Are You Really Covered?

Understanding the Different Types of Insurance Policies & Coverages in HOAs

Inquisitive board members often ask “What is the difference between ‘Walls-In and Walls-Out’ insurance coverage, and what about a homeowner’s investment in upgrades, are they insured, and by which policy? Because of these frequent inquiries and a common coverage gap found in many homeowners’ policies today, this article was written to help anyone who lives in an association insure their home properly. As volunteer board leaders, it benefits us all to share what we learn with fellow homeowners at HOA open meetings, at Echo Resource Panel Luncheons and Educational Seminars and in our HOA newsletters.

The Walls-Out Master Property Policy

As many veteran board members and managers know, the CC&Rs set the governing rules for which building components the Master Property Policy insures as common area, and which building components the owners must insure in their personal homeowner policy. For condominium associations, most of the CC&Rs stop their coverage at the unfinished drywall. This is commonly called a Walls-Out Policy, meaning that the Master Policy will pay to rebuild the structural framing of the home including the roof, chimney, rain gutters and downspouts, wood or stucco siding, windows and door frames, appurtenant fencing and sheds and main plumbing and utility lines. Everything inside the drywall is the responsibility of the condominium owner.

For planned unit developments, most CC&Rs require the association to cover a minimal area on the lot such as painting the exterior siding or replacing the top roofing material. This is because in planned unit developments owners own their lots, similar to a single family home, so the CC&Rs often require the owner to insure the entire building on their lot. This is why it is important to know if an association is a PUD or a condominium and to read the CC&Rs carefully to avoid a risky coverage gap! When boards choose to insure with a WallsOut Master Policy, the homeowner needs to insure their interior building components such as: kitchen cabinets and counter tops, sinks and plumbing pipes, bathrooms, hard wood flooring or carpets, AC system, hot water heater, furnace and ducts, lighting fixtures and outlets, and the cost of painting the interior. Also, all interior upgrades made since the IDOC, or initial date of construction, must be insured by the homeowner, not the association. This is a big financial exposure, but not to worry, because owners can cover this exposure by getting the right type of building coverage in their homeowner’s policy, or what is often referred to as the H06 policy. H06 is the insurance company’s term for a condominium insurance policy. Interior Building Components: The Big Coverage Gap

The smart way condominium owners can protect themselves when the association has a Walls-Out Master Policy, is to add interior building component coverage to their homeowner’s policy. A simple call to the owner’s insurance agent is all it takes! An owner can ask if their policy has dwelling or building coverage and at what limit. If the Master Policy insures only from the drywall out, it’s recommended to get a minimum of $50,000 for the interior building components listed above. If the home is large or an upscale condominium, much higher limits may be needed.

Too many homeowners don’t have this type of building coverage or adequate coverage in the individual policy or H06. It is the most common coverage gap in individual condominium policies. The Walls-In Master Property Policy

A Walls-In Master insurance policy offers more coverage than a Walls-Out Policy and typically will pay for damage to the interior building components as they were constructed on the IDOC, or initial date of construction, with one exception – no coverage for any upgrades made by current or previous owner(s). This means if the original flooring in a home built in the 1970s was lovely yellow linoleum and the counter tops were egg white Formica, that’s all the Master insurance will pay for today after a fire or water loss. If the home has custom hardwood flooring and granite counter tops today, the unfortunate homeowner will have to pay out of pocket to replace these upgrades post fire, unless they are in love with yellow linoleum flooring and egg white Formica! association is a PUD or a condominium and to read the CC&Rs carefully to avoid a risky coverage gap!

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What accidents are covered by a Master Property Policy?

Fire or Arson Lightning Strikes Wind Storm Smoke Damage Theft Explosion Falling Objects (i.e. trees, drones, aircraft, or even meteors – it’s happened!) Interior Water Damage if Sudden and Accidental (i.e. broken pipe or appliance) Vandalism Volcanic Action Collapse of Roofs or Walls Freezing of Pipes Sudden Leakage of Fire Sprinklers Thawing of Ice, Snow or Sleet Sinkhole Collapse Hailstones Riot & Civil Commotion Motor Vehicle Collisions Terrorism (if not opted out) Flood and Earthquake require separate policies

Please share this article with fellow association members so they can also learn how to insure their homes properly.

