Do you have the proper discrimination coverage to protect your community association if a legal claim is made?
The Fair Housing Law prohibits housing discrimination based on race, color, religion, sex, familial status, national origin, marital status, sexual orientation, gender identity, or disability. Claims are increasing in these areas and can cost a community from early settlement costs of $ 10,000 to tried cases of $1,000,000 and more.
Who will provide the defense coverage and pay for the attorney? Will this be paid by your association or your insurance carrier? You should check to make sure you have the proper insurance coverage under several policies:
Comprehensive General Liability Insurance (CGL)
CGL policies cover bodily injury, property damage, medical payment, personal injury and advertising injury liability. Discrimination is generally excluded. Some policies will include coverage under the “Personal Injury” Liability. You need to make sure that “discrimination” is specifically stated or defined in the coverage definition.
Some insurance carriers will add an “endorsement” to your insurance policy for non-employment discrimination. This will offer you some protection. Depending on the insurance carrier, the rates are usually based on the number of units or a % of the General Liability premium.
Directors and Officers Liability Insurance (D&O)
D&O policies defend the board and may pay for any damages arising from a wrongful act. Most policies will specifically exclude discrimination. The D&O policy should be endorsed to provide the proper Employment Practices Liability (1st party) and Non-employment related discrimination (3rd party) coverage. If the policy is endorsed and a claim is made, the insurance carrier will provide the association with defense coverage.
This policy is written on a claims-made policy form and careful attention should be given to full prior acts coverage and the retroactive date. You want to make sure the policy will provide coverage for claims that were pending prior to the inception of the policy.
Employment Practices Liability Insurance (EPLI) –Be sure to include both 1st party and 3rd party discrimination insurance coverage.
Any employer association should implement effective risk-prevention, mitigation and transfer techniques which can help minimize the impact of employee allegations and prevent an employee lawsuit.
If a claim is made, the EPLI policy is designed to cover claims or lawsuits filed by employees, former employees, and employment candidates, regarding their employment relationship (hiring, firing, harassment). This is known as 1st party coverage.
This policy MUST BE endorsed to include 3rd party discrimination coverage. The cost to add this endorsement is usually an additional 10% of the premium.
This policy is also written on a claims-made policy form and careful attention should be given to full prior acts coverage and the retroactive date as well.
Tenant Discrimination Liability Insurance (added to your Management Company Professional Liability policy)
For management companies that also handle rental property, check your coverages to make sure that Tenant Discrimination and Wrongful Eviction is covered. Property owners and managers are protected in the event of discrimination, harassment or wrongful eviction. This can be added by endorsement and there is usually a sub-limit in the policy for this coverage.
Any community should always take the proper steps to avoid potential fair housing violations. In the event your association is charged with discrimination, try to resolve the cases promptly and make sure you have the proper insurance protection.