 Think Tech Hawaii, civil engagement lives here. It's Thursday 3 o'clock and again, it's your time to watch Condo Insider show all about association living. Very good for board members and very good for homeowners alike. I would just want to tell you in the beginning that those of you who follow the Hawaii Council Community Associations, they're doing a board member training seminar on May 12th. It's a half day seminar at the Fort Darussi and it's going to be a great seminar so go on to HCCA and check it out if you're a new board member and want a really good primer on what it's like to be a board member, sign up, very cheap. Anyway, you know I was doing some seminars at the Expo Douglas trade shows in March and I was giving one about peace and harmony and associations. We started talking about the issues that cause the greatest number of mediations and complaints in condo associations. And I was kind of shocked by some of the answers when I did like a vote in the audience what they thought was the truth and what the truth was regarding insurance. So I asked my good friend Sue Savio from Insurance Associates to come back and talk to us and give us a primer on various issues of association insurance. But first welcome back Sue and tell us a little bit about your company again. Well thank you for having me back. I'm an independent insurance agent. I've been in the business since 1975. I write mainly condominiums. That's my main book of business. I write now a little over a thousand and I own condos as well and sit on boards as well so I have it from both sides. And you've also served on the board of community association institute and been as president and very engaged. You're on the CAI legislative action committee so you probably eat, drink and think condo world. That is true. I do. This is the sex bill. I was given a seminar on various topics and we were talking about mediation with the number one cause for mediation in the state of Hawaii were. Everybody thinks there's probably some fight with the board but the argument was who's responsible for the payment. It's a fight over the payment amount either the board was willing for damage to an association most likely a water claim. And so I asked the question to the audience. And I said if you have a water claim how many of you think it's true you should always submit it to your master policy and about less than half raise your hand. I said how many think you never submit it to your master policy and almost more than half raise your hand and say no it's the homeowner's responsibility. What do you got to say about that? Well what I've got to say about it's the reason that half think that or more than half think it's the owner's responsibility it's because it's normally an owner's appliance refrigerator water line whatever leaking and they feel that the owner should take care of it. The problem is the bylaws say that we've got to cover the building as originally built inside and out and have a peril called water overflow sudden and accidental from a domestic plumbing system. So we are required to take care of the building as built. I tell people if you had a fire would you tell the unit owner to go call his own carrier and make the owner sell it by themselves. No you'd file a claim under the master policy. It's the same thing with the water overflow claim. Now if it's a little drip of water and there's a little small stain on the ceiling you don't have to file it. But obviously it's going to be close to the deductible counting the extraction you know putting holes in the wall to dry out the walls repainting putting it all back. It's going to hit the association's normal deductible it's like 5,000. So yes you need to file claims that are going to be near that deductible you should always though make an incident report no matter how small the claim because it could grow. In other words you think it's just a small claim and you make an incident report you know six months ago this happened and now all of a sudden it's a serious matter. We have all the details going back because an incident report was made. So you don't have to have to file the smallest of claims but you do need to always make that incident report the minute you think it's going to involve more than one unit it more than likely is going to go over that $5,000 deductible. And you have to remember when water flows from one unit to another it's flowing across a common element there's mold and these kinds of issues that can be affected with respect to that but you brought up the magic word for part two of this the deductible you know it used to be the old days associations would have a thousand dollar deductible and now it's like twenty thousand dollar deductible how did that all come about okay you're right the old days thousand dollar deductible five thousand came out because as the buildings got older there were more and more small water claims so the insurance company said we're not here's a maintenance policy we're here for insurance claim and if you're not maintaining your appliances all of a sudden we're becoming a maintenance policy because even though we don't repair your appliance we're taking care of the damage done so the insurance companies raised the deductible for the typical condo to 5,000 then that was fine for a while then as the condos got even more old we had 20 and 25,000 50,000 because people are not maintaining their appliances the associations having issues with common element pipes that are all rotting out as the condos are hitting 45 and 50 years of age and the insurance companies are saying we're here for your fire we're here for the big claim but we're not going to be a maintenance policy so that's why the deductibles keep on going up and how does that relate to the H06 policy magic question magic question that H06 is so important and H06 just for anybody who's not assistant doesn't understand is a homeowner's form six it is a policy designed for condo unit owners whether