The Walls-In Master Property Policy – With Upgrades Included

As can be inferred from the title above, this third type of Master Policy will pay for all interior building components and pay for any upgrades made since the IDOC. This is the broadest form of Master Property Coverage for associations today. Some boards choose this broad coverage because they are aware that many homeowners don’t buy the right type of coverage for interior building components, and want to protect them, and they don’t want the “eye sore of an unfinished home(s)” in the community after an Urban or Wild Fire.

In summary, condominium associations can be insured three ways today: Walls-Out, WallsIn or Walls-In with Upgrades Included. Also, CC&Rs of Planned Unit Developments often require the owner to insure the entire home on the lot. Insurance companies look to the CC&Rs to determine what the Master Property Policy will insure, so it is imperative that a homeowner read the CC&Rs. It’s the smart way to learn how to insure one’s home before major fire or water damage, or the other Covered Perils listed at the end of this article. The worst time to learn about a coverage gap is after the accident, so the wise homeowner will talk to their insurance agent and get properly insured!

By communicating often, dedicated board members are doing a great service to protect their fellow homeowners. As Ben Franklin said, “Involve me and I learn!”

Kevin Boland, LUTCF, CIC, AIC, is a twentyyear Farmers Agent specializing in HOA Master Policy Insurance. He also serves on the board at his North Bay PUD Association. Kevin is a past chairperson of the North Bay ECHO Resource Panel. Questions are welcome: kboland@farmersagent.com. Learn more about your HOA insurance at www.kevinbolandinsurance.com

WELCOME TO OUR New Professional Service Providers

Save time and money on two of the largest recurring line items in a community’s budget: landscape maintenance and outdoor water use. Botanicon provides third-party landscape vendor management, quality assurance monitoring, horticultural consultation and training opportunities for boards and landscape committees. Our consultants have decades of experience in the landscape and irrigation industries, so put our knowledge to work for you. With Botanicon, you have subject matter experts on your side to navigate the complexities of horticulture and irrigation, guide decision making and provide continual support. We conduct on site walk-throughs, follow up on punch lists, create community wide plant palettes, phased designs for renovations, water auditing and management, draft site tailored maintenance specifications and scope of work. To take the stress and time out of landscape oversight, call or email us today. We are happy to discuss your individual site needs.

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Find all of ECHO’s Professional Members Online. Visit the Professional Service Provider DIrectory at www.echo-ca.org

BrightView is the nation’s leading commercial landscape company. With a steadfast focus on you and your goals, we’re changing the way landscape services are delivered. From design to development, maintenance and enhancements, our depth of experience makes us a seamless partner for the entire lifecycle of your landscape. Our focus is local, our resources are national. Contact BrightView today!

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The restoration process can be a traumatic experience. That’s why Fire & Water Damage Recovery is committed to returning our clients to their normal lives as quickly as possible. Since 1998 over 30,000 residential and commercial property owners have counted on our friendly, affordable care to quickly restore their property to a safe, pre-incident state. Fire & Water Damage Recovery was created with the client in mind to provide an unsurpassed level of workmanship at a competitive, reasonable price. FWDR is a family-owned and operated local company with four locations to insure a quicker response and better service to San Francisco, Oakland, San Jose, and Stockton. Over the years we’ve helped thousands of Northern California families and business owners get their lives and businesses back on track in a timely manner.

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Continued on page 28

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Since our founding over 30 years ago, the Tinnelly Law Group has been devoted entirely to the representation of homeowner’s associations (“HOAs”), condominium projects and common interest developments throughout California. Our firm has an unparalleled understanding of the unique legal landscape faced by HOAs and their boards of directors. We have successfully represented our clients’ interests in a variety of transaction and litigation matters.

Our firm strives to serve clients with the utmost care and attention. We work in close partnership with HOA boards of directors and their community management professionals to address their legal needs in the most effective and cost-efficient ways possible. We are committed to building lasting relationships with our clients and to advancing the professional standards of our industry.

