COI compliance for HOAs and community associations

Every community association hires vendors, from the landscaper and the pool company to the roofer working over occupied units. When one of them damages a unit or injures a resident, the first question is whether the vendor was insured, and whether the association can prove it. The proof is the vendor's certificate of insurance, checked and kept current.

Why the association has to care

An association owns or controls common property and signs contracts on behalf of every owner. When an uninsured vendor causes a loss, the association can end up paying for it, through its own insurance, a special assessment or a lawsuit that names it.

Directors owe duties to the community, and how the association hires and oversees vendors is one place those duties get tested. Checking that vendors carry the insurance their contracts require is a basic, defensible part of that care. This is general information, not legal or insurance advice; your association's documents and your state's law set the specifics.

There's a premium side too. A claim that should have gone to a vendor's insurer and lands on the association's policy becomes part of the association's loss history.

What a certificate tells you, and what it doesn't

A certificate summarizes a vendor's policies on the day it was issued: insurers, policy numbers, coverages, limits and dates. Three limits to keep in mind:

• It isn't the policy. Exclusions and conditions live in the policy, and the certificate says it doesn't change them.
• It goes stale. A certificate that was accurate in March says nothing about June. Expiry dates are the field to track.
• Additional insured status needs an endorsement. Being listed on the certificate isn't the same as being endorsed onto the vendor's policy. If the association needs that status, ask for the endorsement.

What to require from vendors

Match the requirements to the work. A tree crew running a crane over buildings needs more scrutiny than a supplier dropping off boxes. Associations commonly ask for:

• General liability for injury to residents and damage to property.
• Workers' compensation for the vendor's employees, as the law where the work is done requires.
• Auto liability for vendors who drive on the property.
• Umbrella or professional liability where the work calls for it, such as large jobs or design services.
• Additional insured status for the association, and often its management company, backed by the endorsement.
• The association's full legal name as certificate holder.

Put these in the vendor contract. When the requirement is in the signed agreement, the certificate only has to confirm it.

A checklist for each certificate

1. The certificate holder is the association's correct legal name.
2. Every expiry date is recorded, and anything expiring within 30 to 60 days gets a renewal request now.
3. Limits meet the contract.
4. The coverages match the work.
5. Additional insured status is backed by the endorsement, where required.
6. The insurer is one you can find in your state insurance department's records.
7. A dated copy is kept, with who checked it and when.

Keeping it current across many vendors

One vendor is easy. A large community, or a management company with several, has dozens of vendors whose certificates expire on different days all year. The usual failure is a certificate collected at onboarding that sits in a file and expires without anyone noticing.

Doing it by hand means a spreadsheet, calendar reminders and emails to vendors for new certificates, every month. Software can store each certificate, read its dates and send the reminders. TradeGuard does that for vendors; it was built for general contractors, though, and doesn't have properties or units yet, so a management company tracks vendors as one list.

Making it a habit

• Write insurance requirements into every vendor contract.
• Check at onboarding and at every renewal.
• Keep one list of expiry dates for the whole community.
• Record what was checked and when.
• Report vendor coverage to the board on a schedule, so directors can see where the gaps are.

An association can't remove the risk of hiring vendors. It can make sure it isn't carrying risk that belongs to the vendor's insurer.