Insurance Purchasing

(00:00) Speaker:   It's time for AMG's 2024 Community Leaders Series podcast edition. Over the last three decades, AMG has worked to make the role of community leaders more effective and less of a headache. Seminar topics are a response to which our executive board members have requested. And now here's your host and CEO of AMG, Paul K. Mengert.

(00:23) Paul K. Mengert:  Welcome, everyone. This is AMG's 2024 Community Leaders Series podcast edition. In today's episode, we will be discussing the important topic of insurance purchasing. We are honored to have Candace Cole, AMG's Director of Operations for the Triad Area of North Carolina, as our special guest to provide insights on this critical subject. Candace, welcome.

(00:48) Candace Cole:  Thank you. Paul, I'm excited to be here.

(00:50) Paul K. Mengert:  Let me just tell our listeners who may not know Candace. Candace is an Association Management Specialist as designated from the Community Association Institute. She also holds the CMCA designation and is working toward her PCAM. Uh, Candace has impeccable leadership skills, which has been which have been showcased throughout her time in the industry. She's received administrative training during her time working at the United States Marine Corps and is highly experienced with insurance acquisition for homeowners’ associations. Candace, it's really great for you to take a few minutes out of your busy day to, uh, talk with us about the acquisition of insurance. And I know we have, AMG has several different sets of materials out there about different types of insurance, but today we're really focused more on just the acquisition process. So just want to lead off by asking you to tell our, our listeners today about how to go about their studying, their community insurance and why is it so crucial?

(01:54) Candace Cole:  Well, really, Paul, it's to make sure that, uh, you know, the board and the association is protected if there is a loss.  They want to make sure they have at least the minimum amount of insurance coverage that's required by both their governing documents and any applicable state law that there may be out there. You know, unfortunately, I think a lot of the times if an association doesn't have a lot of losses or a lot of claims that happen, sometimes the board may feel like it could be an unnecessary expense for the association. And unfortunately, it just really isn’t. It's very paramount to ensuring that, you know, the long-term health of the association and the board members themselves is there.

(02:35) Paul K. Mengert:  Yeah, it's really only necessary when it's necessary. But boy, can it be some grave consequences if the, uh, measures have not been put in in place in, in advance. When an association's just kind of starting in this down this process or let's assume some folks are new to the board. How do they, how do they really begin to put together what they would need for insurance? How/ where do they start?

(03:02) Candace Cole:  Well, if they are brand new to the board, I would definitely say start with their community manager, who will then more than likely redirect them to their insurance agent. We want to get them in front of the professionals, get them those individuals who you know, know what they're doing, who have the information, who have the knowledge and can get them going down the correct path.

(03:23) Paul K. Mengert:  Now of course, the community governing documents, usually the Declaration of Covenants and sometimes the Bylaws or Articles, but usually it's in the Declaration, uh, discusses what insurance the association needs. Where else might they look for requirements of just the minimal amount of insurance that's going to be required by governing documents?

(03:46) Candace Cole:  Like it's definitely the governing documents, like you just stated, if there is any applicable state law, they're also going to want to look there. This would be like the minimum amount of insurance required. That doesn't mean that there's not more that they could get, especially if there are certain trends or something like that that their insurance agents are coming across more frequently.

(04:06) Paul K. Mengert:  Right. And of course, the insurance agents a good person to help us evaluate or help our clients evaluate what coverages they really need. And in some cases, I know, uh, there are applicable coverages now available that, you know, didn't even exist 30 or 40 years ago when some associations were set up, such as, uh, as cyber insurance, which is very inexpensive and often included in some of the packages. And of course, I know a lot of clients have had the feeling that they can rely on their management company or their bank for cyber insurance. But of course, we've learned the problem with that is directors’ and community volunteers’ emails get hacked, just like, you know, management companies and banks. So, it's important for the association often to have their own coverage because the problem, you know, may originate with them and not with some third party.

(05:05) Candace Cole:  Exactly. And I feel like that's a trend that just seems to be getting more and more applicable in today's, you know, technologically savvy world.

(05:13) Paul K. Mengert:  Yeah, it's certainly important we hear about even law firms, in one case, I heard about an attorney who fell for one of the what they call social engineering, where somebody basically tricks them into thinking it's somebody that it's not. And, you know, that can happen to directors, it can happen to lawyers or managers. So, everyone needs to make sure they're covered. And as you said, the place you start with this is with your, uh, insurance agent. So, Candice, thanks for being here. We're going to take a AMG Community Leaders Series newsbreak, and we'll be right back.

(05:47) Speaker:  And now it's time for your HOA Solutions Today newsbreak.

