The Value of Loss Assessment Coverage Covering Your Bases

I just attended my monthly association meeting where our board advised our members that our homeowners association had just been hit with a $1,500,000 judgment resulting from a skateboarding accident in our association-owned parking lot. That news was tragic enough, but unfortunately, the really bad information was to follow.

Our association only had $1,000,000 in general liability coverage for this incident. Accordingly, the remaining $500,000 of the judgment will have to be satisfied via a special "loss assessment" levied on the association's membership. With only 10 members in our association, each member will be assessed $50,000 apiece. My neighbor sitting next to me said, "Thank goodness I have loss assessment coverage."

I turned to my neighbor and asked, "What's that?" After all, I said, "My insurance broker told me I have full coverage." As I found out, however, the "full coverage" I was told I had did not include loss assessment coverage, which pays on an association member's behalf their share of an assessment charged against all members as a result of a covered loss. A loss assessment policy would cover the $50,000 assessment set forth above in most cases—assuming that the association had proper insurance in the first place.

As specialists in the area of community association insurance, we provide coverage to thousands upon thousands of community associations nationwide for their directors & officers (D&O) liability coverage. However, it never ceases to amaze us that association members are still confused as to what legal costs and settlements the association is responsible for and what they as an individual association member are responsible to cover on their own. Although this might seem obvious to many, not all consumers are sophisticated, and what you as an association member must be is an advocate for yourself and your position. This is not as difficult as it sounds. At a minimum, if you are buying insurance for your condominium, cooperative apartment, or single-family home in an association, you must ask the insurance agent some basic questions. Loss assessment coverage falls into this category of insurance that you will absolutely need that is not provided within the association coverages. This is necessary whether you are in a condo, co-op, or single-family home.

When considering purchasing a loss assessment policy, you must keep in mind the following:

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15 Comments

  • I would like to have the names of insurance companies who do business in New Hampshire and write loss insurance policies in the highest amount. I have been told that my insurance company only covers 1,000.00 and I want to change to a company that will cover a higher amount.
  • Joel, My condo complex in Pa has just assessed each homeowner with 53K due to a supposed manufacture's defect of stucco and the builder's neglect in proper installation. Would assessment coverage generally cover this type of assessment? I believe I have 50K coverage.
  • What benefit would it be to have loss assessment for a single family home, and we are not a member of an association? How would that apply?
  • I have suggested this article to the residents of Sand Lake Hills in Orlando, Florida. The homeowners there have been involved in a massive lawsuit with the costs ballooning to well over $100,000. The HOA has told the homeowners involved in the lawsuit that they would "take care" of the situation, but it now looks as if a special assessment may be made. I was unaware of such a thing as Loss Assessment Coverage Insurance, but think that your article may be eye opening for my neighbors, and possibly bring much needed protection to a neighborhood in trouble. Editor's Note: the author of this article is no longer with Ian H. Graham Insurance but Ohio-based, McGowan & Co. We can provide you with contact information.
  • My policy shows "loss assessment deductible" of $50,000. Does this mean that I am COVERED for $50,000 of my share of liability, or that I have to bear the first $50,000 of claims and the insurer covers only the excess (this is in my umbrella policy).
  • THANKS SO MUCH FOR THIS INFORMATIONS............................SINCE I PAY SUCH PREMIUMS, I WOULD THINK I AM COVERED. BUT, REST ASSURED I WILL ASK MY FRIEND, HOWARD, WHO TAKES CARE OF MY POLICY WITH CHUBB,
  • Terri, he writes "At a minimum, if you are buying insurance for your condominium, cooperative apartment, or single-family home in an association..." There are lots of planned/gated communities that have HOAs to maintain shared amenities like community pools, golf courses, parking areas, etc. This is not usually the case though. You're not a member of an association, so this doesn't apply to you.
  • OUR CONDO WAS JUST ASSESSED $235,000 BECAUSE WE WERE $156,000 SHORT IN A PERVIOUS ASSESSMENT DUE TO FORECLOSURES AND OUR CONTRACTOR GOING BANKRUPT LEAVING WITH $150,000 OF OUR MONEY WILL AND ASSESSMENT LOSS POLICY COVER THIS
  • I DON'T KNOW. CONTACT YOUR INSURANCE AGENT.
  • Please keep in mind.....the loss assessment coverage ONLY applies to covered perils. In other words, if the loss is something that is not covered under the associations policy or even a normal homeowners policy, the loss assessment coverage would also not apply. Example: The roof on the parking garage is old and needs to be replaced causing an assessment to the association memebers. Since normal wear and tear is not covered, the loss assessment coverage would not apply. However, if the roof blows off in a tornado ( a covered peril) the the loss assessment coverage could come into play.
  • Would a a Would a government mandated water system replacement be considered a loss assessment since each homeowner is responsible to pay $20,000 over a 20 year period fysbbny governmen
  • Last April our condo association assessed each owner for a roof replacement due to severe leaks. this roof was replaced in 2006 after one of two hurricanes we experienced in Florida . In 2006 we were assessed and paid for a 15 year roof, of which we are in litigation over because of a faulty installation. . My question now is on my current policy ($2,000.00) loss assessment clause , can I make a claim against the $5100.00 assessment.
  • CONDO INSURANCE IS TOO EXPENSIVE IN PALM BEACH COUNTY, FL I AM THE HOMEOWNER, CAN A HOMEOWNER BUY JUST THE LOSS ASSESSMENT COVERAGE?
  • Will this coverage cover litigation costs for both the HOA whether they win or lose? And would it cover what some may call "frivolous" lawsuits
  • You talk about Unit Owners Loss Assessment Coverage, but the "Master" Condo Assoc. policy I have for our small condo assoc. shows $50K for Loss Assessment- what would that cover, Can you give me a scenario when a Condo Assoc, would use their own Loss Assessment ?