Those who live and work in Florida know that there is no better place…anywhere. However, every paradise must have its snake, and for us, that snake’s name is “windstorm.” Hurricanes, tropical storms, cyclones, and the like are apt to occur anytime, but most particularly between the months of June and November. Financial planning and budgeting for the ramifications of these disasters, including maintaining insurance, securing lines of credit, and maintaining reserves, can make the jobs of boards of directors that much more challenging. Nevertheless, with proper planning, and open communication with the membership, associations can mitigate their damages and minimize surprise.
Florida is the metaphorical “catcher’s mitt” for hurricanes and tropical storms, necessitating comprehensive property casualty insurance coverage. This includes protection for structural damage, common areas, and liability insurance. For condominiums associations, the Florida Condominium Act (Chapter 718, Florida Statutes) requires that you must have full replacement coverage, which must be determined by an independent appraisal at least every 36 months. However, as we all know, the number of insurance carriers authorized to do business in Florida continues to dwindle, and prices continue to soar. Therefore, strategically the crux lies in choosing the right insurer.
Selecting a reliable insurer is a pivotal decision. Condominium associations should prioritize "A" rated carriers for their financial stability and strong track record. Prominent carriers like Chubb, Allianz, and Travelers Insurance have earned their reputations in the Florida market. If, as has happened to so many of us, you are cancelled and unable to find a replacement private carrier, we are fortunate to at least have Citizens Insurance as our carrier of last resort.
Insurance premiums continue to rise with each windstorm. In fact, while most associations experienced a significant increase last year, that increase did not include the calculation of damages caused by Hurricane Ian, and most experts anticipate even greater insurance costs during 2024. Managing premium payments can pose a challenge. To alleviate the financial burden, associations may opt for installment plans or explore financing options. Additionally, implementing risk mitigation measures, such as storm-resistant building improvements, may help curtail long-term premium costs. Consideration should also be given to having a line of credit available or levying a special assessment in order to have the funds on hand to pay insurance premiums.
Condominium associations in Florida must navigate this challenging insurance landscape wisely. Carefully considered risk management, combined with using the best rated insurance carriers available, and strategic financial planning are crucial in preparing for catastrophic events of all kinds. Consultation with your lawyers, property managers, and your insurance professionals is the key to a Board exercising its best business judgment and fulfilling their fiduciary duties to the Association.
Michael E. Chapnick is a Florida Bar Board Certified Specialist in Condominium and Planned Unit Development Law. Prior to joining Sachs Sax Caplan, Mr. Chapnick worked with some of the largest community association law firms in Florida, and, from 2004 through 2014 founded and operated Chapnick Community Association Law, P.A. Mr. Chapnick graduated from the University of Maryland at College Park in December of 1989, where he earned a Bachelor of Arts Degree in Government and Politics. Mr. Chapnick then attended the Detroit College of Law where he earned a Juris Doctor Cum Laude degree. Mr. Chapnick was admitted to the Illinois Bar and the Federal District Court for the Northern District of Illinois in 1995, and the Florida Bar and Federal District Court for the Middle District of Florida in 2001.
Learn more about Michael including how to work with him here.
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