HOA General Liability Insurance: What You Need to Know
General liability (GL) insurance is an important type of coverage within a community’s master policy. It protects a community association from the costs associated with injuries and, sometimes, property damage. Virtually all community associations require general liability insurance in their governing documents. Keep reading to learn more about general liability insurance, including what general liability insurance covers and why it benefits communities.
What Is General Liability Insurance?
General liability insurance is a type of coverage that protects the association against third-party legal claims involving negligence. For example, if there’s an accident that damages property or injures someone in a shared space, HOA general liability insurance may pay for the cost of repairs, legal defense, settlements, and other related fees. And that’s important. This study shows that HOAs file an average of 11 property-damage claims per year. For claims in which the HOA is deemed negligent and the damage affects a homeowner or an outside entity, GL coverage is activated.
What Does General Liability Insurance Cover?
General liability insurance policies cover a variety of needs for community associations, including:
Unexpected incidents during day-to-day operations.
Accidents can happen anywhere and at any time on community property. Whether someone is injured by a falling weight at the gym or hurt by a defective piece of furniture in the community clubhouse, you want to have some type of GL insurance in place to cover the things you can’t see coming. The most common kinds of general liability coverage for injuries are:
- GL Medical Expense
- GL Bodily Injury
- GL Violent Crime Bodily Injury
- GL Assault & Battery
Protection against allegations from third parties.
Residents, guests, vendors, and even passersby have the right to make insurance claims that your community is the party to blame for their injury or property damage. The GL policy is designed to protect the HOA and its funds from significant impact if insurance adjusters find those claims valid.
Fees from legal defense/settlements.
The HOA must defend itself in court if a third party sues for damages. That defense includes paying attorney fees and additional costs, whether the case is settled or goes to trial. Depending on the total amount and the specific limit set in the coverage, general liability insurance can cover some or all of these expenses.
Damage to rented spaces.
This applies to HOAs that utilize public spaces or rent venues for events. GL coverage protects the HOA from lawsuits for any property damage the association causes while using the venue.
General Liability vs. Directors & Officers (D&O) Insurance
General liability insurance is just one part of protecting your association against claims. While GL insurance covers the costs of claims against the community association, there is an entirely separate coverage called directors and officers (D&O) insurance that protects the board of directors in case a decision they make leads to a lawsuit.
Other community members covered by D&O coverage may include past board members, committee members, volunteers, and sometimes, the community manager. D&O insurance can protect board members from claims, such as:
- Failure to follow bylaws
- Discrimination
- Libel/slander
- Wrongful eviction
- Wrongful termination of staff or contractors
- Breach of contract
With proper general liability and D&O coverage, an HOA is better equipped to protect its community’s finances, operations, and membership.
Why Do Community Associations Need General Liability Insurance?
Every community association needs general liability insurance. With general liability insurance, communities:
- Meet legal requirements. State laws and governing documents usually require associations to carry liability insurance.
- Protect their finances. Without a GL policy, your community’s at risk of depleting reserves from one claim alone.
- Comply with Management Contracts. Most management companies require at least GL and D&O insurance to actively manage an HOA. Many require other lines of coverage, such as Umbrella, Property, and Fidelity.
- Boost confidence. Residents want to know that property managers and board members are protecting them, the community’s finances, and the association’s reputation.
- Satisfy contractor requirements. Vendors often want GL coverage in place before they start working with you.
- Feel protected. It’s easier for boards to focus on operations and improving the homeowner experience if they don’t have to worry about the threat of lawsuits or costly claims.
How Much Does General Liability Insurance Cost?
The cost of a general liability insurance policy varies, but these factors may influence premiums:
- The size of the community and its location. The bigger the association, the more insurance risks it carries. Densely populated areas also pose additional risks.
- Past claims and losses. Your insurance history plays a big role in determining premiums. A record with many claims, lawsuits, or other losses can lead to higher costs.
- Coverage amounts. Paying for additional protection upfront gives you peace of mind, but also higher monthly premiums.
- Community-specific risks. Every association is unique, and your resident activity, property features, and location-specific hazards can all influence pricing.
- Carrier Standing: State-backed insurance programs tend to offer better pricing than non-state-backed carriers.
Use a licensed insurance broker to shop for your HOA’s insurance. Ensure they have a complete understanding of the local market so they can secure the best price and scope of coverage for your community.
Common General Liability Insurance Claims
The kinds of situations that trigger general liability coverage tend to be very similar across associations. Here are some of the most common kinds of claims and how having GL coverage impacts the situation:
An injury from a slip and fall on community property.
The community’s GL policy is designed to cover costs if a lawsuit is filed. If the association is found liable for an injured resident or guest, the policy pays the legal defense and settlement costs, subject to its coverage limits.
Property damage due to improper maintenance.
Imagine that an HOA required to maintain water lines faces water damage from broken pipes. Homeowners may claim health-related issues due to maintenance neglect or property damage claims for water damage to their homes.
A child is injured on the community playground.
If the child’s parents claim that the injury resulted from malfunctioning or poorly maintained equipment, the association’s general liability insurance may cover medical care and repairs to the amenity.
HOA Insurance Assistance
Getting general liability insurance and ensuring you have the right level of coverage is a non-negotiable for the board of directors of a community association. You need this coverage to protect the property and people you care for in the event of an accident.
At Associations Insurance Agency Inc., our sole focus is the community association. We work hard to guarantee coverage meets the exact needs of thousands of single-family homes, high-rises, townhomes, and condominiums. Visit our website to learn more about how we can assist you with GL policies and so much more!