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BEWARE OF THE TRAPS OF E & O INSURANCE!
By
Jan Bergemann
Published
February 7, 2014
Most
all community associations carry what is called E(rror)
& O(mission)
insurance. It’s a professional liability insurance that is
supposed to protect association and board members against the
cost of lawsuits filed against them. Some folks still think erroneously that such a policy
protects against cost of lawsuits in general. No! Coverage only
kicks in if the association/board members are the defendants in
litigation.
Even
if such a policy looks great on first view, there are a lot of
hoops you have to jump through before this policy really does
what it’s supposed to do: Provide
coverage against the cost of litigation if being sued!
But,
as usual, insurance companies are fast with raising the premiums
and demanding payments, but they are often slow when it comes to
providing the coverage.
A
few little tips I have learned over the period of time when some
of the folks I’m communicating with had to deal with their
E&O Insurance carrier.
First
and foremost: Always immediately contact your insurance carrier
as soon as anybody is threatening with litigation or even send
you a presuit mediation demand letter. No matter how frivolous
you think the case is and even if you think that mediation
solved the problem, make always sure you inform your insurance
carrier. Rather be safe than sorry!
OK
– you get your letter promising that the insurance coverage
kicks in. Then comes the problem of selecting the right attorney
from the choices suggested by the insurance company. Make no
mistake, community association law is a very specialized field
of law – and there are really not too many attorneys that are
really knowledgeable when it comes to community association law.
If you read that the attorney, the insurance company wants to
pick to represent you, is a real estate attorney, don’t just
think that you are “in good hands.” I have seen many
so-called “real estate” attorneys who have not the faintest
idea what community association law is all about. Make sure that
the attorney has knowledge about the statutes and applicable
case law. Talk to him/her first before you agree with the
insurance company's choice.
And
always remember while litigation lasts: The attorney is hired
and paid for by the insurance company and is most often more
interested in making the insurance company happy instead of you.
So, if you see settlement offers coming your way, make sure they
are in your best interest, even if the insurance attorney may
praise the offer.
Let’s
say you are lucky and you win the lawsuit – or the other side
folds – and you are the prevailing
party, don’t count on your insurance attorney to
recover the cost or even the deductible you had to pay at the
beginning of litigation. In most cases you have to kiss that
money good-bye. The insurance attorney will not be interested in
recovering your share of the cost.
And
if you have to “use” your E&O insurance policy
– hopefully never – you might be considered
persona-non-grata when it comes to renewing your policy. Sit
down before opening the letter with the renewal notice and take
a deep breath. Otherwise you may get a heart attack if you see
the premium demand for the next year.
In
short: In our litigious society having such a policy is nearly a
must, but: BE
PREPARED!
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Jan Bergemann is president of Cyber Citizens For Justice,
Florida
's largest state-wide property owners' advocacy group.
CCFJ works on legislation to help owners living in
community
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associations. He moved to
Florida
in 1995 - hoping to retire. He moved into a HOA, where the
developer cheated the homeowners and used the association dues
for his own purposes. End of retirement!
CCFJ was born in the year 2000, when some owners met in
Tallahassee
- finding out that power is only in numbers. Bergemann was a
member of Governor Jeb Bush's HOA Task force in 2003/2004.
The organization has two websites to inform interested
Florida
homeowners and condo owners:
News Website: http://www.ccfj.net/.
Educational Website: http://www.ccfjfoundation.net/.
We think that only owners can really represent owners, since all
service providers surely have a different interest! We are
trying to create owner-friendly laws, but the best laws are
useless without enforcement. And enforcement is totally lacking
in
Florida
!
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