Is Your HOA Properly Covered for Losses From Dishonest Acts?

Because homeowners associations are controlled and operated by part-time volunteer members who serve as officers and directors and unrelated third-party mangers that are hired to provide management services, you need to have your HOA covered to prevent losses from dishonest acts. The risk of becoming a victim of a dishonest person who performs services for a homeowners association is compounded by the fact that there are substantial amounts of cash that flow into the association’s bank account every month with very little oversight as to what happens with those funds. Thus, for those people who are vested with responsibilities that provide access to the cash receipts of homeowners associations, there is opportunity to misappropriate funds. Recognizing this particular vulnerability of homeowners associations, state laws and association governing documents commonly include provisions that mandate the purchasing and maintaining of “fidelity insurance” by the association.

Fidelity insurance is insurance that is purchased by the association to protect against losses that result from “employee” theft. Typical insurance policies define an “employee” as an individual that is[…]