Condo Buyers – New Insurance Requirements

From first time home buyers, to retirees looking to simplify their lives, condo’s can be a great choice for your next home. Insuring a condo is a bit different from a single family home because the coverage for damage to the building is separated from the coverage for the interior of each owners unit.   The building coverage is the responsibility of the Homeowners Association.  This policy is referred to as the HOA Master Policy, and a portion of your HOA dues are used to pay the premiums of this policy.  The policy that covers the interior of your unit is referred to as a condo unit owners policy or H-06.  

As an owner, you own the H-06, and can customize it to your individual needs. Lenders historically have required only a copy of the HOA Master Policy as verification of insurance.  With stricter lending requirements, a unit owners policy (HO6) may also be required . 

Here’s a description of both policies for your comparison:  
Unit Owners (H-06) Policy

• Covers your personal property
• Covers personal liability
• Covers interior walls and floor coverings
• Covers improvements or upgrades you made
• Usually has small deductible & fairly inexpensive
• Some lenders and associations require you have such policy  

Masters policy (Policy for homeowners association)

• Does not cover your personal property
• Does not cover liability inside condo
• Does not cover improvements or upgrades you made 
• Covers the condo building and some liability (such as walkways)

Why is the unit owners policy important?  Imagine a fire in your building, and the interior of your unit is damaged.  You need to replace sheet rock, flooring, and remove the smoke damage for a cost of $20,000.   Most of us do not have a cash reserve that would prepare us for a loss of this size, and if we did, we’d probably want to save it for other purposes.   Whether required by your lender or not, a condo unit owners policy will protect you in the event of this type of loss.

Buying a condo?  Call us for a quote today.  510-842-3600.

Business Owners: What happens if your employee gets into a car accident while at work?

The Importance of Hired and Non-Owned Auto Insurance Coverage

Some companies own large fleets of vehicles with drivers hired specifically to operate them. Many more have employees who operate their own personal vehicles on company business. This can be as innocuous as an administrative employee who uses a personal vehicle to go to the post office or bank for the company. Or it can be as extensive as a large sales or customer service force that receives a monthly car allowance for using their own vehicles.

Safety and/or risk managers can forget, or might not realize, that the business may have an additional and potentially serious exposure to loss from employees or others using a hired or non-owned vehicle for company business. What is the difference between hired and non-owned? Simply put:

• Hired is the rental of a vehicle for company business. This does not normally include leasing of vehicles, which usually are rented for a longer duration.
• Non-Owned is the use of a personal vehicle owned by an employee, volunteer or other person (rather than the insured firm) for company-related business.

So, what’s the concern? Isn’t the employee responsible for properly operating and maintaining his or her vehicle? If a collision occurs, wouldn’t the employee’s own automobile policy respond? The answer to both questions is “Yes.” However, your company may be drawn into the situation under the theories of negligence or vicarious liability. This could easily happen if the employee: 

• Had let personal automobile insurance lapse
• Carried only the minimum limits of coverage that the state law requires, or carried limits inadequate to cover a particular claim
• Did not properly maintain the vehicle
• Had a Motor Vehicle Record (MVR) that is below standard

What’s more, your company could be at risk if your business does not have fleet controls or procedures in place to address these issues.  

To see how hired and non-owned auto exposures could involve a business, consider this scenario:

Sally Jones worked for ABC Company and drove to the bank each week as a requirement of her job. On Thursday, Sally drove to the bank and made a deposit. On her way back to the office, she ran a red light at an intersection, causing a collision with another vehicle. Both vehicles were totaled, and there were serious injuries to the other vehicle’s occupants, including a small child. Sally was charged with failure to yield for a red signal light.  

The subsequent investigation revealed that:

• Sally carried only the state-mandated minimum limits of $50,000 of automobile liability coverage.
• Sally’s MVR showed she had three speeding tickets within the last two years and she had been cited for failure to yield at an intersection.

As a result of the collision, the following actions took place:

• The other driver’s insurance company filed for subrogation under Sally’s policy.
• Sally’s insurance company paid its policy limit of $50,000. However, the total value of the claim was set at $1,000,000.
• The other driver’s insurance company also filed for subrogation under ABC’s insurance policy for the difference.
• The other driver hired an attorney and named Sally and ABC as co-defendants in a lawsuit, alleging that: – Sally was negligent for failing to stop for a traffic control device, driving recklessly and speeding – ABC was negligent for failing to perform due diligence before permitting Sally to operate a motor vehicle on company business – and for not securing a copy of Sally’s MVR, not properly evaluating it, and not properly supervising the employee.

