Maine Condo

In the news recently are two articles about misappropriation of condominium association funds.   The first one was a Portsmouth, NH bookeeper who allegedly stole funds from two condominium associations in that town.   The second concerned a person who allegedly stole money from a condominium association in Biddeford, and also from a festival which celebrates the French heritage of that town.  Several other recent articles detailed misappropriation of funds from businesses, from municipalities and even from attorneys trust accounts by employees.

As numerous as the newspaper articles are, they report only the tip of the iceberg.  Many organizations do not report embezzlement out of embarassment or the fear of bad press.  For small associations especially, financial controls are loose and it is relatively easy to steal funds and to get away with it for a significant time.  Fidelity insurance, purchased as part of the association’s insurance package, can cover these risks.  It is relatively inexpensive and can help you recover from those occasions when a treasurer or someone else has made off with association funds.

HO-6 policies automatically include loss assessments coverage, which reimburse individual unit owners for amounts they must pay the association to reimburse the association for the deductible portion of losses.

HO-6 policies may also include “Special Coverage A”, covering losses to units and betterments installed by unit owners.  This is the coverage that typically has a low deductible, and which reimburses the difference between its deductible and the association’s deductible when the unit owner is stuck with paying the associations deductible.

If a unit owner wants to make a claim on the association’s insurance policy, who pays the deductible?  This question has become more important as the cost of insurance goes up, and associations choose larger deductibles – $5,000 or $10,000 in some instances.  I am hearing different answers from my clients about this.   What does your association do?