Community Associations

The architectural review committee denied a homeowner’s request to add a pergola. The homeowner hired an attorney. The lawsuit named the association  and the three board members who voted on the denial, individually, by name.

This is not a hypothetical edge case. It is a pattern playing out in community associations across the country in 2026, and board members who assumed their volunteer status provided meaningful personal protection are discovering otherwise. According to research cited by Kevin Davis Insurance Services, 31 percent of homeowners believe their HOA board has too much power. This figure correlates directly with the likelihood of disputes escalating to litigation when homeowners feel a decision was wrong.

What D&O Actually Covers

D&O insurance protects board members and the association against claims alleging wrongful acts related to the performance of governance duties. These claims can arise when homeowners allege that the board enforced rules inconsistently or selectively, mishandled election procedures, made arbitrary or discriminatory architectural decisions, failed to follow governing documents, or breached its fiduciary duties through financial management decisions.

When a claim is covered under the policy, D&O insurance typically provides coverage for legal defense costs, which are often the most significant financial exposure in governance disputes, as well as indemnification for settlements or judgments up to the policy limit. Board members receive defense counsel, and their personal asset exposure may be limited to amounts that exceed the available policy coverage.

What D&O Does Not Cover

D&O does not cover bodily injury or property damage. Those claims fall under general liability coverage. Intentional fraud and criminal acts are excluded. Actions taken outside a board member’s official authority are typically excluded. Suits between covered persons, such as one board member suing another or the association suing a former director, are generally excluded, though some policies include carve-backs for non-collusive disputes.

The policy is written on a claims-made basis, which means the coverage in force when the claim is reported is the coverage that applies. Boards that change carriers or allow coverage to lapse need to address prior acts coverage and extended reporting periods. These gaps can leave past decisions without coverage even when a new policy is in place.

How Much Coverage Is Enough

For most associations, a minimum of $1 million in D&O limits is appropriate. Communities with 50 or more units, active common areas, a history of governance disputes, or an active litigation environment should consider carrying $2 million to $5 million in coverage. D&O premiums for community associations in 2026 typically range from $900 to $5,000 annually for small to mid-sized communities. This makes D&O one of the most cost-effective coverages in any insurance program given the level of protection it provides.

Annual D&O reviews should confirm that the policy’s retroactive date provides full prior acts coverage and that limits remain appropriate based on changes in community size, operations, or litigation history. Specialty programs for community associations include D&O policy structures designed specifically for the governance dynamics of HOAs and condominium boards.

Ready to make sure your board members are protected? The team at Tooher-Ferraris has been helping community associations and their leadership since 1932. Contact us today to schedule a no-obligation consultation.

When your association renewed its property insurance in 2021 or 2022, the building’s insured value was set based on construction costs at that time. Since then, those costs have not come down. They have gone up and in most markets, they remain 15 to 20 percent above pre-pandemic levels, according to Gallagher’s 2026 construction market analysis.

If the insured value of your association’s property hasn’t been formally updated since then, there is a reasonable chance the community is significantly underinsured. The time to discover that gap is not during a catastrophic fire, flood, or structural failure, it is now.

Why the Numbers Matter More Than Most Boards Realize

Property insurance for community associations is not simply about having a policy in place. It is about having a policy that will actually fund a rebuild after a total or major loss. When insured values lag behind actual replacement costs, the consequences arrive in two forms.

The first is straightforward: if the building is insured for less than it would cost to rebuild, the insurance payout will not cover reconstruction. The shortfall becomes the association’s problem which typically means a special assessment on homeowners at the worst possible time.

The second consequence is less widely understood: the coinsurance penalty. Most commercial property policies include a coinsurance clause requiring the insured value to equal at least 80 or 90 percent of actual replacement cost. If insured value falls below that threshold at the time of a loss, the carrier is entitled to apply a coinsurance penalty, reducing the claim payout proportionally, even on a partial loss that would otherwise be straightforward. An association that insured a clubhouse for $1.2 million based on 2020 valuations, when 2026 replacement cost is $1.6 million, could face a significant penalty on even a partial fire loss.

What an Insurance Appraisal Does

An insurance appraisal is distinct from a real estate appraisal, which establishes market value. An insurance appraisal determines the actual cost to rebuild or replace a structure at current construction prices. The appraisal accounts for current material costs, labor rates, code compliance upgrades that would be required in new construction, and debris removal.

According to the Community Associations Institute, insurance appraisals are considered best practice for any association with shared buildings and should be updated every three to five years or whenever significant renovation, addition, or meaningful construction cost changes warrant a review. Associations that haven’t reviewed property values in three or more years are the ones most likely to discover a meaningful gap.

