LAGUNA HILLS, Calif. – New regulations went into effect at the start of the year that require that associations have fidelity bond coverage for its directors, officers and employees. This insurance covers losses from theft and law requires that the limits be three times monthly assessments plus reserves or that they comply with CC&Rs if limit requirement is higher.
The new law also requires that the fidelity policy include computer fraud and funds transfer coverage up to the employee theft limit. This coverage must be purchased as a stand-alone fidelity policy.
Ane Agostini, chief executive officer of CID Insurance Programs, Inc., in San Diego, said sometimes it’s easy to allow risk management to fall through the cracks but that management companies need to make sure they’re enforcing indemnity agreements and that they have adequate limits in their insurance policies.
“Management companies need to make sure their associations have these coverages,” she said. “An association’s governing documents usually do not specify a specific limit. However, some of them do dictate what that limit should be. The state now has come in and said you have to follow this.”
The California Legislature proposed AB 2912 last year and it was signed into law September 17, 2019. The changes to the law took effect January 1, 2019.