By Gary A. Poliakoff and Ryan Poliakoff
Choosing an Insurance Agent and Exclusive Use Rights
This is the time of year when many associations are considering the renewal of their insurance policies, one of the largest line items in any budget. With other large contracts, your manager might prepare a specification of work and put out a request for proposal, and three or more contractors would submit bids with their pricing. But that’s not how it works in the insurance world for condos and HOAs, and this confusion causes a lot of associations to make questionable decisions when it comes to their insurance.
First, understand that, for many large condominiums, especially those on the ocean, you may only have one or two insurance options—QBE and Citizens (depending on QBE’s rates for your property). By law, insurance companies must provide the same quote to every agent for the same property at the same valuation. So there is no actual benefit to asking several different agents to quote the insurance on your property, at least with the big carriers. Further, these companies won’t even let the agent quote your property until he or she has received an “agent of record” letter that authorizes him or her to be the official agent for the property. So there is, in reality, no situation where multiple insurance agents are able to get multiple actual bids from the same insurance companies for the same property. It simply doesn’t work that way.
Instead, what you may see if you bring in multiple insurance agents for interviews with the board is a variation in the assumed valuation of the building, and then estimations of the premium that would apply to that valuation. For example, a broker might make a presentation and say “I don’t think your property is really worth $100 million, I have a legitimate appraiser who will say it is worth $85 million, and that will save you $50,000 on your premium.” And it will. But remember that this is not some special discount—the broker is saying that he will lower the appraised value of the building, and in turn QBE or Citizen’s rates will be lower. But any insurance company doing the same thing would be offered the same rate.
Now, there is a secondary market for insurance for some properties, especially those that are not at high risk from hurricanes or flood. Many of these insurance companies are smaller and less capitalized, but they can still be highly rated and a safe insurance option. Different insurance brokers will solicit quotes from different pools of companies outside of the main three or four, so it is a valid question to ask your agent exactly where he or she is shopping your policy.
So if you know that insurance quotes are fixed by law, and that only one agent at a time can receive an official quote, how do you as a board member go about choosing an insurance agent for your community? Insurance is all about customer service. When a disaster happens, who is the agent you feel comfortable helping you recover? Whom do you trust and like working with? Is your agent local and available to you, or are they based in another state? When you met, did they tell you the truth about the way condo and HOA insurance works in Florida, or did they sell you a line about how much money they can save you if you would only sign an “agent of record” letter for them? Remember, that letter is the official letter that changes your insurance agent, as far as insurance sellers are concerned. So don’t get fooled into thinking that you can sign ten of them and get repetitive bids from multiple providers. It just doesn’t work that way. Pick one strong, trustworthy and experienced insurance agent for your association, and let that person do their job—reaching out to every available market, finding an appraiser who will value your property accurately and fairly and bringing you the best quote possible.
I live in a community that is governed by an HOA. My question is: when I purchased my unit I was told that I was required to pay maintenance fees to the association for the amenities in the clubhouse; however, the board gave one room to a club for their exclusive use and gave the café owner the lounge and the patio area. I feel that, if I am paying for these rooms, I should have the right to use them (after all, they were listed in the offering). Signed, S.M.
We are of the opinion that the board does not have the authority to grant an exclusive use right to any part of the common areas to a private club, to the exclusion of the unit owners. However, as to the Board leasing a portion of the club house to a concessionaire for its exclusive use, that is not uncommon, assuming that the Board is vested with the power in the covenants, conditions and restrictions.
Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living. Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site. Email questions to firstname.lastname@example.org. Please be sure to include your hometown.