disputes arise.

Key Considerations and Best Practices:

• Transparency and Communication:Maintain open and honest communication with residents throughout the claims process.
• Vendor Relationships: Build strong relationships with reputable contractors and mitigation specialists.
• Legal Counsel: Engage legal counsel when necessary, particularly for complex claims or disputes.
• Education and Training: Provide ongoing training to board members and staff on insurance claims procedures.
• Regular reviews of the reserve study:Make sure that the association's reserve study is up to date and accurately reflects the current replacement costs of the buildings and common elements.
• Understand your state laws: Make sure you understand the laws that apply to your association and what the governing documents may also require.

Managing insurance claims for community associations is a complex and demanding task. However, by implementing proactive planning, meticulous documentation, and clear communication, managers can navigate the process effectively, protecting the association's assets and fostering a sense of security within the community. In the end, it is about more than just repairing property; it is about restoring peace of mind.

Insurance Perspective

By: Devon Schad, Schad Agency

Simplicity is the ultimate sophistication in a world of complex insurance. It is always best to discuss claims with your agent, but below is a look into a general wind/hail claim:

Pre-Season Preparedness

• Encourage associations to send out information about loss assessment coverage before hail season (April–October) and at insurance renewal.
• Ensure associations understand their policy details, including wind/hail deductibles and any potential gaps in coverage

Immediate Steps After a Storm

• Before filing a claim, have a reputable roofing contractor assess the damage and provide an estimated repair cost.
• If damage is found the association should plan how they will fund the roof repair, including owner assessments and payment plans for those without sufficient coverage.

Filing the Claim and Managing Costs

• Submit the claim to the agent. 
• If the damage is below the deductible use roofer estimates to help validate the claim. The goal is to have the carrier agree the property is damaged.
• Detailed Scope of Work: If the cost is below the deductible, ensure a comprehensive scope of work is prepared upfront to prevent additional assessments later. The association may consider hiring a third party to develop the scope and estimate ensuring all contractor bids are based on the same criteria. 
• Obtain Multiple Bids: For damage below the deductible, the association can obtain multiple bids to ensure cost-efficiency and transparency or use third party to help. If the cost exceeds the deductible, multiple bids will not affect the claim payout and therefore multiple bids will not be necessary.

Contractor Selection & Project Management

• Select a contractor who agrees to perform the work as approved by the insurance carrier and has a track record of performance
• Consider requiring a performance and payment bond to protect against the contractor failing to complete the job or from unpaid subcontractors, suppliers or laborers involved.

Community Communication & Assessment Process

• Hold a meeting with community members, the roofer, the insurance agent, and the association attorney to explain the claim process, expected timelines, and financial implications including potential assessments.
• Follow Association CC&Rs for Assessments: If an assessment is necessary, conduct a formal meeting and vote based on the association’s governing documents.

Monitor the Repair Process

• Assign a point person to oversee the roofing project and address any issues that arise.
• Conduct a final inspection before making full payment to ensure work is completed to standard.

Contractor Perspective

By: Joshua Flanagan, Blue Frog Roofing 

From my experience and the experience of Blue Frog as a company working with communities through countless large loss claims, we’ve found a very smooth process to help make insurance claims successful. Here is a basic process with key points to follow, also outlining major pitfalls we see communities fall into if the correct order and steps aren’t followed. 

Immediately following a storm:

• Choose 2 or 3 reputable contractors to assess the community for damage
• The BOD should meet with the contractors and choose their contractor to work with through the process. It is important to select the contractor before filing a claim.

Claims Process:

• Pursue the claim option right for the community. Consider deductible, rough cost of repairs, policy limits and exclusions, etc. in determining if filing a claim is right for the community or not. 
• If so, file the claim 
• Contractor should prepare for the adjuster appointment and it's crucial that the contractor is on site during the adjuster/engineer appointment(s). This allows them to get on the same page quickly, speeds up the process and makes it much smoother from the beginning. 

Insurance Scope and price

• If necessary, the contractor submits a supplemental estimate. Sometimes the adjuster misses essential items needed for the project like permits and telehandlers or documented damages. 
• If a claim is filed, but the claim amount is lower than the deductible, the contractor can still request the scope and estimate from the carrier. This is typically written by the adjusting firm hired by the carrier. 
• In this below deductible situation, all supplementing needs to be completed before any special assessment because loss assessments will be funding the entire project and cannot be filed on more than once for a specific event. It’s important to have your contractor work directly with the insurance carrier and adjuster to make sure all necessary damages related to the loss event are included.
• The insurance approved estimate and proper documentation written by the insurance adjuster must be used when everyone files claims on their H0-6 loss assessment policies
• Again, it is important that the insurance company or the adjusting firm on the claim writes the estimate and sets scope of work, not the roofing/construction company.

Community Meetings:

• After the insurance information is finalized with the insurance company/adjuster, it's important to have a full community meeting to explain the next steps, answer questions and educate to ensure a smooth process.
• Special assessment vote and letter: unless the board can pass an assessment, the vote will go to the community to have it officially passed
• Special assessment letters with correct documentation is sent to homeowners to submit to their loss assessment carriers to file claims with.
• Pre-project planning meeting: contractor should meet with management and the BOD to get on the same page before the project. 

If the claim is going to end up lower than the deductible:

• With 5% and higher deductibles being the norm, this situation occurs quite often. 
• It is still a good idea to choose a contractor and work with them before getting further in the process. The contractor of choice should work with you and a third party and/or your insurance provider through the process and make sure everything that needs to be repaired is included. 
• Make sure that a third party is writing the scope and estimate. 

Production:

• Once the claim is finalized, funds are coming in, and the project is planned, the hard part is over, and the work can be done!
• Make sure you are on the same page with your contractor regarding the project plan, quality control, project updates, materials and warranties.
• Perform a final walkthrough with the contractor making sure everything is completed properly.