I am going to give my annual plug for earthquake insurance for HOAs. I have written a whole article about it which appears in the Articles section on my website at http://www.californiacondoguru.com. Here is an excerpt explaining something few boards think about when deciding how to approach the question. Too many people dismiss it because of the cost. That in my view, without delving deeper into the possibilities of risk balancing, and options, and how to get owners enrolled in a more protective system, could be a breach of duty on the part of a Board. Boards, I know you have a lot on your plate, but I am one knowledgeable homeowner who understands that having some kind of foundation to rebuild from in the event of an earthquake that destroys ANY building in the condo development that I live in is critical to each and every person’s investment in the property. I am one savvy owner that understands those who have equity in the properties will stay and rebuild if they can, but those who have little equity – like investors and anyone mortgaged to the hilt, will simply walk away, leaving the entire burden of rebuilding to those who want to stay.
Here is the excerpt from the Article on the website on the topic many miss in the consideration of whether to have earthquake insurance:
“It’s only fair to talk about the reality that some owners whose master plan is to “walk away” from their homes if the big one hits, and let the banks foreclose, for this too is an honest concern. If an association carries master earthquake coverage, all owners must share in the premiums, thus sharing in the price of balancing of the risk thus all owners have participated in laying the “foundation” to recovery. If an association has no master policy, those owners who plan to walk will avoid all responsibility toward protecting the association’s financial health with protective coverage. Which seems the most fair, especially to the folks who have built up equity in their property? After the fact the association does have foreclosure rights and also personal debt action rights against owners who do not pay special assessments but as most know, it is not easy to collect debt these days. So why let these owners avoid the up-front participation in risk sharing?”