Though the storm has passed and the waters have receded, the damage of September’s Hurricane Irma is still rippling through its path. The destruction has left many residents homeless and communities in a state of total disrepair. The question of financial responsibility lingers unanswered, leaving many HOAs in a precarious position. This disaster shines a bright spotlight on the need to reform HOA reserve spending and the absolute necessity of reviewing HOA insurance policies.
Two months out from the hurricane, Floridian HOAs are still failing to manage the financial burden of repairing common areas and walls-out unit damage. Homeowners, already struggling with thousands of dollars in personal losses and temporary housing expenses, are now facing increased HOA dues and special assessments. Meanwhile, HOAs must account for some residents being unable to pay. Worse yet, FEMA funds may be unavailable to assist HOAs in clearing debris from roads and common areas which the feds consider “private property.”
Another major problem is the simple effect of supply and demand. Following any natural disaster, private resources are strained. HOAs like Tamerlane in Hollywood, FL had to inform its residents a month after Irma made landfall that the private contractors were charging anywhere from double to ten times their normal rates for debris removal.
Other HOAs are facing a different issue. Some county and city governments are offering to clear debris on private HOA property but only if the board signs a waiver that indemnifies the government and third party contractors against any damage or injury that occurs during the clean-up. This creates an enormous risk for HOAs, particularly if they are underinsured. HOAs trying to avoid being held liable for property damage or personal injury are left to pay for the debris removal themselves.
The fallout of this financial tie-up could change the way HOAs allocate their reserve funds, too. In Florida, HOAs are legally bound to raise money for a reserve dedicated to maintenance and other large projects, but residents can vote every year to waive this reserve to be used for other purposes. This leaves too many HOAs without enough reserves to even begin handling the impact of a natural disaster like Irma.
In all of this chaos, one thing is certain—communities which had the proper HOA insurance before the hurricane are in a better position to recover more quickly. Having the right amount and coverage allows HOAs access to the cash needed to start on repairs and debris removal or to protect against the risk of government waivers. This will be a hard-learned lesson for many association communities, but others throughout the country can and should take note of the need to be protected with HOA insurance before disaster strikes.
About Scott Litman Insurance Agency
At Scott Litman Insurance Agency, we are dedicated to protecting HOAs like yours. We have a unique understanding of the industry and the common risk exposures that you face in your daily operations. In fact, we find that 90% of the policies we review are missing coverages that violate the Covenants, Conditions, and Restrictions (CC&R), exposing the board, HOA and management to lawsuits – which is why our comprehensive policies are tailored to meet your specific needs at competitive prices. For more information about our products, contact our experts today at (818) 879-5980 ext. 201, or fill out our online form.