What to Do Before the Next Renewal

Start by asking when the property was last formally appraised for insurance purposes and whether the current insured value reflects today’s construction costs. If the answer involves an estimate, a prior-year escalation factor, or an appraisal more than three years old, an updated appraisal is warranted. For associations with January renewal cycles, July is the right time to initiate this process. Appraisal results typically take four to eight weeks, leaving adequate runway for the renewal conversation. Specialty programs for community associations include property coverage structured around accurate replacement cost valuations, with program advisors who can facilitate the appraisal referral.

Ready to confirm your association’s property is insured for what it would actually cost to rebuild today? The team at Tooher-Ferraris has been helping community associations since 1932. Contact us today to schedule a no-obligation program review.

The conversation used to happen after the offer was accepted. Increasingly, it is happening at the showing.

“What will insurance cost on this place?” “Does a roof this old even qualify?” “We’re in a flood zone. What does that mean for our mortgage?” “Why is the deductible so high on a house at this price?”

These questions are coming earlier in the buying process, and for good reason. Homeowners insurance has become more expensive, harder to qualify for, and more variable by property than most buyers expect. In some markets, insurance costs are affecting affordability calculations more meaningfully than rate changes. Buyers who discover insurability problems after going under contract are losing earnest money, blowing up timelines, and sometimes walking away entirely.

Real estate professionals who can navigate these conversations intelligently, connecting buyers with the right resources at the right moment, create a smoother transaction and a stronger client relationship. Those who handle them carelessly create liability.

What Buyers Are Actually Worried About

The questions brokers are hearing in 2026 reflect a market where insurance is no longer a formality. Buyers want to know whether a property’s roof age will trigger a denial or a dramatically higher premium before they invest in inspections and appraisals. They want to understand flood zone designations and whether National Flood Insurance Program coverage is required by their lender. They are asking about deductible structures in wind-prone areas, insurance-to-value requirements, and whether a prior claims history on a property will affect their ability to get coverage.

According to a 2026 survey from Bankrate, more than one in three homebuyers say insurance costs played a role in which home they ultimately purchased. This figure reflects how dramatically the homeowners insurance market has shifted over the past three to four years. Buyers who do not get insurance guidance until post-contract are increasingly finding surprises they did not budget for.

Where the Value Is and Where the Liability Is

The real estate professional who helps a buyer connect with a knowledgeable insurance advisor early in the search process creates measurable value: fewer failed transactions, fewer last-minute surprises, and buyers who feel genuinely supported through a complex process. That is a competitive differentiator that referrals notice.

The liability enters when agents cross from connecting buyers to insurance professionals into offering insurance assessments themselves. A broker who tells a buyer “this home should be easy to insure” or estimates monthly premium costs is making a professional representation outside the scope of their real estate license. If that representation is wrong and the buyer encounters an unexpected denial, a surcharge, or a cost that affects their ability to close, the E&O exposure is real.

The right approach is a specific one: refer early, refer specifically, and document the referral. Telling a buyer, “You should speak with a licensed insurance professional before we get too far into this search,” is a responsible approach. It positions the broker as a knowledgeable advocate who recognizes that insurance has become an important part of transaction due diligence rather than something addressed after the fact.

Building the Right Referral Relationship

The most effective brokers in markets with complex insurance environments have cultivated relationships with independent insurance advisors who understand residential property risk and can give buyers a preliminary read quickly. Tooher-Ferraris works with real estate professionals to support their buyers with straightforward, no-pressure home insurance conversations early in the process. The goal is to help transactions close without surprises, not to become a speed bump. Visit our specialty programs page to learn more about how we work with real estate professionals.

Ready to build an insurance referral relationship that adds value to your transactions? The team at Tooher-Ferraris has been helping families and professionals navigate homeowners insurance since 1932. Contact us today to learn how we work with real estate professionals.

It starts innocently. A buyer is walking through a house and asks, offhandedly, what insurance on a place like this would cost. The agent gives a rough number. The buyer uses that number in their budget. The actual quote comes in 40 percent higher. The buyer closes anyway, but now the monthly payment is uncomfortable, the relationship is strained, and if anything goes wrong downstream, there is a paper trail connecting the agent’s estimate to the buyer’s decision.

That is how E&O claims in real estate often begin: not with a dramatic professional failure, but with a casual comment that crossed a line the agent did not realize was there.

Insurance questions from buyers and sellers are coming earlier and more frequently than ever. In a homeowners insurance market defined by rising premiums, restricted carrier availability, and properties that are harder to insure than they appear, the gap between what a buyer expects and what insurance actually costs has never been wider. That gap is exactly where E&O exposure hides.