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TOPICS

ADUs

Stephen T. Brindle, Esq. – SwedelsonGottlieb

New HOA Election Law

John P. Gill, Esq. - Hughes Gill Cochrane Tinetti, PC

New Accounting Rules

David Levy, CPA – Levy, Erlanger & Company, CPAs

How To: Balcony Inspections

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Education that builds stronger communities.

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Back to the Future Continued from page 21 tech terms, it was a dinosaur. Simple email processes such as distribution groups and tracking processes were cumbersome or non-existent. These challenges led to the purchase of a new email system which easily integrated with customer records and efficiently distributes and tracks open and click through rates of its messages. The development of targeted emails has become equally easy. Now the association can automatically push (send) notifications of deadlines for compliance and important events. This is done through text messaging and email.

A big productivity gain is the addition of tracking functions with messaging. Now the association will know the effectiveness of messages sent. This allows the community to focus distribution of information through the best channel for the intended recipient. They will be able to track whether the email has been opened or clicked through which implies the message has been read.

In addition, an improved communication system allows community maintenance and repairs to be more efficient and helps to prioritize work to be done. The system allows residents to Sample of tracking functions from push notifications via email.

send in video and snapshot photos of the project needing attention or repair (this was difficult via email because of file size limitations). Management can review these and prioritize the corrective work. Conversely, a work order can automatically communicate with residents about the progress the work order and letting them know when it is completed.

Employing more sophisticated ways of communicating with residents, especially with the advent of mobile phone photos, video and texting, has been a big advancement for resident relations. Using mobile devices and SMS texting the association can quickly address some of the most challenging service issues: repairs, maintenance and rules compliance. The transition to this “new” technology was virtually seamless because most residents already were using texting and photo functions on their mobile devices for personal and business reasons.

Privacy & Security Systems Based on the homeowner survey, it was clear that residents consider their privacy and security as critically important. Improving the systems to help residents know when the pool vendor, landscaper, or other vendor will be working in the area is important for security. The vendors do not have access to phone numbers or email addresses of HOA residents to inform them, but now vendors can be electronically tracked, and residents can see where they are working and, if needed, lodge questions about unexpected activity. Vendors and management will be able to push out a message of the activity which provides a greater sense of security for the homeowner.

Paperwork Processing

The old “paper trail” is no longer! Now, new and existing residents process mandatory and voluntary compliance work electronically. This includes an electronic signatures on documents of importance. The use

of an electronic signature service makes it easy for the association to find and collect signatures on critical documents. Even the busiest international homeowner usually has access to the internet and email. They can sign critical documents in a timely manner simply by going online.

Further, the association now encrypts and stores important documents in the cloud which means information is accessible through any internet connection if the user has their access credentials. The service is performed almost instantaneously and very convenient worldwide. It’s a snap for routine tasks to be completed, especially those which previously took a great deal of time and money. The old system was time-consuming because simple service requests caused a disruption to workflow and searches for physically filed paper documents. The processes are now simple, mobile and fast. Still, a few residents want or need paper documents. The association employed an outside service provider that specializes in on-demand printing of documents. Simply place an order on a mobile phone or other device it will print and send the requested documents to the residents. These include paper statements, ballots, violation notices and other common documents. It is easy and cost effective and provides necessary communication options for those homeowners who are not as comfortable with technology.

Landscaping and Irrigation Systems

The community needed to

Continued on page 32

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We counsel: • Condominium Associations • Planned Unit Developments • Mixed Use Associations • Commercial Associations

We provide general counsel to Associations including the following services: • Construction Defect and Civil Litigation • Dispute Resolution • Governing Document Interpretation • Governing Document Revisions • CC&R and Rules Enforcement

boost curb appeal and that began with evaluating the landscaping. Proper watering of the landscape was an issue. Water usage in some California communities can be very expensive, especially during droughts when curb appeal takes a backseat to the need for water. Automation of irrigation is almost a necessity in communities with large planted common areas. The board recognized the aesthetic need for better control of irrigation in the community to maintain appearance. It also knew that a new irrigation system Back to the Future Continued from page 31

and controller would save the community money over the long run. The decision was not difficult to improve the “curb appeal” of the community by installing a remotely operated and managed landscape irrigation system. The system selected was managed remotely by a cloudbased sprinkler controller. Installing this system saved more than 56% on the HOA water bill, while consuming 40% fewer gallons annually.

