Homeowner’s Association Budget Season Forces California Condo Property Managers to Reassess The Right Amount of Earthquake Insurance

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Motus Makes Available Direct-to-Consumer Earthquake Coverage for California Condos, Which is Critical During the COVID-19 Pandemic

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“While the quagmire of master earthquake insurance and the liabilities facing boards in this regard remain unsettled, this ‘consideration’ standard gives us a reasonable platform to begin to address the master policy question,” said Dan Wallis, CEO and Founder of Motus.

With June comes the start of Homeowner’s Association (HOA) budget season for most property managers, making it the perfect time for boards to meet their minimum legal requirement by “considering” earthquake insurance.

Motus Insurance Services, which just introduced a direct-to-consumer, earthquake insurance program for California condominium associations and unit owners, is poised to assist these boards and their constituents in choosing the best type of coverage to protect their properties during this unstable time caused by the impact of COVID-19.

While legal experts in the HOA space may have varying stances as to whether a board needs to purchase a master earthquake policy, there is one thing all legal minds can confidently say: All boards must consider or do their due diligence with regards to earthquake insurance in order to protect their members.

“While the quagmire of master earthquake insurance and the liabilities facing boards in this regard remain unsettled, this ‘consideration’ standard gives us a reasonable platform to begin to address the master policy question,” said Dan Wallis, CEO and Founder of Motus. “Unfortunately, some boards might ultimately decide against pursuing one, despite the currently precarious economic climate which will make losses hurt even more financially.”

First, how often must a board consider earthquake insurance? Since the master earthquake policy is a commercial policy, it does not have as many regulations as personal lines products – which is good and bad. An agent selling fire insurance to a homeowner must “offer” earthquake insurance to the homeowner every year. So, if a board wished to be as safe as possible, and with California legal precedent unsettled over exactly how often a board must “consider” earthquake insurance, they would consider it yearly.

Their HOA insurance agent would also offer it yearly. However, if a board, in good faith, considers/examines a master earthquake policy every two years, the board would be well-positioned to defend themselves in any lawsuit for “failure to maintain” earthquake insurance. New earthquake modeling occurs at least every three years, so premiums and the association’s risk from earthquake is constantly changing.

Motus says that for boards that truly just want to protect themselves from D&O lawsuits after an earthquake, the key is to pursue as much information as possible in good faith, and thoroughly document their evaluation of it. At a minimum, this means retaining emails among board members as well as a record of the topic in board minutes (at least once every two years).

It is also highly recommended that the board clearly communicates to all unit owners (via email and traditional mail) that they either purchased or declined earthquake insurance. Beyond covering the board’s liabilities, it is the right thing to do for many unit owners, as many assume earthquake coverage is included in the HOA’s master fire policy.

Importantly, the California Department of Insurance deregulated the master earthquake insurance policy at the end of 2017, for good reason. This paved the way for California’s (and the country’s) first ever “master opt-in” earthquake policy – an important new alternative for HOAs and HOA boards. The Department of Insurance thought this was smart for all consumers in California and would encourage and enable more property owners to buy earthquake insurance. If not for the master opt-in policy, unit owners in associations without a master earthquake policy could not fully indemnify themselves after an earthquake. Individual policies in the market were only meant to supplement a master policy, not replace one.

“With budget season around the corner, we recommend that all boards carefully consider earthquake insurance again – and document the process – including the opt-in master policy,” said Wallis. “It was a needed evolution of the master policy that makes more sense to boards – easier on their budgets – while a huge win for unit owners who wish to buy their own earthquake insurance.”

About The Motus Solution
The Motus Opt-In Earthquake Program is designed to bring all the benefits of a traditional master earthquake insurance policy to the more than 30,000 associations and 2.5 million condo owners who are not covered by one.
Only a master earthquake policy can allow a condo owner to fully protect the equity in their home. This is because only a master policy can fully cover damages to residential buildings, foundations, garages, underground pipes and other common areas within the community. Traditional unit owner policies (which are only available to about 1 million of the 2.5 million condo owners who don’t have a master policy) were designed to supplement a traditional master policy – not replace the coverage they provide.

Each Motus Program is a custom-built master policy based on the specific exposures of the association. Once the board approves the Motus Program for its association, each unit owner then has the option to purchase their pro-rated rated share of a master policy – covering unit interiors, residential buildings and common areas.

To learn more about Motus Insurance Services, visit http://www.motusins.com

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Frank Tortorici
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