Property Managers Handling Property Insurance Claims

What Do Property Managers And Community Association Managers Need To Know About Property Insurance Claims?

1. Deductible Buyback Coverage:  Deductible buyback (DBB) insurance is one product that you can offer to your clients, which provides an option for them to reduce their financial burden following a loss by lowering their deductible under a separate policy. For example, on a $1,000,000 property, a five percent wind deductible equals $50,000. Under a wind buy-back policy, the insured, under a separate policy, could cover four percent of the five percent deductible. Instead of the insured having a $50,000 out-of-pocket exposure it would now be $10,000.
   
   
2. Loss Assessment: In the absence of reserves set aside or buyback coverage to absorb (increasingly high) deductibles, the board will assess the community members for a portion of the deductible relative to their ownership interest in the property. It is important to be aware of timelines and the responsibilities of individual owners when collecting on an assessment is part of the claims process. Having requirements in place for loss assessment coverage and understanding what unit owners will be required to submit when claims are filed under their HO-6 policies is key to a smooth and expedient claims and restoration process.
   
   
3. Setting Reserves: Reserves are the funds set aside by insurance carriers to pay a given claim along with any associated claim expenses. Reserves are important as they determine not only the carriers’ understanding of the value of a given claim but also the representatives (and their authority) they assign to adjust a given claim. Reserves are established at three points in the claims process: when the claim is filed, at the initial site visit, and upon the initial coverage determination. Being armed with the information necessary to accurately set the reserve when a claim is called in can significantly increase the ease and reduce the time required to resolve a claim.
   
   
4. Accurately Representing Coverage: An accurate representation of loss or damage is critical to an expedient and accurate claim resolution. Part of an accurate representation of loss is understanding under what coverage damage applies, both within the master HOA policy and between the master and the individual HO-6. Knowing where the communities’ responsibility ends and the individual unit owners begin is often outlined in the governing documents of the community and will help inform the representation of damage.
   
   
5. Fiduciary Responsibility: HOA board members serve in a position of trust, representing the interests of the community members. As such they have a fiduciary responsibility to the community they serve. The fiduciary duties of Community Association Board members are outlined by individual state corporate law. Most HOAs are nonprofit corporations, typically formed by filing Articles of Incorporation in the state in which the community is located. fiduciary duties involve three basic components: the duty of care, the duty of loyalty, and the duty to act within the scope of authority. The fiduciary responsibility of the board highlights the importance of ensuring claims are filed when damage is sustained and making sure all damage is covered in the claims process.
   
   
6. Managing Reconstruction: Once the claim has been settled, the process of getting work done begins. Contractors must be held accountable to the established scope, and any reasonable supplements must be substantiated and submitted.
   
   
7. Recovering Depreciation: Once all work has been completed, proof of completion must be submitted to the carrier to recover depreciation holdbacks and close the claim. It is important to make sure the information submitted for the release of depreciation is well-organized and clear to avoid delays in the release of final funds.

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