The HOA community in this article started with a very low net promoter score from its homeowners. The board took notice and acted. They initiated wise steps to assess the situation, determine and validate the areas causing the poor scores, and instituted costeffective technological solutions to provide greater service to the homeowners, and accurate and readily available information for members. Further, new automated systems resulted in better compliance, more community engagement and a reduction of operational expenses. By embracing technology the community escaped the bonds of outdated legacy systems and streamlined operational efficiency and effectiveness – propelling their HOA back to the future.

Krishna Yalamanchi is happy to share with boards the vendors he has spoken with and those he selected. In addition to serving on an HOA community board of directors, Krishna owns HOA Alchemy, LLC, a software company dedicated to helping HOAs modernize their business management and compliance systems. The source code used for these systems is open to all. Krishna can be reached at krishna@HOAalchemy.com.

Invite-a-Homeowner Program

Echo puts homeowners first! We are proud of this legacy and want to share it with as many homeowners as possible. Considering there are approximately 14.5 million HOA residents and more than 50,000 HOA communities in California, the opportunity for growth is enormous. Help us to grow by inviting homeowners to join Echo.

Last month, the Echo board of directors approved the extension of the special Invite-a-Homeowner Program to encourage individual memberships. All new individual members will receive a special rate of $50 for

their first year of membership. They must be recommended by an existing HOA board member, professional service provider member, or community manager member. It is our hope that through membership growth, our programs and influence will increase accordingly and help to build knowledge and passion for communities through education, connection and resources. Please join today!

Legislative Review

For the most up-to-date information, visit the HOA Advocacy section at the ECHO website: www.echo-ca.org/hoa-advocacy

The California legislature and Governor have completed their work for 2019. With the exception of those bills that may carry over into 2020, the remaining legislation has been signed, vetoed, or failed passage. Review the final disposition of each bill below.

Current Legislation AB 670 AUTHOR: Friedman SUBJECT: Accessory Dwelling Units STATUS: Signed by Governor. POSITION: Watch SUMMARY: Would void provisions in common interest development governing documents that effectively prohibits or unreasonably restricts the construction or use of an accessory dwelling unit or junior accessory dwelling unit on a lot zoned for single-family residential use that meets the minimum standards established for those units. However, the bill would permit reasonable restrictions that do not unreasonably increase the cost to construct, or effectively prohibit the construction of these units.

SB 323 AUTHOR: Wieckowski SUBJECT: Elections: Felons, Inspectors, Email Disclosure STATUS: Signed by Governor. POSITION: Oppose SUMMARY: Requires an association to disqualify a person from nomination as a candidate for not being a member of a common interest development at the time of nomination or for being convicted of certain felonies. Authorizes an association to disqualify a person from being nominated or from serving on the board for specified reasons, including the failure to pay regular assessments. Defines email addresses as association records for the membership list. Allows the rules of an association to permit association employees or contractors to serve as inspectors of election. Allows members to sue over violations of bill provisions in superior court.

SB 326 AUTHOR: Hill SUBJECT: Inspection of Elevated Components STATUS: Signed by Governor. POSITION: Watch SUMMARY: Requires the association to cause a reasonably competent and diligent visual inspection of the load-bearing components and associated waterproofing systems to determine whether the exterior elevated elements are in a generally safe condition and performing in compliance with specified standards. Requires the inspector to issue a report, and the association to take immediate action if the exterior elevated element poses an immediate threat to the safety of the occupants.

SB 434 AUTHOR: Archuleta SUBJECT: Managing Agent: Production of Records STATUS: In Senate Inactive File. POSITION: Watch SUMMARY: Requires a managing agent whose management agreement has been terminated to produce client property and client records within a specified period of time pursuant to a written request by a common interest development association, except as specified.

SB 652 AUTHOR: Allen SUBJECT: Right to Display Religious Items STATUS: Signed by Governor. POSITION: Watch SUMMARY: Prohibits the governing documents of a common interest development from prohibiting the display of religious items, as defined, on the entry door of a common interest development member’s separate interest. The law makes an exception during the time that maintenance, repair, or replacement work is performed.

