Published on: Mar 18, 2010
[This article is based on a talk given by Paul Corcoran, Inspire Risk Management to the March meeting of the Apartment Owners Network. Paul is an insurance broken who specialises in block policies for apartments in Ireland and the UK.]
Block insurance is one of the many things your service charge pays for. It’s an insurance policy taken out on your behalf by the management company and covers all the common areas, grounds, car parks, lifts, gates, etc. It is a condition of your mortgage so it’s not optional. In the current climate, it’s also likely to make up a significant chunk of the total running costs each year so it’s vital that your board are well informed when choosing a policy.
What does it cover?
– fire and theft
– employers liability
– third party property owners
How do you control your premium?
– Re-assess your reinstatement value every 3 years to avoid under or over-insurance. This should cost about €1,500 for a large development.
– Desktop your reinstatement value every year. This is done by comparing your last full assessment value to average building costs. This is significantly cheaper than a full assessment.
– Manage any insurance risks such as uncollected waste, abandoned cars or broken emergency lighting. Try to stop claims before they happen. If you have electricity junction boxes in the car parks, make sure they’re locked, protected and if they’re low down, surrounded by barriers to prevent cars colliding with them.
– Perform health and safety audits and fire risk evaluation. Test all your fire systems regularly, document your approach to that.
– Document any attempts to fix problems that show up during audits.
– Control your claims. Some directors and some agents have a tendency to treat insurance policies as ATMs which leaves the company with a poor claims history. This will drive up the premium in future years. You can also keep any outstanding service charges in mind when making claims on behalf of owners. Insurer may put specific excesses in place if there are repeated identical claims (water damage).
– Agents should never be able to submit claims to the broker or insurer without approval from the board. Each claim should be documented and examined at a minuted board meeting before being passed. Brokers should be instructed to make sure this happens. The board should always be aware of their claims history.
– Review issues with insurer regularly and build a long term relationship with insurer. These two go hand in hand. If you have a good relationship with your insurer and broker, you’ll be able to discuss issues and find resolutions.
– Never let your agent or broker automatically renew your insurance policy. Make sure the board gets involved early and plans for the renwal or change-over.
– Don’t let agents automatically renew insurance without board involvement. Be involved early. Work with your insurer to resolve problems. Demonstrate that you’re working to resolve the problem.
You should also talk to your broker about taking out D&O Cover. This covers the costs of any court cases brought against the directors and officers. Generally it has a value of about €1.3m. You should make sure to take a policy which is specific to management companies.
It is important to know that D&O cover does not cover any illegal acts undertaken by directors. An illegal action by one director could leave the others without cover. For this reason, it is important to minute all meetings and decisions.