(05:52) Newsbreak:  A new Florida law, effective July 1, increases accountability for condominium associations, COAs, and buildings three stories or taller. The law addresses key areas such as reserves, record keeping, maintenance and repairs. COAs can prepare for compliance by collaborating with their banking partners to prioritize capital projects, select appropriate contractors, and explore loan options. Examples of necessary projects include roof replacement, concrete restoration, painting to prevent leakage, and elevator maintenance. By working together, project managers and bankers can ensure these tasks are appropriately prioritized. This legislation affects Florida's approximately 49,000 homeowner associations and 27,000 COAs, impacting a significant number of homeowners across the state.

(06:38) Paul K. Mengert:  We're back. I'm Paul K. Mengert, and I'm here with Candace Cole, the Triad Area Operations manager for AMG. And we're discussing insurance acquisition today. Candace, I know we mentioned in the, before we went to the newsbreak, you mentioned that, uh, insurance agent is a great place to start with figuring out what you need and how to get it and all that. And of course, that makes sense. But how do you know you have the right insurance agent? And, you know, if, uh, somebody maybe new to the board, what guidance would you give them on finding out if you've got the right agent to start with?

(07:12) Candace Cole:  Well, Paul, I definitely would, you know, say utilize your professionals that you have available to you. You know, community managers at AMG. We work with a lot of qualified insurance agents, and we would be very happy to get them in contact with the board of directors, or if they already have an insurance agent that they used, you know, we'd be happy to reach out to them as well. I think having an agent who is well versed in the HOA industry will really help the directors in making the most informed decision they can when choosing their policy and their policy amounts. You know, a lot of insurance agents that do this on a daily basis are happy to come to a board meeting. We can invite them to a board meeting. You should be talking with them annually to review these insurance policies. You know, they can jump on a zoom meeting, a phone call, whatever the directors need so they can have the right information to do the right thing for their association.

(08:05) Paul K. Mengert:  Boy, do I agree with that. And frankly, I think a any association that's not meeting with their insurance agent once a year is really missing an opportunity. Things do change. And, uh, I think it's not only does it change in the insurance industry, sometimes things have changed at the association, and maybe new buildings have been added or new amenities have been added, or maybe there's just some new risk that's out there, like we were discussing cyber a little bit ago. Some of the older associations may have had great insurance that was, you know, good a long time ago. But, you know, the world has evolved.  Another place I've found that in addition to the community manager, the directors might want to check with their attorney for a recommendation of agents that the attorney has found to be to be solid. But of course, at AMG we work with a lot of different agents, and we're always, always pleased to recommend one. And I would just point out to our listeners that the agent is really, you know, crucial because, you know, the way this usually the acquisition works now on insurance is, the agent will go to a set of companies and get proposals from those companies and bring them back to the board. Some agents only work with one company, and some agents work with lots of different companies. And oftentimes the agent that requests a proposal first from a company is the one that the company considers to be the one who has the right to sell that association insurance. So, one of the problems is if you go to a weak agent or someone who's not super experienced and they're the representative interfacing with the insurance company. You may not have the best spokesperson lobbying for your community, and it's important at two times, really. It's important number one, when you're getting the insurance and you want to make sure you're getting the right price, the second time it can be even more important is when you have a loss, and you need a strong agent advocating for the rights of the association. So, I really, uh, you know, of course, price is really, really important when you're in requiring acquiring insurance. But also think about do you have an agent and an agency that's going to have some strength when you when or if you have a loss and you need somebody to be your ombudsman at that point?

(10:28) Candace Cole:  Yeah. And also, I mean just somebody to give you advice, you know, let you know kind of how they see this should be handled, what they should potentially do and what can be the, you know, pitfalls and all of that of having a claim. Nobody wants that to happen, but it certainly does. And having a strong professional, you know, in their back pocket will definitely pay off.

(10:50) Paul K. Mengert:  Absolutely. Well, Candace, this is really great. We're going to go to our second AMG Community Leaders Series, newsbreak, and we'll be right back with more about insurance from Candace Cole, AMG's Triad Operations Manager.

(11:04) Speaker:  And here's another HOA Solutions Today newsbreak.

(11:08) Newsbreak:  Residents from over a dozen Montana HOAs recently attended a sustainability workshop addressing education, financial challenges and practical solutions for HOAs. The workshop covered topics such as achieving sustainability certification, combating wildfire threats, forming action committees, and fostering collaboration between community managers and renters. The workshop director highlighted the excellent collaboration between HOAs and property managers, but noted differences between vacation rentals and second homeowners, emphasizing the need for tailored approaches based on varying priorities and resources. Key focus areas include landscaping, waste and consumption, finance and governance, and energy efficiency. Organizers plan to gather feedback from attendees to create a resource guide for homeowners based on these categories.