SB 754 AUTHOR: Moorlach SUBJECT: Election by Acclamation STATUS: Signed by Governor. POSITION: Support Summary: Requires, when the number of director nominees at the close of the nomination period is not more than the number of vacant director positions on the board, that the director nominees be considered elected by acclamation if the association includes 6,000 or more units, and the board complies with specified notice requirements, and the board disqualifies a candidate for specified reasons.

BOOKSTORE The ECHO Bookstore is your source for valuable information on the duties of HOA board members. Find these and other informative publications, including FREE downloads, online at www.echo-ca.org.

BOOKSTORE

MEMBERS: To order, log in for your member pricing through the Online Store at echo-ca.org or call (408) 297-3246

2019 2019

2020 Condominium Greenbook Member Price: $17 Non-Member Price: $25 This companion to the Condominium Bluebook is an in-depth guide to all aspects of association finances, including accounting methods, financial statements, reserves, audits, taxes, investments and much more. Not for the accounting novice, this is a tool for the treasurer or professional looking for specific information about association finances. 2020 Condominium Greenbook Member Price: $17 Non-Member Price: $25 This companion to the Condominium Bluebook is an in-depth guide to all aspects of association finances, including accounting methods, financial statements, reserves, audits, taxes, investments and much more. Not for the accounting novice, this is a tool for the treasurer or professional looking for specific information about association finances.

2019 Civil Code Sections Governing California Community Associations Member Price: $20 Non-Member Price: $25 This publication includes the current version of the DavisStirling Common Interest Development Act, the Civil Code sections

that apply to common interest developments and selected provisions from other codes important to associations. FREE DOWNLOAD FOR MEMBERS

Board Member Handbook Board Member Handbook

Member Price: $20 Member Price: $20

Non-Member Price: $25 This publication is the essential guidebook for HOA Board members, dealing with governance, finances, insurance and maintenance issues. Non-Member Price: $25 This publication is the essential guidebook for HOA Board members, dealing with governance, finances, insurance and maintenance issues.

FREE DOWNLOAD FOR MEMBERS

2019 2019

Condominium Bluebook 2 020 Edition Condominium Bluebook 2 020 Edition

Member Price: $17 Non-Member Price: $25 This well-known compact guide for operation of common interest developments in California now includes a comprehensive index of the book and a chapter containing more than 200 frequentlyasked questions about associations, along with succinct answers. Member Price: $17 Non-Member Price: $25 This well-known compact guide for operation of common interest developments in California now includes a comprehensive index of the book and a chapter containing more than 200 frequentlyasked questions about associations, along with succinct answers.

Construction Defect Claims Construction Defect Claims

Member Price: $19.95 Non-Member Price: $25 New buildings can conceal extensive faults. It’s a board’s worst nightmare—rainstorms damage buildings and bring owner complaints. Is legal action necessary? With this new book, you’ll learn about the resolution process for construction problems, and how to handle complex claims. Member Price: $19.95 Non-Member Price: $25 New buildings can conceal extensive faults. It’s a board’s worst nightmare—rainstorms damage buildings and bring owner complaints. Is legal action necessary? With this new book, you’ll learn about the resolution process for construction problems, and how to handle complex claims.

Home and Condo Defects Home and Condo Defects

Member Price: $12.95 Non-Member Price: $17.95 Member Price: $12.95 Non-Member Price: $17.95

Construction defect litigation can be confusing, expensive and fraught with legal pitfalls. This eye-opening guide, written by accomplished construction-defect attorneys, is an essential tool for board members who need to understand the legal process. Construction defect litigation can be confusing, expensive and fraught with legal pitfalls. This eye-opening guide, written by accomplished construction-defect attorneys, is an essential tool for board members who need to understand the legal process.

Robert’s Rules of Order Robert’s Rules of Order

Member Price: $7.50 Non-Member Price: $12.50 A step-by-step guide to the rules for meetings of your association, the current and official manual adopted by most organizations to govern their meetings. This guide will provide many meeting procedures not covered by the association bylaws or other governing documents. Member Price: $7.50 Non-Member Price: $12.50 A step-by-step guide to the rules for meetings of your association, the current and official manual adopted by most organizations to govern their meetings. This guide will provide many meeting procedures not covered by the association bylaws or other governing documents.

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