you're living in your unit or whether you rent it out and if you have six condos God bless you you can have six H06s and this policy takes care of not only your upgrades because remember master policy as originally built not upgrades it takes care of your contents if you have any in it if your landlord you may not takes care of your rental income if you're a landlord loss of use if you're an owner who can't live in your unit while it's being repaired and it takes care of the associations deductible so my appliance leaks I damage your unit Richard and you've got we have a $10,000 deductible the association said Sue Savio you cause damage to Richard's unit you and it was $12,000 we got $2,000 from the insurance company cough up the $10,000 I can send that letter to my H06 carrier who maybe I have a $500 deductible on my policy we'll cut the check for 9500 bucks to the association I make up the $500 thank God I have my H06 I think we saw from the famous Marco Polo fire right the problems that are created when homeowners just take the H06 policy for granted and don't look at their limits with regard to assessments with regard to deductible for water claims with regard to liability that they need to put more energy into that loss rental income is another example right you know so I don't think homeowners look at the H06 although I can honestly say after the Marco Polo fire working with you you were able to assist me with all my property right they get that all fixed up and to be honest with the audience out there even I on my own H06 is for my rental units after Marco Polo looked at and said hmm I don't have enough coverage in certain parts of this policy and upped it and I think the problem is the H06 is such an inexpensive policy it's cheaper than auto insurance so we just have a tendency to renew it not even look at it and we don't ever say oh my rental income has gone up from the thousand dollars a month now to 1500 or gee I don't have any contents in there but I did remodel the floor I did put in ten thousand dollars worth of improvements and we just kind of forget about it and then when the fire hits and some of those people are going to be out of their units for more than a year all of a sudden you don't have enough rental loss of use and you have to go rent a place you got to pay maintenance fees if you have a mortgage you got to pay mortgage so it's really there's this huge need for a robust H06 gone are the days you can just buy the common everyday limits it's not enough do you have any reaction to that recent lawsuit fell to Marco Polo by a tenant saying that the association was negligent and the fire caused me to lose my personal belongings I don't have an H06 policy you should pay you know don't get me started I think everybody needs to stand on their own two feet I buy a unit I know that there's a master policy it's my responsibility I think to make sure I have the coverage I need I realize that people say well I didn't understand I didn't know I've always said people should take a test before they're allowed to buy a condo and if you can't pass the test you can't buy the condo because you don't understand how it works and that's kind of what we're doing here trying to tell people how important these things are so do I think we'll let the courts decide that one but I could spend all day ranting and raving about owners who don't want to admit the fact that they blew it not the association not the board another common thing that I said is don't file claims that raises your premiums what do you think on the H06 it doesn't raise your premiums if that's what you're talking about on the master policy it doesn't necessarily raise your premiums but what it tells the insurance company is G 20 water overflow claims seven of them from water heaters this association needs to send out notice about these water heaters association is to do something that's what it tells the insurance company if we're paying on all of these claims the insurance company at some point in time is going to say time to up the deductible you folks aren't taking care of things or hey association what are you doing about it now if the association says we're doing a plumbing inspection we're having a plumber go into each unit we're gonna expect water every water bearing appliance we're gonna force our owners to repair when if they don't repair the appliance we're gonna come back ourselves and repair it and charge it to them that's the kind of thing the insurance company wants to see they don't want to see a board that says oh well we have insurance let them pay you know because it just doesn't work that way and I had an owner who knew I was doing a show today about insurance who gave me this example hey the louver windows in the high-rise condominium according to declaration our common element a responsibility of the association however the maintenance and repair of those windows are the unit owner's responsibility assume for a moment one of those glass louvers falls out and hurts somebody who's on the hook yeah I've had that claim it's a combination both parties will be sued the person whose unit it came from as well as the association because it fell on somebody in the common element areas what will happen is the insurance company for the association will defend the association explaining that it's their job to insure it we have them insured but it's not the job of the association to maintain those louvers this association where I had the claim had actually sent out notices to the owners to inspect your louvers make sure you they're tight we've had a couple of issues and of course you not everyone does what they're supposed to do so the unit owner better have his 806 in this instance because he's going to be sued as an individual will defend them as a member of the association but not as an individual because they're going to sue the association and unit owner a so unit owner a needs to hire his own attorney to defend him if he has his 806 