One of the largest potential exposures that association property managers and board of directors face is underinsuring property. If a significant loss happens and there is not enough insurance, they can potentially become liable for errors and omissions claims by owners damaged as a result of their malfeasance.

I thought about this while attending Merlin Law Group New Jersey attorney Jason Cieri’s wedding last week. I was catching up on New Jersey property insurance law and came across a case1 where the flood insurance was not adequate to cover a Superstorm Sandy damage claim.

The appellate court noted the correctness of the trial judge’s finding:

It was unnecessary for the court to determine whether the [b]oard conveyed to Kathy that it wanted … ‘maximum coverage’ because the chain of events in the factual record showed that the King defendants discharged their duty and provided the level of coverage requested by the [b]oard’s property manager. Given that this was not a material issue of fact, the court was free to leave the question of whether the [b]oard had conveyed to Kathy … that it wanted ‘maximum coverage,’ unresolved.

The property manager told the insurance agent to only place insurance for $1 million per building. The agent had previously expressed concern that the buildings should each be insured for $2.4 million.

Property managers for associations should demand that boards insure to full replacement values. They should also suggest that boards retain qualified insurance-to-value firms that will determine the proper amount of insurance to purchase. I mentioned this recently in a post, Insuring To Value is a Difficult Underwriting Requirement Making Underinsured Structures Quite Common.

Thought For The Day

Surround yourself with good people. People who are going to be honest with you and look out for your best interests.
—Derek Jeter
1 Bijou Villa Condominium Association v. King, No. A-4234-17T3, 2019 WL 1949622 (N.J. App. Div. May 1, 2019).

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