The Five Statements That Create Liability

Professional liability claims tied to insurance conversations in real estate typically involve one of five categories of misstatement. Each one is common. Each one is avoidable.

“This house should be easy to insure.” Insurability depends on roof age and condition, the property’s claims history, proximity to fire stations, construction materials, and market-specific carrier appetite. None of these are visible from the showing. An agent who implies a property is straightforwardly insurable is making a professional representation that only a licensed insurance professional can make accurately.

“Insurance on a home like this usually runs around X per month.” Premium estimates are underwriting determinations. They vary by carrier, the buyer’s own claims history, the property’s specific characteristics, and coverage structure. A number cited by an agent, even a well-intentioned one based on their own prior policies, creates the impression of professional guidance it cannot back up.

“The roof should be fine.” Roof age and condition are among the top factors carriers use to determine both eligibility and premium. Stating that a roof “should be fine” for insurance purposes requires knowledge of carrier guidelines the agent does not have.

“You probably don’t need flood insurance here.” Flood zone designations can be complex, and whether flood insurance is required, recommended, or optional depends on FEMA flood map designations, lender requirements, and the buyer’s own risk tolerance. Agents who opine on flood insurance necessity are operating outside their scope.

“I wouldn’t worry about the claims history.” Prior claims on a property are visible to insurers through CLUE reports and affect both eligibility and pricing in ways buyers cannot fully anticipate without professional guidance.

What to Do Instead

The right practice for every one of these situations is the same: refer the buyer to a licensed insurance professional, do so early in the process, and document that you did. Five practices that reduce E&O exposure in insurance conversations: never estimate insurance costs; avoid characterizing any property as “fully insurable”; recommend buyers speak with a licensed insurance professional before making an offer on properties with potential insurability concerns; document insurance referral recommendations in writing; stay within the scope of the real estate license. Per the specialty programs coverage that protects brokerages, your E&O policy covers licensed real estate activities, not insurance advice.

Ready to connect your clients with an insurance partner who can support your transactions without creating risk? The team at Tooher-Ferraris has been helping real estate professionals and their clients since 1932. Contact us today to schedule a conversation.

The email looks perfect. It appears to come from the title company. The wire instructions are formatted exactly right. The urgency feels familiar because the closing is tomorrow and the funds need to be in place today. The buyer follows the instructions and wires $200,000 to what turns out to be a criminal’s account. By the time anyone realizes what happened, the money is gone.

This scenario plays out in real estate transactions every week and it is accelerating. The FBI’s Internet Crime Complaint Center reported $275 million in real estate-related fraud losses in 2025, according to reporting published by NAR Magazine in April 2026. The frequency and sophistication of attacks has increased dramatically as artificial intelligence gives criminals the ability to craft convincing communications at scale, impersonate known contacts with voice cloning, and monitor transaction email chains in real time before inserting fraudulent wire instructions at the most vulnerable moment.

July is peak closing season. It is also, for that reason, peak wire fraud season.

The Scale of the Problem and Why AI Changed Everything

Wire fraud in real estate is not a new problem. What is new is the speed and scale at which attacks are now being deployed. According to CertifID’s 2026 State of Wire Fraud report, industry data shows a 1,760 percent increase in business email compromise attacks since AI tools became widely available. The volume is extraordinary, and it is not plateauing.

Sixty percent of title professionals surveyed reported that fraud attempts are increasing. The average business email compromise incident in real estate results in losses of $150,000 to $200,000 per incident. Buyer cash-to-close fraud, where the buyer is tricked into wiring closing funds to a fraudulent account, represents the most common category.

The reputational damage compounds the financial loss. Per CertifID’s 2026 data, 56 percent of consumers said they would not work with a title company or real estate firm again after a wire fraud incident, even when all funds were fully recovered. In an industry built on referrals, a single fraud event can damage the relationships that took years to build.

What Your E&O Policy Does Not Cover

Standard errors and omissions insurance does not cover wire fraud. E&O is designed to respond to professional mistakes within the scope of licensed real estate activity. Wire fraud is a cybercrime. It is a criminal act, not a professional error. When a buyer’s funds are misdirected through a fraudulent email that exploited a communication channel the brokerage used, the E&O carrier will typically decline the claim.

The coverage that responds to wire fraud and business email compromise is cyber insurance, specifically with social engineering and crime endorsements that address funds transfer fraud. A standalone cyber policy for a real estate brokerage should address fraudulent instruction coverage, social engineering, computer fraud, and the breach response costs that follow a wire fraud incident.

