In Pembroke Pines, the Heron Pond condo complex’s property insurer halted coverage in April, and the general liability carrier warned it won’t renew its policy when it expires in June.

Near North Miami Beach, the Star Lakes condo complex’s board president said he expects this year’s insurance premiums to be about 45 percent more than the association paid in prior years.

And at the Hammocks in West Kendall, the association’s general liability and umbrella insurers refused to renew policies this year, and few new carriers offered new policies.

These associations have one thing in common: For years, board members pulled off various types of mismanagement and schemes, lawsuits and homeowners allege.

They aren’t alone. Condo associations and HOAs across South Florida have been involved in hotly contested disputes, with owners alleging that boards of directors ran plots such as election meddling, fund misappropriation, insider deals with vendors and inadequate property maintenance despite assessment hikes.

At some associations, after hard-fought battles to oust board members, new leadership is working to fix past misdeeds and make the communities whole. But leaders are finding that the associations’ histories of litigation, insurance claims and building code violations are still haunting them.

Insurers aren’t looking kindly at these associations, with carriers unwilling to provide coverage or quoting higher premiums and deductibles, according to experts and records.

The issues come amid Florida’s strained insurance market. Premiums surged in the wake of the deadly 2021 collapse of Champlain Towers South in Surfside. Some carriers already have stopped insuring properties in the state, while others are raising premiums because of the exposure to hurricanes and storm surges. Champlain was only insured for $48 million.

Some associations saw their total insurance costs double or triple, driven by property premiums. Overall, property insurance costs are now starting to stabilize, though not soften, brokers said.

But associations with a litigious history, structural safety citations due to alleged mismanagement, or in some cases criminal investigations into former board members are dealing with a new frontier of insurance issues.

“Imagine if they oust the corrupt board, and someone had filed a lawsuit, and the insurance is going to pay. When it’s time to renew, there are significant increases,” said Tamara Reyes, founder of South Florida Property Management Solutions, which helps homeowners who suspect association mismanagement.
 

The problem is pronounced at the Hammocks, one of Florida’s biggest HOAs, where a former board president, her husband and three ex-board members were arrested in 2022 on charges that they ran a massive fraud scheme by hiring bogus contractors that did no work. When the association paid the contractors, the ex-board allegedly misappropriated the payments.

Due to the prior board’s alleged misconduct and the association’s claims history — including four wrongful death claims — just three carriers provided quotes for general liability insurance and two for umbrella coverage, which provides excess protection to general liability. All came in at “exorbitantly high premiums,” the Hammocks receiver who oversees the HOA wrote in a court filing.

Reyes said issues don’t have to be as severe as at the Hammocks for associations to experience insurance woes.

“You have to either go into the secondary market, which means the premiums are going to go up, or not be insured,” she said. “It’s becoming a big issue.”

Association insurance 101

Under state law, condo associations and HOAs must secure property insurance, which is the costliest. Association flood insurance is required by mortgage lenders to homebuyers, as it’s usually too expensive for unit owners to get this coverage on their own.

But association governing documents and contracts with property management firms also usually spell out a slew of other required policies. They include directors and officers (D&O) policies protecting board members if they or the association is sued over their decisions; workers’ compensation; general liability (GL), and umbrella policies that provide excess coverage for D&O and GL policies, according to experts. Crime insurance covers financial fraud and theft.

Policies are annual, and insurers generally require a lump-sum payment. That pushes many associations to take out financing for the premiums, repaid in increments at interest rates of about 5 percent to 8 percent, adding to the total cost.

Insurers consider an association’s five-year claims history, said John Lee, vice president of FirstService Financial in Florida. Civil litigation also could play a role, as D&O and GL policies include a duty to defend an association and its board members.

“That’s going to affect many things with your ability to get insurance,” Lee said. “[In Florida,] there’s not a lot of carriers, there’s not a lot of capacity, and there’s not a lot of appetite. So the carriers that are writing insurance, they want the clean stuff that doesn’t have any claims history or anything attached to it that’s not squeaky-clean.”

Some properties have been thrust into the public eye through campaigns to oust board members. Insurers are taking note. “Underwriters are people too,” said Ben Meyers of AssuredPartners. “They’ll Google the association.”

NEWS PAGE

HOME