Not Your Grandfather's Policy Changing Times Require a New Look at Condo Insurance

 Recent developments, both legislative and environmental, have led to  considerable changes in the Illinois insurance marketplace. And such changes,  as managers know, often lead to added paperwork, confusing requirements, and  tricky legal questions for condo boards. While many new insurance products—such as the heavily-hyped “terrorism coverage”—have failed to catch on for the condo market, modifications in traditional  coverage have altered the insurance picture in ways previously unseen.  

 Many insurance insiders now see condos as liabilities in the wake of the Great  Recession. And that, in turn, presents problems for management. Although unit  owners pay reserve fees on an ongoing basis, insurers fear some managers may  defer maintenance in a bad economy. When that happens, say experts, condo  properties become a bad risk, producing losses that are passed on to condo  associations.  

 "The ongoing protection of condominium owners in Illinois appears to be reasons  the Illinois Condominium Property Act has been amended in previous years,” says Tifinni Tegan, CIC, the assistant vice president of Ian H. Graham  Insurance (part of Aon Affinity) in LaGrange, Ill., who specializes in crime  and fidelity and directors and officers insurance coverage. "The downturn in  the economy and homebuilding has highlighted the crime and fidelity  requirements of the Illinois Condominium Property Act in more recent years. The  managing agent or property manager and their employees must be covered under  the association's directors and officers coverage. An association may then need  to obtain more comprehensive coverage than that previously purchased."  

 The Illinois Condominium Property Act (ICPA) outlines specific insurance  coverage and limit requirements for all condominiums in Illinois and  specifically states that if any condo instrument has provisions in it that are  inconsistent with the act, these instruments are considered void.  

 For example, the ICPA requires associations with six or more units to buy  fidelity bond (crime coverage), Tegan explains. Now, many associations which  did not previously purchase crime coverage are required to do so by law.  Additionally, even if these associations had crime coverage in place, the  limits might be inadequate per the act, meaning these associations have to  increase limits on existing policies.  


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