policy his insurance company is there to back them and help them and from my little experience in this world yes hiring attorneys is not cheap oh no you're better off having an HOS six policy and have the insurance company defending you and then you have maybe some reasonable pocket of funds available for the liability policy to cover you for the window that accidentally fell out right and you've got to remember that probably the price of an attorney for an hour is the price of a homeowner six for a year so in other words I'd rather spend my money buying a homeowner's policy and hopefully not even have to spend an hour of an attorney's time in for the same cost well guess you see a lot of HOS six policies yep you see people looking at this more you think it's still a problem people don't understand I would say because of the Marco Polo fire and the Oahu and Tower fire more people are looking at it we've had people call and ask questions we've had more more saying well we know questioning what coverage is what and where does it I get coverage for that they're trying to understand it so I think as bad as a Marco Polo fire is as much as we hate to lose lives at least some good is coming out where other people are saying wait a minute I live in condo land I have a condo am I insured correctly and briefly I know you insured Marco Polo how's it doing now it's doing very well I'm sure the people who live there are we could go faster but you have to stand there's building permits to get insurance company has they're started already I think they're I don't I won't say they're halfway through but they are doing floors by floor by floor it's a tough one because there's a lot of asbestos and other things in the building and so it's going to be a long process and there will be people out for over a year and you feel for them yeah I see that and I was talking to one of the attorneys recently he was saying people don't realize that when you have a fire like that in the beginning you're not sure even today they don't know the cause that they've got to put everybody on notice so that the air conditioning the refrigerator the stove can send their own experts in because if you later found out that they might be a defendant you can't be repairing it and taking away their right to inspect and protect themselves so there's a period of time where you really can't do much why all this is sorted out to protect everybody's best interest on the legal side of it as well that is true and we did have every insurance company was notified we whether that there was this opportunity to come within this time frame to come and look do your inspection I mean we didn't even know if they had coverage there or not but we tried to notify every insurance company well the article I read in the paper within last day or two about Marco Polo is basically saying at least the owners who are interviewed were saying they were happy with the communication they were happy with the progress and just the situation but I do know we're dealing with it as a company right now a couple people who just are in desperate need of help they have no place to go they don't have the income stream they didn't have insurance that are in desperate need of health and I know that we have contributed as a company a hundred thousand towards that and and we are announcing very shortly tomorrow we're contributing another 50,000 to help those people but the problem is by an H06 policy and and protect yourself you know you it's only I'm gonna say 300 bucks a year maybe probably about 200 250 dollars I mean you got a lot of stuff and you got a lot of upgrades it could be more but again you know you need the basics at least so yes okay well we're gonna take a short break for a minute and we'll come back and talk about policies in general we'll be right back with condo insider matchday is no ordinary day the pitch hallowed ground for players and supporters alike excitement builds game plans are made with responsibility in mind celebrations are underway ready for kickoff MLS clubs and our supporters rise to the challenge we make responsible decisions while we cheer on our heroes and toast their success elevate your matchday experience if you drink never drive aloha I'm Keeley Ikeena and I'm here every other week on Mondays at 2 o'clock p.m. on think tech Hawaii's Hawaii together in Hawaii together we talk with some of the most fascinating people in the islands about working together working together for a better economy government and society so I invite you into our conversation every other Monday at 2 p.m. on think tech Hawaii broadcast network join us for Hawaii together I'm Keeley Ikeena aloha welcome back to condo insider we're talking about association insurance and we were helping I think dispel some of the myths about claims and water claims and what the master policy includes but I'm gonna remind everybody that when you have a water claim and you're in a condo the master policy covers these overflows of sinks and ice makers breaking and depending on the size of the claim it needs to be reported and a notice done with regard to the actual incident so we can protect the association that being said this kind of just review the basic policies associations have to have or bank by law so let's begin with the big one property insurance okay the property insurance is a big one because it's usually the most expensive one if you have property and even if you're a community association you may have a sign that you want to ensure or a gate guard guard gate or something of that sort you would need property insurance for a high-rise obviously they got a big building that's worth millions and we have to ensure it so the property policy by the condo statutes is required to be insured to 100% replacement cost all right so you can't say oh it's a concrete building only 50% will ever burn or 20% I'm going to ensure for that value you have to ensure to value because it's required by condo statute