(11:58) Paul K. Mengert:  Welcome back folks. I'm Paul K. Mengert here discussing insurance purchasing with AMG's Director of Operations for the Greensboro and Triad Area of North Carolina, Candace Cole. Candace, this has been a great discussion so far. I think we've really touched on many of the thoughts of how you kind of begin this process. And while today's episode is more about the process than it is particular products, and that we have a lot of detailed information available on that otherwise. But just, you know, let's talk just for a few minutes about, you know, what kind of coverages might associations want to be asking their insurance agents about, that may not be one of the more obvious coverages.

(12:44) Candace Cole:  Sure. I don't know if anybody's ever listened to a CLS podcast or attended one of our previous meetings, they know I'm a big advocate of Standalone Directors and Officers Insurance, Paul. Um, I seem to talk about it a lot, but I think this is something that we, you know, definitely we're seeing a rise, I feel like in fair housing claims about discrimination and it's not monetary, its action based. And a lot of those endorsed policies on a standard liability insurance policy may not cover it. So Standalone Directors and Officers Insurance, we mentioned Cybersecurity and Crime earlier, an umbrella policy. I feel like a lot of board of directors aren't really aware that this will just increase their overall coverage for, quite frankly, a minimal amount of money. So, these are definitely different coverages that they should be asking about.

(13:38) Paul K. Mengert:  Absolutely. And I know that, um, I've recently talked to a couple boards about why they need their own cyber and crime policies and, you know, just maybe take a I want to take a minute here to mention that to our listeners, that there have been cases where either a rogue director or community leader or somebody impersonating a community leader goes into the bank or is able to through electronic means, access the funds of the association nefariously and money gets stolen without any involvement, frankly, of the management company or any failure of the bank. So, when we talk to our clients about having this coverage, it really is super important, not to mention just the possibility that a third party that's not connected with any of the association or the manager or any legitimate connection, somehow figures out how to steal the money from the from the bank. And that does happen. And does the bank automatically cover that? Well, it may just depend a lot on what the circumstances are. So, we certainly encourage clients to have this insurance. In many cases it is a very small cost considering the risk that's available.

(15:03) Candace Cole:  I know, Paul, you mentioned earlier about those emails, you know, social engineering emails. They are tricky. Um, they are very good at making them look at like they are from the legitimate company. And clicking on those links is very easy to do.

(15:20) Paul K. Mengert:  Sometimes over the yeah, sometimes over the years it just fell off people's radar or they couldn't afford it, at one point they didn't get it. So just copying what you got last year may not be good enough.

(15:31) Candace Cole:  Yeah. We actually even just when it comes to, you know, their property coverage, um, we had a community where their clubhouse was severely undervalued in their property coverage. You know, this housing climate, property values are going up. And so, they definitely just need to review that and make sure that what they have is what's covered, because that would have been detrimental to not having this coverage should something have happened to that clubhouse.

(15:56) Paul K. Mengert:  Boy, isn’t that the truth? And I've also seen it go the other way that, you know, sometimes I've seen these things overvalued and you're they're not going to pay you more than it's actually worth. So, overvaluing it doesn't really do you a favor. So, it really is a good idea to look at these things sharply. And it's one of the things we, you know, really haven't harped on that I want to, you know, at least touch on before we wrap up for today is who is really the advisor and who legally can be giving the association advice about insurance because most management companies, and certainly not AMG, we're not licensed to be providing insurance guidance so far as a process. Or we can talk about process and administrative ideas. We try to talk about questions that should be asked, but we are not licensed to provide, you know, insurance specific insurance advice to associations. So, who do we hand that to? Who do associations really need to look to for that?

(16:57) Candace Cole:  Like we said previously, Paul, we need to go with the professionals, the insurance agent who is licensed and if necessary, or they want to, their legal counsel as well they could reach out to. But, you know, I'm not an insurance professional. I know a lot about it have been, you know, being in the industry and just from different experiences. But, you know, we can't give that on point advice. We can give direction, but their insurance agent is definitely who they should be looking to.

(17:25) Paul K. Mengert:  Yeah, that's that is absolutely the way I see it. And sometimes, you know, at least periodically, it's a pretty good idea to involve the attorney and make sure that the agent has a clear understanding of all the property that the association is supposed to, uh, supposed to cover. And, you know, of course, we you know, a lot of times, look at what the business judgment rule is. Uh, directors are supposed to, uh, by statute, actually, uh, use good business judgment. And I believe that it is good business judgment for them to have direct contact with the insurance agent and attorney and be reviewing this carefully, because, sadly, associations do have big losses. That doesn't happen often, but from time to time it does happen. Candace, we're going to go to our final newsbreak today and we'll be right back.

(18:17) Speaker:  And now our final HOA Solutions Today newsbreak.

