INSURANCE QUESTION

A growing number of associations in the Village are considering “jumping ship” as regards having the insurance coverage on their buildings with Plastridge Insurance Agency, the agency with whom the Village has done business for some time. Our association is among them. From what I understand, the Insurance Committee is looking into changing agencies as well, and has whittled down their choices for 2011 to three, Plastridge being one of the three.

It is very late in the game to be deciding, however. The deadline for our management company to have the final 2011 budget approved by our board is December 15--otherwise, there would not be time to get payment coupons to owners by January 1. But from what I have been told, the Insurance Committee plans to have come to a decision on the agency they will go with by December 21. Not wanting to wait till December, some associations have looked into buying their own insurance.

There’s a lot that could be hashed out about all this, including, why, since no hurricanes have hit us since 2006, Plastridge’s projected rates for 2011 are 10% higher than the 2010 projected rates (the projected rates being the budgeted amounts for most associations). Plus why, when after much prodding, Plastridge FINALLY provided each association with a copy of their 11 policies but (inexplicably?) FAILED to give the prices for the separate policies--making it impossible to know if a policy was worth its cost! And why Plastridge waited so long to divulge the fact that the Village had been turned down by the insurance company that covered damage from internally-caused water leaks (many think because of the suspiciously inordinate number of huge water damage claims in one single year, 2009). Which in turn resulted in the rates for this particular insurance nearly tripling through another company that would write us this insurance.

My question now is only one, however. There is a rumor afloat that associations who make their own insurance arrangements will be penalized in some way. Is there anything to this, and if so, what kind of penalty would this be? Could it be that if an association purchased insurance on its own for 2011, was dissatisfied, and wanted to get back on board in 2012 with the insurances arranged for by UCO, that the association might have to do so at higher rates than if it had stayed with the UCO-arranged insurances in 2011? I am not an insurance expert, but I think could understand this. I get a lower rate on my State Farm insurance for having been with them for a number of consecutive years and had no claims.

Can someone tell me? Many thanks.
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Your BLOGMEISTER replies:

Hi all,
This is a wonderful question, let's explore what is a somewhat complex issue:

First let me address this issue of UCO imposed "penalties". This is not the philosophy of "my UCO". I have seen some quasi threats in past correspondence that were simply revolting. They all go along the line of "do this, or sign that - or else...." To simply make a long story short; that is not my "style"; but for the record, those Associations that "jump ship" will be in violation of 28 years of precedence and the 10 year standing Bilateral Agreement, from which we have all benefited.

Now, what about Insurance; Your insurance Committee has been in conference for the last three days with candidate Agencies. The meetings have indeed been restricted to Committee members only, because Company proprietary strategies were discussed. Why were we in conclave for many hours each day; because in accordance with our Bylaws, we went out for bids on our Insurance needs and these three agencies survived the bidding process.

The choice of the Insurance Committee will be revealed very shortly but the strategy governing what your Association will pay, is very much in the hands of each and every one of you! There are very different strategies being employed this year, each building will be individualized depending on their committment to Maintenance and of course the Association claims history. The era of "one size fits all" is over!

Briefly, there are some eleven (11) coverages on the table, they are:

1) Property. The major component of your policy, quotes range from $3.413 - 3.802 million dollars.

2) Difference in conditions (DIC). Quotes range from $450 to $623 thousand dollars.

3) Boiler and machine. Quotes range from $35 to $201 thousand dollars.

4) Crime/Bond . $29 thousand dollars.

5) Wind Buy down. $416 to $892 thousand dollars

6) Ordinance of law. Not quoted at this time due to future expiration date.

7) General Liability. Quotes range from $225 to 242 Thousand dollars.

8) Umbrella. Quotes range from $73 to $121 thousand dollars.

9) Directors and Officers (D & O).  Quotes range from $219 to $224 thousand dollars.

10) Workers Comp. Quotes range from $158 to $173 thousand dollars.


These numbers are approximate and for the entire CV Campus and the quotes are interlaced with a plethora of various Deductibles and conditions; a very complex task to sus out!
So how can every Association control it's individual premium?

The first question you need to ask is "Do we need each and every coverage"?
For example, by accepting the entire package, the premium for the Village can be as high as: $5,996,336.00 plus some 6% in taxes and fees!

However if the Wind Buy downs were rejected, the premium for the Village would be $4,132.872.66 This is a very significant difference.

Clearly if each unit owner has Homeowners Insurance with the mandatory minimum of $2,000.00 loss assessment coverage, they would be covered in the event of a catastrophy requiring your Association to assess each unit to cover the building deductible.

Larger buildings however such as 42, 56 and 80 unit buildings would require each Homeowners policy to have as much a $3,750.00 loss assesment coverage. An 80 unit building, valued at $10,000,000.00 with a 3% deductible would have to come up with a $300,000 deductible payment thus suggesting loss assessment coverage of $3750.00 per unit. Another option would be to establish a "Reserve for Deductible"

One comment on the "jumping ship" mentioned in Lannys Post. There is no possibility that numbers will increase by 10%, as the highest quote we have in hand, assuming all Associations take the full 11 coverages comes to $6,356,116.00 which includes Taxes and fees. The current total premium is $6.9 Million, which suggests a $600K reduction. As noted above, if Wind Buy downs are rejected, we are looking at $4,380,844 a delta from current rate of $2.6 million dollars.

Finally, the Agents UCO are meeting with have decades of Corporate history, hundreds of staff and large geographic footprints. This will serve us well in the event of major Insurance casualty.

A word on the redacted numbers in the policies that were distributed to Associations. Interestingly, the copies distributed to UCO were not redacted, thus, there is no acceptable explanation whatsoever for the redaction, and it will not happen again while I am in office.

The new company sending you letters was filed with Florida SunBiz on April 16, 2010. While the individuals in the company may have many years of experience, what is their Corporate track record in case of a major catastrophy?

So, wait for the numbers and think before you jump! Even if you put out a budget this year with a number for Insurance that turns out to be to high, the excess will be there at year end for any use the Association desires.

Connecting the dots:

For some guidance of what coverages you need, start with the basic coverages mandated by Florida law. These are to be found in the sidebar of this BLOG under "CONDOMINIUM INSURANCE": or simply click on the following URL:

http://goo.gl/4fklf


Dave Israel