If the plaintiff was successful in the lawsuit and ABC was found to be negligent, ABC could potentially be responsible for $950,000 in damages: $1,000,000 Total claim value - $50,000 Sally’s policy limit = $950,000 in damages ABC would have to pay. What’s more, if the jury determines that punitive damages are warranted, the costs could be two to three times the $950,000 underlying damage amount.  

Steps to Help Minimize Your Company’s Risk  

Hired and non-owned automobile exposures can place a company’s assets at serious risk. Implementing controls can help to reduce and minimize these risks. At a minimum, your company should:

• Identify all employees who operate their personal vehicles on company business.
• Require these employees to provide proof of adequate limits of automobile liability insurance. Ask me for more details.
• Obtain periodic MVRs on all employees with driving responsibilities, including those who operate their personal vehicles on company business. Review their MVRs and evaluate them against written criteria. If an employee’s MVR is determined to be unacceptable, the employee should not be permitted to operate their own vehicle or a company-owned vehicle on company business.
• Inspect employee vehicles and determine if they are in good operating condition and all safety devices, such a headlights, signals, brake lights, backup lights, horn, windshield, etc., are in proper working order.
• Document everything you do so you have written records/files.

If you have a large number of employees who use their own cars on company business, the same fleet controls should be established and applied as for drivers of company-owned vehicles. This would include all the steps above, plus driver training programs and formal collision review procedures.  

Please give us a call to review your policy to help make sure you’re business is properly insured. 510-842-3600

I am an Insurance Agent in Oakland, California, servicing the East Bay communities of Oakland, Berkeley, Emeryville, Alameda, San Leandro and Albany.

Going Green - the no car option

These days I’m hearing an increased desire to “go green”.  Whether it’s to save the environment, to save your wallet, or some combination, more and more of my clients are opting out of traditional auto ownership.  Some become confirmed walkers and public transit takers, others grab a cab, but everyone has the occasion need to use a vehicle.  You might want to drive to an important client meeting, a weekend getaway, or simply do the monthly household shopping.    So the question arises, “do I still need an auto insurance policy?”  

Here’s a few simple tips:  
First – establish ahead of time the amount of Liability coverage you need.  In CA, most drivers will need more than the minimum required limits if they are ever involved in an auto accident.   For starters, I encourage my clients to cover their income, and if they own property or investments, to make sure those are covered too.  This may be more coverage than you’ve had in the past.  Need help?  Call us!

Next: talk to the people who will lend you their vehicle  

Cars Share Programs:  Car share programs have become increasingly popular for urban and student drivers.  Some “car share” programs offer $1mm coverage which will take care of most people’s needs.  Read the fine print because insurance coverage varies between programs, and if you have larger insurance needs, you’ll want a program that offers higher limits.   

Traditional Rental Car programs:   Renting cars is a great option for longer trips, and for business travelers.  Liability limits at Rental Car companies are typically designed to cover State mandated coverage.   Most drivers get their increase coverage needs met by their auto policy.  If you don’t own a vehicle, you’ll need a different solution.  

Borrowing cars from friends or family:   We all do this in a pinch, so let’s talk about how you are covered when you borrow a car.  The answer is “it depends”.  Typically auto insurance follows the vehicle, not the driver.  Some very popular policies however have a “named driver” clause which means ONLY the people named on the policy will be covered in the event of an accident.  The other situation I’m sometimes concerned about is that your friend or family member may be driving on lower limits than you need.  In those cases, if you owned a car, your policy would pick up the difference.   If you don’t own a vehicle, you may want your own coverage.  

Solution:  If you are a safe driver, you may not realize that there’s a type of insurance policy called a “non-owned” auto policy.   People who’ve with driving blemishes, especially DUI’s are required to carry this type of policy in order to maintain a drivers license.  However, there’s no stigma for the rest of us to purchase one.  The benefits of a Non-Owned Auto policy are that you know that you (and your home, savings, retirement, paycheck) are fully protected whenever you drive.   

Need a non-owned auto policy?  Call for a quote today at 510-842-3600

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