(18:22) Newsbreak:  Despite pending congressional actions to limit the Corporate Transparency Act, HOAs and board members are currently required to comply with beneficial ownership information - BOI reporting requirements. Accurate and timely reporting is crucial to avoid severe penalties, including fines of $500 per day for ongoing violations and criminal penalties such as imprisonment for up to two years and fines up to $10,000. CAI is advocating for their efforts to relieve HOAs from the BOI mandate, arguing that HOAs were likely not the intended focus of federal financial crime prevention efforts. Additionally, individuals may face civil and criminal penalties for willfully failing to file required BOI reports or for submitting incomplete or false ownership information to the US Department of the Treasury's Financial Crimes Enforcement Network.

(19:13) Paul K. Mengert:  We're back everybody. I'm Paul K. Mengert here with Candace Cole, and we're going to be wrapping up today with three takeaways from our acquiring insurance episode. Candace, tell us what you think the three takeaways are.

(19:26) Candace Cole:  Insurance agent. Insurance agent. Insurance agent. No, I, um I think one is definitely, you know, contacting professional insurance agents, somebody that works with the, uh, with HOAs on a frequent basis. Know the coverages. Education is power. Knowledge is power. So, you know the directors can educate themselves. I know we'll have some information on that as well. There’re many websites that they can visit that show the different kinds of coverages and also review those coverages on an annual basis. I can't, you know, state that more than I believe we already have, but they should definitely be looked at annually.

(20:06) Paul K. Mengert:  Excellent. Well, we do have some links in our notes today that people may want to take a look at. And just to wrap up with my three takeaways, very similar to Candace annual review of insurance number one. Number two, good insurance agent. Uh, number three, review with your attorney carefully and make sure everything you need covered is covered. Of course, AMG is always here to facilitate and help set up the, uh, meetings and appointments that the association needs, and try to get you to the right folks to help you on all topics, certainly including insurance. Candace, any final word?

(20:43) Candace Cole:  No, just thank you for having me, Paul. I enjoy doing this. And if anybody you know, like I said, if they have any questions, reach out to their community manager. We are more than happy to help.

(20:51) Paul K. Mengert:  Well, thank you everyone. Thank you for tuning in to this podcast episode. And a special thanks to Candace Cole, AMG's Director of Operation in Greensboro and the Triad Area, for speaking with us about the important topic of insurance purchasing. I'm Paul K. Mengert, your host for the 2024 AMG Community Leaders Series Podcast Edition. If you would like to explore more of our podcast episodes or gain access to the 2024 to more 2024 CLS content, please visit HOACommunityleaders.com.

(21:24) Speaker:  Thanks for listening to AMG's 2024 Community Leaders Series Podcast edition. To find out more information on this episode, please visit HOACommunityleaders.com. This podcast is a production of BG AD Group. All rights reserved.

• Insurance policies should be reviewed annually.

• Make sure you have a good, professional, up to date insurance agent.

• Be sure to carefully review your policy and coverages with your attorney to make sure everything you need covered is covered.

Navigating Changing Laws and Regulations: How HOAs And COAs Can Work with Banking Partners To Plan And Prepare

A new Florida law, effective July 1, will increase accountability for condominium associations (COAs) in buildings three stories or taller. The law addresses key areas such as reserves, recordkeeping, maintenance, and repairs. COAs can prepare for compliance by collaborating with their banking partners to prioritize capital projects, select appropriate contractors, and explore loan options. Examples of necessary projects include roof replacement, concrete restoration, painting to prevent leakage and elevator maintenance. By working together, project managers and bankers can ensure these tasks are appropriately prioritized. This legislation affects Florida’s approximately 49,000 HOAs and 27,000 COAs, impacting a significant number of homeowners across the state.

Leaders In HOAs Discuss How to Improve Sustainability Practices

Residents from over a dozen Montana HOAs recently attended a sustainability workshop addressing education, financial challenges, and practical solutions for HOAs. The workshop covered topics such as achieving sustainability certification, combating wildfire threats, forming action committees, and fostering collaboration between community managers and renters. The workshop director highlighted the excellent collaboration between HOAs and property managers but noted differences between vacation rentals and second homeowners, emphasizing the need for tailored approaches based on varying priorities and resources. Key focus areas included landscaping, waste and consumption, finance and governance, and energy efficiency. Organizers plan to gather feedback from attendees to create a resource guide for homeowners based on these categories.

HOAs must file BOI reports with the Financial Crimes Enforcement Network

Despite pending Congressional actions to limit the Corporate Transparency Act, HOAs and board members are currently required to comply with beneficial ownership information (BOI) reporting requirements. Accurate and timely reporting is crucial to avoid severe penalties, including fines of $500 per day for ongoing violations and criminal penalties such as imprisonment for up to two years and fines up to $10,000. CAI is advocating for efforts to relieve HOAs from the BOI mandate, arguing that HOAs were likely not the intended focus of federal financial crime prevention efforts. Additionally, individuals may face civil and criminal penalties for willfully failing to file required BOI reports or for submitting incomplete or false ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FINCEN).