What Insurance Is An Association Required To Maintain?

From the Illinois Department of Financial and Professional Regulation Division of Real Estate

Condominium Association

A Condominium Association is required to have the following insurance, per Section 12 of the Illinois

Condominium Property Act (765 ILCS 605/12):
(1) Property Insurance: The Association shall maintain Property Insurance (i) on the common elements and the units, including the limited common elements and except as otherwise determined by the board of managers, the bare walls, floors, and ceilings of the unit, (ii) providing coverage for special form causes of loss, and (iii) providing coverage, at the time the insurance is purchased and at each renewal date, in a total amount of not less than the full insurable replacement cost of the insured property, less deductibles, but including coverage sufficient to rebuild the insured property in compliance with building code requirements subsequent to an insured loss, including: Coverage B, demolition costs; and Coverage C, increased cost of construction coverage. The combined total of Coverage B and Coverage C shall be no less than 10% of each insured building value, or $500,000, whichever is less.

(2) General Liability Insurance: The Association shall maintain commercial general liability insurance against claims and liabilities arising in connection with the ownership, existence, use, or management of the property in a minimum amount of $1,000,000, or a greater amount deemed sufficient in the judgment of the board, insuring the board, the association, the management agent, and their respective employees and agents and all persons acting as agents. The developer must be included as an additional insured in its capacity as a unit owner, manager, board member, or officer. The unit owners must be included as additional insured parties but only for claims and liabilities arising in connection with the ownership, existence, use, or management of the common elements. The insurance must cover claims of one or more insured parties against other insured parties.

(3) Fidelity Bond (Crime Insurance): An association with six (6) or more dwelling units must obtain and maintain a fidelity bond covering persons, including the
managing agent and its employees who control or disburse funds of the association, or the maximum amount of coverage available to protect funds in the custody or control of the association, plus the association reserve fund. The fidelity bond must be in the full amount of association funds and reserves in the custody of the association or the management company.

(4) Director and Officers Liability Insurance: The board of directors must obtain directors and officers liability coverage at a level deemed reasonable by the board, if not otherwise established by the declaration or bylaws. Directors and officer’s liability coverage must extend to all contracts and other actions taken by the board in their official capacity as directors and officers, but this coverage shall exclude actions for which the directors are not entitled to indemnification under the General Not For Profit Corporation Act of 1986 or the declaration and bylaws of the association. The coverage shall include, but not be limited to, coverage of: defense of non-monetary actions; defense of breach of contract; and defense of decisions related to the placement or adequacy of insurance. The coverage shall include as an insured: past, present, and future board members while acting in their capacity as members of the board of directors; the managing agent; and employees of the board of directors and the managing agent.

Common Interest Community Association

A Common Interest Community Association should review its Association’s community instruments to determine what insurance the Association is responsible for maintaining.

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