Why Your Association Needs a Condo Fidelity Bond
The members of a condo association board are often friends and usually neighbors. They work together to create a safe and positive place to live. Despite the comradery often experienced among board members, fidelity bond or fidelity insurance is important to condo associations. Unfortunately, some board members of the condo association may try and take advantage of their position, even embezzling association funds. In fact, it happens more often than one might think. Here’s how condo associations can be protected from potential loss with a condo fidelity bond.
Embezzlement in the Condo Association World
Many will remember the high profile case of Andrew Kissel, who elaborately embezzled $3.9 million while serving as the treasurer of a high-end condo association in Manhattan during the late 1990s and early 2000s. His sad story ended in a much-covered homicide. However, embezzlement in the world of condo association often takes a less sinister appearance. Just as recently as 2010, Edward M. Richards, a 55-year-old native of Brockton, MA stole over $100,000 by simply not paying bills. Eventually, other condo members realized money was missing and Richards confessed to 4 years of embezzlement in his kitchen.
How to Protect Your Association
There are a few straightforward, precautionary steps when can be taken to prevent stories like Kissel’s and Richards’. Here are a few guidelines to follow:
- Always have more than one person responsible for finances
- Require double signatures on checking accounts
- Have a committee to reconcile expenses monthly
- Politely inquire about seeming discrepancies
Implementing these practices will go a long way toward protecting your association and its members from potential loss.
Condo Fidelity Bond Coverage
Simply put, fidelity insurance protects the condo association from employee theft. The policy is normally equal to the number of funds accessible or controlled by the board. Because budgets can change annually, it is important that this coverage is reviewed at least once a year. Fidelity coverage is not automatically included in an association’s master policy, so it is imperative that the board check with their insurance provider to ensure they are properly covered.
Important Provisions
There are variations between policies but the following provisions should be considered by the association.
- Must be an employee theft: if the person who is stealing is not being compensated for their actual role, their theft will only be covered if an endorsement has been added to the policy.
- The loss must be related to theft: this means there must be intent on the part of the person who stole the funds. If the funds were lost due to errors or omissions, but the person did not intentionally steal them, coverage will often not apply.
- Must be a covered item: be sure you are aware of what exactly your policy covers. It may cover cash but not other assets. It’s important to make sure you have proper coverage for your particular association.
Make sure your condo association is protected against employee dishonesty. Having the right coverage for your condo association is the only way to ensure this. You can start by implementing simple steps to get a second pair of eyes on your association’s finances. Once you’ve done that, review your current policies and needs with an expert at H&K Insurance. Contact us about any questions you have. Our expert team would love to help you as you ensure you have proper condo fidelity bond coverage.