so we do have the property policy and then along with that we're going to have certain coverages like building ordinance which will then give additional money because your building was built in the 70s and the codes have changed and now that you have a big fire we have to upgrade things to the building and you need to add additional funds not only just the as built but you need now additional funds so that's building ordinance and there's other types of coverages that come with it so the property policies are the most expensive if you have a long problem and I know the word is co-insurance so if you intentionally only insured the building for 50% of its value because you misstated the replacement cost how does that affect the policy okay so it affects the policy in that if you only insure for 50% of a loss of the value you're only going to get 50% of your loss or less because let's say you have a hundred thousand dollar fire insurance company comes out the adjuster does this thing he estimates the value of the building says gee you insured for 20 million you're supposed to be insured for 40 million you had a hundred thousand dollar loss you're only going to get 50% of your loss oh and by the way you have a five thousand dollar deductible so now the hundred thousand is down to 50,000 minus the five thousand dollar deductible you're down to 45,000 dollars on a hundred thousand dollar loss you have to ensure two value okay the co-insurance clause says that we agree that this is the value and you're going to ensure to at least 90 or a hundred percent depending upon what co-insurance clause you have so it is important to make sure you keep up with the rising cost of construction and what a building was built for back in the 70s and 80s and what it would cost a day is at least double and how does flood and hurricane fit into all this okay hurricane is part of the property policy so if the hurricane comes or windstorm comes you have coverage under the property policy the only difference is the deductible that the hurricane has wind has the standard deductible like the fire policy you know the five or just five thousand dollar deductible the hurricane is a percentage it's either a one or a two percent of the building value so if you had a low rise with ten buildings and only two got damaged by a hurricane it would be two percent of that those buildings that got damaged take a high rise there's just one big building so their co-insurance I mean their deductible is either one or two percent of their building value so that's how hurricane works it's just a higher deductible but it's covered the building as built inside and out so whether it's the windows that blow out and the sliding glass doors and all your cabinets and appliances that's all under the master policy but if it blows out your contents or the rain comes in and trashes your contents and your beautiful wood floor that's your policy if you have hurricane how about flood flood is only carried by projects that are required they're in a mandated flood zone along the alloy of course along the ocean if I'm up on the mountain I don't have to have flood I'm not in a mandated flood zone and flood covers things like tsunami mother nature drops 20 inches of rain and you know it enters into the units that type of thing is flood not appliance overflow and so with with flood insurance they got high rise do you again ensure the whole building you have to ensure the whole building you question why because if the flood ever got to the 20th floor we're not going to be here to pay any claims we're all dead but building arc but yeah building art but I think the reason is that in the old days when I first started in this business many years ago they used to do an 80% female used to let you do an 80% on flood if it was a high rise and I think basically they've lost so much money on the flood they said no we're going to make everybody insured to 100% value because they collect more money you know they're still in arrears and say we have property insurance mandated by law right how does that differ from general liability okay general liability is just that it's liability coverage for the association for things like in the common elements limited common elements someone slips and falls someone get hurt at the pool you have a spa someone gets hurt in the spa or on your weight equipment it covers things that happen in the common and limited common areas like louis falling out like louis falling out of the window and landing on somebody's shoulder at the pool causing a hundred twenty five thousand dollars worth of damage well then we're gonna kind of skip onto one I'm gonna say the umbrella is next because I'd like you to also comment about the fact some people say it's better to have a lower limit for the liability and a higher limit for the umbrella and maybe you can describe what an umbrella is and then the felony miss on that okay so if you think of an umbrella okay on the handle of the umbrella is going to be your general liability policy going to be your workers comp policy going to be your directors and officers policy or if you have an automobile for the association as an automobile it'd be on that to the general handle part minute we use up to any of these limits whether we have a horrible dno claim whether we have a horrible accident in the pool and somebody wins more than the two million on our general liability policy the umbrella part the part that you whip up to protect you from the rain that's going to pay above these policies so yes it makes more sense to spend money on a good size umbrella because you've got all these policies underneath it but you have to have certain limits before the umbrella carrier will cover so on an auto policy they want you to have a million on a general liability policy they want to have the two million for the occurrence directors and officers most will accept a million dollars so you have to have at least these limits so that when they're