What Brokers Can Do Right Now

Real estate transactions present unique cybersecurity and wire fraud risks. The FBI recommends that brokerages develop a formal risk-reduction plan and regularly train agents and staff to recognize AI-driven fraud, social engineering and suspicious changes to payment instructions.

Tooher-Ferraris helps real estate brokerages strengthen their protection through practical risk management guidance and insurance programs tailored to the realities of the industry. Recommended safeguards include:

• Confirming wire instructions by phone using a number already known to be legitimate
• Requiring verbal verification of every change to payment instructions
• Treating last-minute payment changes as potential fraud attempts, regardless of how authentic the email appears
• Providing ongoing cybersecurity and wire fraud training for agents and staff
• Reviewing internal procedures to identify vulnerabilities before criminals exploit them

Operational controls are essential, but they cannot eliminate every exposure. Tooher-Ferraris understands how wire fraud, social engineering and data breaches can intersect with a brokerage’s real estate insurance program. Our experienced advisors review policies closely to identify exclusions, inadequate limits and coverage gaps that may not become apparent until a claim occurs.

Traditional professional liability and E&O insurance may not respond to every cyber-related loss. Tooher-Ferraris can help brokerages evaluate specialized cyber coverage designed for the real estate transaction environment and coordinate it with their broader commercial insurance program.

Since 1932, Tooher-Ferraris has helped businesses navigate complex risks through thoughtful coverage, experienced guidance and responsive service. Contact our team to schedule a no-obligation review of your brokerage’s insurance and risk management program.

A landscaping crew the association has used for three seasons shows up to trim trees near the pool deck. One worker falls from a ladder and is seriously injured. The crew carries no workers’ compensation coverage. The injured worker’s attorney names the homeowners association in the resulting lawsuit, arguing that the association bears statutory employer liability for the uninsured worker’s injury.

This scenario is one of the most common ways community associations find themselves in litigation they did not anticipate and cannot immediately defend. Contractor-related losses on association property are a significant and preventable source of both insurance claims and personal liability for board members. Prevention requires consistently enforcing written insurance requirements before any contractor begins work, not after.

Why Vendor Insurance Requirements Matter

When a contractor or vendor works on association property without adequate insurance, the association absorbs the risk that contractor’s coverage was supposed to transfer. An uninsured worker’s injury, property damage caused during a project, or a workmanship defect that leads to structural damage can all become the association’s financial problem when the contractor’s policy is inadequate, expired, or nonexistent.

According to OSHA, construction, groundskeeping, and maintenance occupations consistently rank among the highest for workplace injury rates. Community associations engage contractors across exactly these categories, including landscapers, roofers, painters, pool service technicians, elevator maintenance providers, and general contractors for capital improvements. Each engagement is a risk transfer opportunity that should be documented and enforced.

What Every Contractor Must Provide Before Starting Work

• Current insurance coverage is essential. The contractor should provide a current certificate of insurance showing active general liability, commercial auto, and workers’ compensation coverage in amounts appropriate for the project’s scope. For most standard maintenance vendors, $1 million per occurrence in general liability is a reasonable minimum. For larger capital projects, $2 million per occurrence is more appropriate.
• An additional insured endorsement is required. Do not rely on the certificate of insurance alone. The certificate shows what coverage exists, while the additional insured endorsement is the document that actually extends coverage protection to the association under the contractor’s policy. Many associations accept certificates without confirming the endorsement is in place. That gap often becomes apparent only after a claim, when the association expects the contractor’s insurance to respond.
• A written indemnification agreement should be included in the service contract. The agreement should specify that the contractor will defend and hold the association harmless from claims arising from the contractor’s work on the property. The language should be reviewed by the association’s legal counsel to confirm it is enforceable in the applicable jurisdiction.
• Workers’ compensation coverage must be verified. The contractor should provide evidence of workers’ compensation coverage for all employees working on the property. Associations that hire contractors without this coverage may face statutory employer exposure, meaning they could be treated as the employer of record for an uninsured injured worker.

Building the Process

Insurance requirements should be written into every service contract and reviewed annually. According to the Community Associations Institute, vendor insurance requirements should be reviewed annually with both legal counsel and the association’s insurance advisor, since appropriate requirements depend on the association’s own coverage structure and the nature of the work being performed. A contract file confirming insurance verification for every active vendor is one of the most practical risk management steps any community association can take. Specialty programs for community associations include contract review support and vendor insurance requirement frameworks. Commercial insurance program advisors can help identify appropriate requirements for the specific projects and vendors your community engages.

Ready to make sure your vendor risk transfer practices are protecting the association? The team at Tooher-Ferraris has been helping community associations manage risk since 1932. Contact us today to schedule a no-obligation consultation.