Deciding what to do if your community receives property damage is one of the most stressful issues an association or community may face. When the common area(s) or elements of the association or community get damaged by a severe storm or another catastrophic event, it can cause a great deal of stress for the board and create a cause of friction between the board and property management on one side and unhappy residents on the other.
When such an event occurs, the board must act quickly to contain and mitigate the damage caused by the event, and they must also see to the medium and long-term needs of the association, which typically means filing an insurance claim for the loss so that the damage can be correctly repaired without the community coming out of pocket for what should be a covered loss.
What is the first thing you should do?
The first thing that an association should do is stop the damage from becoming worse. This is known as mitigation. In almost all property insurance policies, the policyholder has a duty to mitigate any damage so that any damage caused by the loss event does not become worse over time. Many boards are unaware of this, and we have seen many cases where the lack of mitigation by an uninformed board have led to claims being denied and associations having to come out of pocket for repairs.
In one case, the association, upon realizing that there was a fire in progress on the property, immediately picked up the phone and called their insurance company to report the loss. However, the right thing to do would have been to first contact the fire department and report the fire, rather than assuming that a fire alarm system was sufficient to alert the fire department to the blaze.
I can assure you that the fact that the association board contacted the insurer to report a fire while it was ongoing, rather than first contacting the fire department, did not help them while going through the claims process. If the carrier feels your actions or lack of actions caused additional harm to the property, it will likely prejudice the claim and make it harder for the community to obtain a fair settlement for the damages.
In cases where the cause of damage is still occurring, such as when a fire starts or a pipe breaks, your first responsibility is to contact an appropriate service provider who can help you remediate the damage and minimize the losses incurred by the property, such as the fire department, a roofer, or a water mitigation company.
Do this at the absolute earliest opportunity. After you have made sure that you have stopped the damage from getting any worse, your next call should be to an insurance claims attorney, not your insurance company, so that you can be advised as to the correct way to report the damage and open a claim without doing anything which may prejudice your case later on. In situations where the loss event has already finished, such as after a hurricane or hail storm, your first call should always be to your attorney to advise you on the appropriate next steps.
What other steps should you take?
After the damage has been mitigated to the best of your or the contractor’s ability, the property manager and/or board President should contact an attorney who has experience handling large loss and complex insurance claim cases on behalf of associations. Hiring a law firm—one that is not already your counsel—has many advantages.
One of the biggest advantages of hiring a law firm that focuses on insurance claims and property damage matters is the specialized experience that such a firm has in dealing with cases similar to yours. One of the biggest reasons why HOAs, condos, and community associations hire attorneys that specialize in HOA and condo law is to have access to, and peace of mind from, attorneys who specialize in the kinds of issues communities face every day.
Because property damage claims are typically not an everyday issue, property damage cases may very well be a new type of matter in which your association attorney has little experience. A property damage firm offers your association the best chance of obtaining the highest value resolution for your community.
In addition to the highly relevant and specific experience an insurance claim law firm has in dealing with property damage cases and insurance claims, insurance claim law firms have a team of specialists in their network who can provide exactly the kind of help your community needs when faced with a property damage scenario. This may include adjusters, consultants, engineers, and other professionals who are experts in their respective fields and who can be called upon to provide unbiased damage assessments, causation reports, and reliable estimates to complete repairs and return the property to its pre-loss condition. A good insurance claim attorney is like a department store for insurance claims, where everything your association might need before, during, and after each step of the process can be found in one place.
Another important reason why associations should retain a property damage or insurance claims attorney is that it can help to prevent any conflicts of interest between the association, the property manager, the owner of the property, and the attorney for the association. By hiring an outside firm that specializes in insurance claims you can avoid these conflicts.
Above all, the biggest benefit that an insurance claim attorney can bring to an association is the ability to properly handle the entire process from beginning to end, taking on a great deal of work and decisions that would otherwise have to be done by the property manager, building owner, or board members, none of which will be fully versed in how to properly address and handle insurance claims.
Your insurance claim attorney will report your loss to the insurance company, send out 3rd party experts to evaluate the loss and estimate the cost to repair, and can make sure that the association remains in compliance with the provisions of their insurance policy. Of course, most importantly, they can go toe-to-toe with your insurance carrier to fight against lowball settlement offers, obtain advanced payments when necessary, push them for more timely responses, and make the insurance company take your claim more simply because you have an attorney handling the matter. For the association, the property manager, and the building owner, hiring an insurance claim attorney is a win-win-win.
Once we hire an insurance lawyer, what should the association be doing?
After the association has chosen a law firm to represent them in their insurance claim, there are still a few things they will need to do to make sure that the claim process goes smoothly and successfully while also taking the necessary steps to get life back to normal for the residents.
It is very important to make sure that all of the damage that the board is aware of gets thoroughly documented (images, descriptions of damage, etc.) after the loss event but before moving any debris or taking any steps to mitigate the damage. As soon as all of the damage and debris has been documented, you can have any debris which is blocking access to any parts of the community moved to a safe location where it is not disturbing your residents or operations. You can also take any mitigation steps such as tarping roofs, boarding broken windows, etc. We strongly encourage you to speak with your insurance claim attorney BEFORE having any debris removed from the property or mitigating damage, especially at the early stages of your insurance claim.
Sounds easy, right? Wrong. While your duty to your insurance company is clear in that they have the right to inspect the property and inspect the damage, you also have a duty to your residents to help them to get the community, and their property, back to its pre-loss condition as soon as possible. So while your insurer wants you to do the minimum amount of work to stop more damage from occurring and then wait for them to inspect the property, your residents want you to have the property cleaned of debris and any damage to be repaired ASAP. As board members of the association, you are caught in the middle.
In our experience, the best way to handle these competing interests is to make a plan that outlines which steps will be taken and in what order they will be taken. So this by working with your association’s attorney so that they can make sure that the board’s plan will be in compliance with all association rules and bylaws.
Next, put that plan into action and delegate tasks to various board members or committees where appropriate. Most importantly, make sure that all members of the association are kept informed about the plan and the progress being made in executing it. It’s very important that the board provide clarity to its membership as this can reduce tensions and address many resident questions preemptively.
By hiring an insurance claim attorney to handle your claim, creating a plan to bring the property back to its pre-loss condition, and being open and honest with your residents throughout the process, your association will be able to maximize your recovery while keeping the peace between your residents and the board. If you have any questions about your association and would like to speak to an insurance claim attorney, please call us at 1-855-LOSS-PRO (1-855-567-7776)