Crime Insurance for Community Associations
Protect your funds.
Our Association Crime insurance program is designed to protect community associations' funds against fraud, forgery, and theft.
- Available as Agreement 1 only (Employee Dishonesty) or Agreements 1-6+8
- A managing agent endorsement
- Financials are not necessary to bind
- One step, online quoting and policy issuance
- Limits start at $10,000 and can be increased up to $5 million
- Various deductibles are available, including high-deductible options allowing our policy to sit above another
- Homeowners associations (HOA)
- Cooperatives (CO-OP)
- Commercial condominium associations
- Timeshares / intervals
- Condominium associations (COA)
- Planned unit developments (PUD)
- Property owners associations (POA)
First-Party Coverage – Wrongful acts committed by board members, employees, volunteers, or property managers (subject to policy terms and conditions)
- Agreement 1 Employee Dishonesty
Third-Party Coverages – Wrongful acts committed by perpetrators not employed by or associated with the association (subject to policy terms and conditions)
- Agreement 2 - Forgery or alteration
- Agreement 4 - Outside the premises
- Agreement 6 - Money orders and counterfeit paper currency
- Agreement 3 - Inside the premises
- Agreement 5 - Computer fraud
- Agreement 8 - Funds transfer fraud
The coverage information outlined here is a guideline only. Please refer to the actual policies for full terms, conditions, exclusions, and limitations. In the event of a conflict between this document and the actual policies, the policies will control.
- Great American Insurance Group
Community associations are typically required in their bylaws to carry Crime and Employee Dishonesty (Fidelity) insurance to protect the money an association has in its operating and reserve accounts. The Employee Dishonesty portion of a Commercial Crime policy covers employee theft; for a community association, this should not only cover board members but also volunteers, community managers, management company agents, and temporary and leased employees. In order for coverage to kick in, an employee dishonesty claim must be deemed a theft; i.e., embezzlement, check fraud, invoice padding, etc. Coverage would not be provided for loss of funds that were simply “lost” by an employee without the requisite intent to steal.
It’s also important for insureds to understand that Commercial Crime insurance is not designed to cover a loss that is known before coverage is obtained, nor, similarly, a loss suspected beforehand. If an association suspects ongoing employee embezzlement and then purchases coverage, losses incurred prior to the policy being in place will not be covered.
Why are community associations targets of employee theft?
Many associations have a significant amount of money set aside for future capital expenditures including for improvements. Oftentimes, the associations are less active and have fewer eyes on this money, which makes them an easy target. There have been instances where the reserve account was split between different banks, CDs or other interest-bearing accounts. Individuals have submitted false or padded invoices, created false bank records, income statements, and used associations debit or credit cards for non-association purposes. In one case, for example, a former HOA manager in collusion with her ex-husband stole $3.8 million using falsified invoices for construction work.
Mitigating crime losses
There are steps an association can take to protect itself from employee theft and other types of commercial crimes that you can share with your insureds, including:
- Segregation of duties surrounding tasks such as deposits, bank reconciliations, check signing, inventory/property control, and wire transfer approval;
- Having annual comprehensive audits performed by an outside party (CPA firm);
- Countersignatures for checks;
- Use of “Positive Pay” or similar online banking control tool;
- Implementation of computer protections such as password controls and encryption of data;
- Physical access controls surrounding high-value property; and
- Procedures surrounding the approval and setup of vendors and client accounts.
The more communication and “checks and balances”, the better associations will be able to mitigate employee theft exposures.