Is it acceptable for a condo association to “self-insure” and cancel their current insurance? Also: Can a board avoid naming a director to an empty position?
Question: My cooperative dock association board of directors is exploring the ability to “self-insure” by cancelling the wind coverage on the docks and increasing the reserves. The present windstorm insurance is almost half of the annual budget and is effectively useless due to the deductible. The board thinks they can do this by amending the governing documents to remove the insurance requirement. Can this be done?
Answer: Probably not. While the governing documents can be changed by an amendment, the documents cannot be changed to circumvent the requirement of the Cooperative Act. Specifically, F.S. 719.304(3) which requires a cooperative association to insure all association property. In a cooperative, the association “owns” the docks and leases them to the members. So, the statutory requirement that the association insure “association property” includes the “docks” even though Statute 719.104(3) does not literally use the word docks.
The Cooperative Act also allows an association to “self-insure” as an alternative to traditional insurance. However, “self-insurance” is not simply maintaining reserves. It is controlled by Florida Statute 624. To boil it down, it requires the association to essentially create its own insurance company and fund it. It is extremely complex and cost prohibitive in the sense of the actual savings.
Source: Condo Q&A: Amending Documents, Bylaws and Boards
