The December issue of Florida Community Association Journal ran my article, "Directors and Officers Liability Coverage: What Every Board of Directors Member Needs to Know."  While I am certain that many think the only insurance law we practice is property insurance, our firm handles a variety of first and third party insurance coverage disputes and bad faith cases.

The important issue for Condominium Boards is that most Director and Officer liability policies exclude coverage for errors in obtaining proper insurance coverage. I think this is the largest potential error a board may face. The most prevalent issue is underinsurance.

Most condominium associations will be underinsured unless they retain a professional and thorough firm to make an insurance to value analysis. Many condominium association policies carry co-insurance clauses which penalize condominiums for not carrying enough insurance to cover full replacement cost. Our clients and public adjusters have told us that some insurers are specifically asking their field adjusters to question the accuracy of the amount insured and make a determination as to whether a co-insurance penalty should applied.

When co-insurance penalties are applied, most policyholders tell us that they relied on their insurance agent to help determine the amount to be insured. We are currently in litigation in the Lakeshore of Polk County Condominium Association case where we won the underlying case against the carrier, but a co-insurance penalty was applied. The current litigation, lead by Donna DeVaney, involves the insurance agent’s neglect in estimating accurate replacement cost. The controversy amounts to millions of dollars because of the size of the losses.

Insurance is a very important financial product, one I truly appreciate as a consumer and a litigator–I love this area of law. However, everybody, including the buyer of property insurance and middleman arranging for the sale, should be careful to obtain the correct coverage. The ramifications caused by co-insurance penalties can be devastating.