General Liability Coverage-How Much is Enough?

All master association policies should have general liability coverage to protect the association from situations where is may have liability to injuries or property damage: a guest sustains an injury falling on a slippery driveway; someone is injured on the playground equipment; someone drowns in the pool; the possibilities are endless.

Most standard policies will come with coverage limits of $1M per occurrence and $2M in aggregate, meaning that the upper limit for a policy period is $2M. Coverage limits go up from here, I've seen them as high as $30M in aggregate. What determines which coverage limit is right for your association? The right answer is "it depends;" there is no formula that works in every situation. To start with every association with <100 units should have $2M per occurrence; $4M in aggregate as a minimum to be afforded personal liability protections for unit owners under the Davis-Stirling Act. Associations with 100 or more unit should have minimum coverage of $3M per occurrence; $5M in aggregate to have Davis-Stirling Act protections. HOWEVER these coverage limits are minimums, there a many situations where your association could need more than the minimum amount of coverage.

Association board members are best advised to seek the counsel of a qualified attorney familiar with HOA issues to determine a general liability coverage amount for a specific situation. He/she will be familiar with the type of legal actions, claims and settlements associations have had to deal with. Generally, some factors that need to be taken into consideration include: total number of units within the association; amenities within the complex - pools, hot tubs, exercise rooms, playgrounds, etc.; percentage of units rented; condition of the premises; whether or not complex is mixed use, commercial businesses and residential living; and, history of claims/losses.

General liability coverage is a key coverage area that board members need to evaluate and determine a best solution for their association.