FREQUENTLY ASKED QUESTIONS

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About AMS

Association Powers and Decision Making

Association Structure and Funds

Common Interest Developments (aka Homeowner Associations)

Director Election and Term

Enforcement and Disputes

Insurance and Liability

Insurance and Liability

The law does not require a minimum amount of liability insurance, but most governing documents specify minimum policy limits. The law does state that if certain statutory policy limits are met, the individual owners cannot be held responsible if the damages exceed the coverage.

Most governing documents include a minimum insurance requirement by stating that the limits of coverage shall not be less than the full current replacement cost of the structures. In other cases, the documents allow the board to determine the appropriate amount of insurance. Regardless of what the documents say, the board is empowered to exceed any minimum insurance requirement and must use prudent business judgment in determining the amount and type of insurance.

Homeowner associations must provide copies of their insurance policies upon request.

Most governing documents do not require earthquake insurance, and it is not required by law. Since earthquake insurance is expensive and typically involves a large deductible, its benefits are debatable, and a board should not face liability for choosing not to obtain it if the decision was based on competent advice from an insurance professional.

Managing agent bonds and fidelity bonds are a form of insurance for the theft or misappropriation of funds. This type of insurance is not required by law in Washington or Oregon but is required by some governing documents. It is advisable for large associations to obtain this type of insurance unless their funds are handled by a professional manager who already has adequate bonding or coverage.

In general, when insurance proceeds are insufficient to pay repair costs, the association must levy a special assessment to cover the shortfall. But most governing documents describe a procedure for dissolving the association and selling the property following a very large uninsured or underinsured loss. These procedures are intended to provide an alternative to a special assessment so large that most owners could not pay it.

The governing documents contain detailed property insurance requirements. In condominium projects, these typically require that the association obtain property damage insurance (sometimes called casualty insurance) for everything located on the property except the contents of the units. These policies usually cover damage to interior walls, floors, and ceilings within units, but do not cover damage to cabinetry, plumbing and electrical fixtures, appliances, wall and floor coverings, and furniture. The individual owners are responsible for insuring the contents of their units, and may also be responsible for payment of the Association’s insurance deductible in some circumstances.

In planned developments, the governing documents usually require the association to insure all portions of the property which it is obligated to maintain. But in some cases, the individual owners are required to insure everything on their lots even though the exterior surfaces of the homes are maintained by the association.

Maintenance, Alteration, and Defects

Meetings and Decisions

Mortgages and Liens

Officers, Managers, and Committees

Owner Assessments

Ownership and Possession

Use of Common Area

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