we do go above them in a claim settlement the umbrella carrier then kicks in the additional funds so if you rate that as an umbrella rating a little less expensive than the general liability you know it's like the two million example you gave so it's to buy a three million umbrella they have a five million our coverage is that better economically for you to do it that way a lot better economically plus not only is it above the general liabilities above the other policies talked about it is much cheaper to spend your extra hard-earned maintenance dollars for insurance on an umbrella policy I have many a board that will say gee we only have a million because you have a new board memory six million dollars that's not enough and I say but you have a five million umbrella you have a ten million umbrella you know that's where the coverage the money should be put in to what is the average umbrella for an association you know for a smaller association when I started this business it was two million then it went to three small associations carry five now because of the fires we've been having in the liability exposure and what can happen we've been recommending to most people that they up their five million to ten we have many people going to twenty five million people are saying hey for another five six seven hundred dollars why am I not buying the best protection because I have five hundred owners and I've got their assets to worry about or I have three hundred owners and projects that have you know a thousand owners there's nothing for them not to have a fifty million umbrella okay dno policy what is it okay directors and officers serve for free and I know because I do as well and what that policy does is protect the directors in case someone thinks we made a bad decision even if it was a good decision and decide to sue the board so what the board wants to do and the owners who elect the board they want to make sure that maintenance money isn't going to need to go for law fees to protect the board so they buy a directors and officers policy and for decisions that are made good batter and different there's this policy that was going to hire the attorney that's going to pay to protect the board if they lose they're going to pay them the settlement and all four insurance dollars does it cover committee members at a board it does cover committee members whether the board members or not so in other words we decide to have a landscaping committee and we have somebody that's not on our board and wants to join the landscaping committee with two or three other people they're covered it's a committee of the association okay the other policy is sometimes called crime policy sometimes called a fidelity bond I don't know if there's a difference or not but not really what is that okay that's protecting the association's funds because everybody's putting their hard earned dollars into maintenance fees when we into reserves into everyday operating expenses so when we expect it to be there when we need it if for some reason somebody stole it or or took it for different reasons or and it is amazing how people come in are very clever you want the insurance company to say yes you lost a hundred thousand dollars we will go ahead and you know make that up to you the premium is relatively expensive couple hundred bucks a year so you know it's a well worth and I think my statute the managing agent if you have a managing agent also by law has to have a fidelity and crime policy and if actually if in fact you had a loss and for some reason the policy didn't cover it and you went through all the other hoops and there was a conviction and arrest that the real estate fund actually has a recovery fund right but be honest with you that this requirements are so great and most people have sufficient crime policies I don't think I've ever seen it tapped you know I can't either I've had bond claims and we have paid out on them and we're glad that we could pay out on okay last question for we have to end the show we could talk for hours I know when you have a policy coming for renewal you just renew it or you go out and get bids or prepare or what what what what does an agent do okay about 90 to 120 days before renewal the agent fills out an application gathers all the loss runs for the last five years get some information about the things they're doing so the losses don't look as bad because we've had 10 water claims but we've done a plumbing inspection or we're going to replace our pipes gets proof of all of that oh we've replaced our roofs that we hurricane clipped whatever the case may be we get as many good things as we can to add to our application shoot it out to the marketplace and get in our quotes even though we shoot it out on 90 to 120 days prior we probably start to get quotes in 30 days before the expiration date under writer's call with questions some say nah I got too much on the alley why I don't want any more or hey I got six buildings in a row I'm skipping this one so we go through that ritual and then we go out and get the quotes line them all together and then present the best of the association well I think within 30 minutes we've done an amazing job of going through a very complex subject of insurance and I hope our audience paid attention because there's very useful information in this and I want to thank you for being on condo insider today you're always there to help out and help our industry you've been that way for years and I appreciate your friendship and all you do for the community and thank you for being here today and also from condo insider we look forward to you coming next week to see the show we're going to be talking about when you have a claim about what these remediation companies do that come in suddenly to help you at least get the plumbing stopped and the water cleaned up and and the things you do when you first have a claim and how that works so again thank you for watching condo insider see you next week