Directors and Officers Coverage is Not the Same as Fidelity Coverage

I was in court today, involved in a dispute about (among other things) inadequate unit owner access to association records and inadequate insurance. In response to my claim that the Association had no fidelity bond (as the Declaration required), the opposing counsel waived the Association's Directors and Officers policy, arguing that its coverage was "the same" as that provided by a fidelity bond.

He's wrong. I may need to hire an expert to testify to that, but you don't need to. Ask your Association's competent community association insurance agent, and they'll tell you that the two policies are entirely different, and that your Association needs both.

A fidelity bond (sometimes called fidelity insurance, but often referred to in governing documents as a bond) provides coverage for "loss of money, securities, or any other property due to acts of dishonesty committed by an employee acting alone or in collusion with other persons..." Directors and Officers coverage, on the other hand, provides coverage for "mismanagement or [intentionally] wrongful acts." The covered wrongful acts may have been intended, but if the intent was to steal from the Association, the Directors and Officers will not be there to help.

Lesson for today: Your Association should have Directors and Officers and fidelity coverage. If your insurance agent tells you otherwise, it's time to find a new insurance agent. Look at the resource directory at the UCCAI web page for a list of agents specializing in community association insurance.

And if your attorney tells you otherwise, you know where to find a new attorney. ;)

Liveblogging CCAL -- Part 2

The current session is dealing with the perpetual issue of when to report a liability claim. The speaker, Jeanette Dixon Lee-Sam, is reporting that one of the largest reasons for denial is the failure to give timely notice. She reports that her company (AIG) has a staff or lawyers, one of whom will be appointed to seek to resolve the claim, in house.

Ms. Lee-Sam has stated, more conclusively than I have ever heard anyone state, that the notice of a potential claim will not adversely affect coverage or premiums. Her co-presenter, Joel Meskin, generally agreed, although he said that a number of notices may have an adverse effect.

Association lawyers who wish to provide a defense on behalf of their insureds, and insured associations which wish to have their counsel are advised to: 1) carefully consider whether that is, in fact in the association's best interest; 2) articulate, if they do wish to represent the association, how they are specially suited to assist, and 3) be willing to accept the insurer's scheduled rates.

More Risks Associated With Smoking

In case you missed it, there was a rather spectacular and very unfortunate fire at the Incline Terrace Condominiums last Friday night; as a result of the fire, 80 residents were displaced, and 39 units were destroyed. Here are some links to stories on the fire: KSL, The Salt Lake Tribune and the Deseret News.

Fortunately, no one was killed or seriously injured in the fire. Unfortunately, a few pets were apparently not rescued, and a number of unit owners (and renters) were without insurance for the contents of their units.

Please, regularly remind your owners and tenants that the contents of their units are not insured by the association's policy. And if you prohibit smoking in the units, you probably ought to prohibit it on the decks, as well. (There is a conflict, in the various news stories, as to whether the association tried to stop the on-deck smoking.)

The photo was taken by Jason Denney, and posted on ksl.com.