Individuals, associations and other entities carry insurance coverage to protect them from liability, loss, and other financial and legal threats – that’s pretty basic. What is more unclear, however, is deciding when to file a claim versus paying out of pocket for a loss or damage.
Paying for property damage can be expensive, and in some ways defeats the purpose of paying for insurance in the first place. On the other hand, a history of claims can cause a building or association to pay ever-higher premiums, or even be dropped from its insurance entirely.
In a liability claim, I’d say, any time somebody is demanding something, you have to put the carrier on notice,” says Tammy LoVecchio, AAI, CPIA, a partner and client advisor with Gulfshore Insurance in Naples. Failure to do so could have devastating effects on the HOA’s pocketbook.
“If somebody fell and came to me looking for damages, I would have no choice but to put my carrier on notice,” LoVecchio continues. “Because if it becomes something later, and I didn’t put them on notice, I could jeopardize my coverage completely. Let’s say that Jane falls on my property and breaks her arm. She says, ‘All I really want you to do is pay my medical bills.’ And the board says okay, that’s two thousand dollars, just pay her and let her go away. She has four years from that time to come back and say, ‘You know what? I fell, I broke my arm, my arm’s never felt really good since, and I’m going to sue you because of it.’ Well, now, we didn’t put the carrier on notice of this claim. We knew it happened, but we didn’t tell them, and we can jeopardize our coverage for that reason.”
Notifying the insurance company that an incident occurs does not necessarily mean the carrier will foot the bill. It’s more of an insurance policy for your insurance policy—if something happens down the line, the carrier needs to know.
“It might be that you still want to pay it, if you put them on notice, and some carriers may allow that and some may not,” she says. “You might just say, ‘I’m going to put you on notice in case something happens, but it’s really a four hundred dollar medical, and we’re going to go ahead and pay it.’ And hopefully nothing else comes of it. But some carriers may say, ‘No, we’re going to pay it.’”
There is perception that one giant claim will cause all insurance companies to avoid the claimant like the plague for years to come—a notion that gives HOAs pause before submitting claims of any kind. This is not necessarily the case, and anyway not a rule of thumb to follow.