President’s Message: A Question of Insurance

Good Morning Residents.

There have been many questions about the change in policy regarding insurance requirements for entertainers and performers. Although the concern has been described for just the entertainers, the changes were directed at all contractors that access the facility. Perhaps the best way to start is to explain what was required, what is required now, and why the change.

About one year ago the Finance Advisory Committee (FAC) was directed by the Board to examine and recommend changes in our contracts, agreements, insurance coverages, and how each would affect the HOA. FAC consulted with legal counsel for the HOA and made written recommendations to the Board. There were examples of contractors not supplying required certificates of insurance and related endorsements to be furnished to the HOA making it more difficult to collect on a potential claim for damages.

It is true that guests of residents do not have to show any proof of insurance when accessing our community and its common area and amenities. Please remember all residents take responsibility for their guests and any damage that may be caused while visiting our community. In the case of a guest of a resident, if the guest causes damages in the common area, the HOA will collect from the resident if the guest refuses to pay the claim. This is different for all contractors in that if there is damage by a contractor, we would have to take legal action, like small claims court, if the contractor refused to pay a claim. This is a more time consuming and costly process for the HOA. On the other hand, if the HOA has entered into a written agreement which requires a certificate of insurance from the Contractor or Entertainer, together with the Additional Insured endorsement from the insurance company, the HOA can submit the claim and be paid by the other insurance company, which protects our HOA from a claim and possible increase in future rates.

In the review by FAC and legal counsel for the HOA, it was determined that some contractors were not providing a certificate of insurance for Automobile Liability which is separate from Commercial General Liability insurance. The HOA was already asking for a certificate of insurance for Commercial General Liability together with an ‘Additional Insured’ endorsement on the insurance policy, from all contractors and Entertainers. What was not being checked was ‘did the contractor or Entertainer have Automobile Liability insurance coverage’.

Since this coverage was not being checked, the FAC recommended that all agreements with Contractors and Entertainers have a provision requiring a certificate of Auto Liability insurance coverage in addition to a certificate of Commercial General Liability coverage. The FAC, legal counsel for the HOA and the insurance broker of record for the HOA also recommended the minimum limits of coverage for Automobile Liability be the same as the minimum limit for Commercial General Liability which was One Million dollars ($1M). The Board decided a minimum limit of $1M for Automobile Liability insurance was burdensome for the entertainers that were being hired by the Clubs and Groups, so they voted that part of the recommendation down. It was discussed and decided since California law requires proof of insurance, and people are supposed to carry such a card in the vehicle, we would just ask for a copy of that card for Club Entertainers. That way no Entertainer would have to obtain different coverage or pay for an increase in coverage limits. The Entertainer would simply show proof of Automobile Liability insurance with at least the minimum California car insurance coverage for Bodily Injury Liability and Property Damage Liability, and the HOA would be satisfied. This was the compromise at the time regarding Automobile Liability coverage for Entertainers.

The Board thought requesting a copy of an insurance card would not be a burden since everyone already had one by state law requirements. So, this policy was implemented at the beginning of this year in the hope of increasing the protection of the HOA, and it would cause little effort to obtain. It now appears some feel that asking for such a document for the Club Entertainers is a burden, so the Board will need to discuss this situation once more. It was not the intention of the Board when implementing this policy that any Club or Group would be overly burdened with the request because the proof of insurance for Automobile Liability is a state requirement. It was also thought by the Board that checking to be sure Contractors and Entertainers have auto insurance when they drive on site was a responsible policy.

I understand no system is perfect and we try to implement that which can work for the great majority of situations. Many of the situations don’t come up at the time of implementation but become known after the implementation process. For example, what happens if there is a substitute performer last minute because of illness, emergency, etc. The insurance would not be confirmed. This is true. What happens for the guests of the performers that drive in a separate car, there would be no proof of insurance. This also is true. What happens if a Contractor or Entertainer cancels their insurance, we would not know it was cancelled, and that too is true. All these exceptions can occur and make for more detailed work for the Clubs and Groups. It was never the intention of the Board to make for more work just to make for more work. It is the intention of the Board to protect all residents of the HOA the best we can within reasonable limits, a point of balance you might say.

Given this information the question now before the Board is what policy should be implemented? I totally understand and agree that more work for little reason seems onerous and burdensome. Somewhere we need to find that balance to protect the 6,000 residents and not to overly work Clubs and Groups that supply such terrific service and programs. Finding the balance will be the challenge. We could simply remove any requirement for proof of auto given that many think it is a low risk situation. We could make exceptions for just some Clubs and Groups, but that might seem unfair to other Clubs and Groups. And then there are some residents that believe asking for the card is not a burden and needs to be done. I do believe that if residents don’t want the Clubs and Groups to have to do such work, and the residents want our insurance to cover the claims because it is a low risk, I think that is their right. But we need to all recognize, with open eyes, it might lead to higher premiums, can’t say how much, can’t say it would happen, I can only say it is possible.

At our next Board meeting we will need to discuss and try to a find a solution. There is no perfect answer but there should be a reasonable solution that benefits the greatest good. So, everyone should respond to the Board with their thoughts, ideas, and solutions. Your opinion matters because in the end, whatever risk we take on, we do it together and it will affect us all. At the same time, if policies are too burdensome, and we lose volunteer programs that we all enjoy, that too affects us all.

So please write to us with your thoughts on how we should proceed.

Thank you for your help.

Kim Fuller