Southern California HOAs’ Insurance Challenges

››› By William Yarian,

CMCA®, AMS®, PCAM® Many California community associations are built close to high-risk fire areas. Wildfires in recent years have caused significant property losses and, sadly, human lives. Several insurance carriers have canceled insurance policies for various reasons or have left the California insurance market. Their departure is mainly due to the increased amount of claims they have paid.

With less competition and wildfire risks increasing, the remaining insurance carriers have increased the premiums, often significantly. Some association boards have been left with no choice but to pass an emergency assessment to pay their substantially-higher insurance premiums. Some policies offer lower property coverage limits or higher deductibles and, in some cases, both. These factors have had a negative financial impact on some community association finances. Unfortunately, wildfires are not preventable. Community associations can prepare to protect residents and property by being proactive in diminishing the risk of wildfire losses for their communities. Some suggestions are as follows:

Landscape Fire-Scaping

Fire-scaping, which is the process of planning common area landscaping to prevent the spread of wildfires by incorporating fire-resistant plant species. Clearing dead plant material surrounding the community is an effective fire prevention method. Community associations in high-fire areas should comply with all brush clearance

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requirements. Trimming trees adequately and away from structures by removing dead foliage will prevent fires from reaching property. Lastly, maintain roof surfaces free of any flammable material.

Homeowner Fire Safety

Residents play a big role in preventing fires on their personal properties. Educating and reminding residents is an effective way to prevent fires. Some best practices are proper open-fire practices and disposal of fire ashes, working smoke alarms, keeping private property landscaping free of dead material, storing combustible materials safely, following local fireworks restrictions, etc. Local fire authorities offer protection recommendations and can be engaged to conduct fire safety training or inspections.

Maintenance

Maintaining appliances and mechanical components in community common facilities and private homes in the best condition helps prevent fires. Flying embers from these fires can easily spread to the surrounding natural habitat or neighboring properties. Reminding residents about the importance of appliance maintenance is encouraged.

Disaster Plan

Community associations should formulate and keep an emergency plan current for disasters. Plans should cover what steps to take if any structure is destroyed combined with a financial plan to overcome a disaster, and whom to contact when an emergency strikes. Prioritize educating and communicating the evacuation plan to all residents. Arrange for emergency repairs and shutting down access to hazardous areas to prevent liability and promote community safety.

Insurance Requirements

Risk transfer is essential in protecting community associations. The California Davis Stirling Act requires community associations to have a master policy. Insurance policy coverage limits should be adequate to cover the replacement costs in case of a loss. It is best practice for community association boards to review insurance policy coverage limits with their insurance agent annually.

William Yarian CMCA®, AMS®, PCAM® is the owner and CEO of Infinity Property Services AAMC, a full-service management company serving Los Angeles and Ventura counties. He can be reached at william@ipsmanage.com.

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