By Jon H. Epsten, Esq. & Mary M. Howell, Esq.
We are seeing with more frequency associations either carelessly completing insurance renewal applications, or allowing an uninformed insurance agent or broker to complete the application form for new or renewed insurance, without making sufficient inquires of the board and management about actual or potential claims. This is particularly important in the context of directors and officers liability insurance.
In this type of policy, insurers often deny coverage either by alleging the company was not put on notice of facts which might lead to a claim (such as a request for IDR or ADR), and/or failure to disclose a potential claim on the application for insurance. While the initial denial of coverage may be subject to challenge by the association, it is better practice to notice the carrier of any negative input from owners–even if that means a letter a day!
We also encourage boards and management to take the renewal process seriously, rather than treat the process as a routine ministerial act. Encourage your insurance agent or broker to become actively engaged in the insurance application process and claims reporting process.
The result of not properly reporting information to the insurance company can have devastating financial consequences on an association.