Crime and Fidelity Insurance

Effective January 1, 2019, homeowner associations are required to purchase an insurance policy that covers employee dishonestly (fidelity) plus non-employee theft.

Employee dishonesty coverage protects associations against dishonest acts such as embezzlement committed by an employee as defined in the policy. In a common interest development, the definition of "employee" should be broadened to include the board of directors as non-compensated employees of the association, as well as the association manager and management company.

Associations Must:

  • Purchase a fidelity policy with coverage limits in an amount equal to or greater than the combined amount of the reserves and total assessments for three months unless the governing documents call for greater limits.
  • Cover all persons handling funds, including officers, directors, employees, managing agents and the management company, and
  • Include in the policy coverage for "computer and funds transfer fraud" in the same amount or greater, unless the association's governing documents call for greater limits.

Boards are encouraged to seek the advice of an independent insurance broker or agent in order to obtain the best policy at the lowest price.