By Jessica M. Knutsen, CIC, EBP Jessica has been practicing insurance for 14 years. She has developed expertise designing insurance programs and developing Risk Management Plans exclusively for condominiums, cooperatives and large HOAs. She is a Vice President at the USI Community Association Insurance Practice. Jessica holds the Certified Insurance Counselor (CIC) professional designation and is a CAI Educated Business Partner. She was elected as one of the 12 members to lead national Community Association Institute (CAI) as 2020 – 2022 CAI’s Business Partner Council in an At-Large position (Insurance Broker). This position allows her to provide input on policy matters to the CAI Board of Trustees. She actively participates in the Education, Legislation and Membership committees of the Washington Metropolitan Chapter (WMCCAI).
Recovering an Additional Insurance Payment: cess? o r P l a c i h t e An Un
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ne could say it is common knowledge that common-interest communities in the DC metro area have a specific insurance requirement to purchase an “All Risk� property policy, equal to full “Replacement Cost Value (RCV).� This means that even if a highrise was built in 1981, an insurance company would repair the physical damage without deducting the depreciation accumulated in 39 years. However, what is not
common knowledge is that an insurance company will not voluntarily pay the replacement cost value. The initial payment will almost always be “Actual Cash Value (ACV)�—meaning RCV minus depreciation. In order to obtain full RCV, the Community Manager or Board of Directors will need to take an extra step to recover the depreciation that was intentionally deducted, hence the name “Recoverable Depreciation.�
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Unfortunately, numerous claims are closed with only ACV paid, and many associations fail to take the extra step to recover the depreciation they are entitled to. Surprisingly, during an insurance webinar in August 2020, organized by the Washington Metropolitan Chapter Community Associations Institute, 30% of the attendees reported that they had never dealt with this process. It is expected that some people will perceive this practice as unethical. Nevertheless, all property insurance policies have a provision under the Loss Conditions section that clearly states that claims will be paid on an ACV basis first. The provision also clarifies
