SUNLAND DIVISION 17 OWNERS ASSOCIATION
Board of Director’s Meeting -April 8, 2015 2:30 PM –4:30 PM
Location: Sunland’s Golf Course –109 Hilltop Drive, 1stFloor Ballroom
Call to Order: The regular meeting of Sunland Division 17 Owners Association Board was called to order at 2:32 PM by President Susan Hamman.
Roll Call and Quorum: The chair confirmed a quorum with four Board members present: President: Susan Hamman, Treasurer: Terry Main, Board Member at Large One: David Jelin and Board Member at Large Two: TomSteffen. Judy Field, Secretary, was absent. Tom Steffentook minutes for the board.
60 residents and four guests from Division 11 were in attendance at the meeting.
Review and approval of minutes: Draft minutes from the regular Board meeting of March 11, 2015had been circulated to the Board in advance. There were no corrections. MOTION: Tom Steffen moved to approve the minutes as written. The motion was seconded and approved.
Old Business:
- Earthquake Insurance: Susan stated the primary focus of this meeting was Division 11’s insurance, first the upcoming renewal of the Division’s regular policy and secondly, the issues related to the now separated earthquake policy. She gave a brief summary of the Insurance Committee’s work over the past four months, which involved getting quotes from different insurance providers to present to the Board.
2. Amy Clements from Community Association Underwriters (CAU). Amy Clements represented CAU, the Division’s insurance provider for the past nine years. Ms. Clements stated that CAU provided insurance for 1700 HOA’s in Washington State. Division 17 received earthquake coverage under its current policy for a very nominal rate, approximately $ 2700 per year. On the open market place, this same earthquake coverage cost $30,000-$40,000. CAU decided to get out of the catastrophic risk market with its quotes, but would obtain optional earthquake riders for its policy holders.
*What Changed in the Catastrophic Risk Business: a)Many insurance companies underestimated the risks; disasters such as Hurricane Sandy and Katrina exceeded the insurance risk predictions, b) CAU is going from three year policy contracts to one year contracts. Several of their insured HOA’s had losses. Because they were locked into three year contracts, CAU had to cover those losses at the guaranteed rate of the contract, which did not reflect current market value rates.
*Ms. Clements passed out a handout which detailed Division 17’s coverage summary with CAU (handout attached to hard copy of Secretary’s minutes). Division 17 has “all in” coverage, which essentially means that if you turn the unit upside down and shake out the contents, CAU’s policy covers everything that doesn’t fall out. “All in” coverage is usually required by an association’s governing documents. Lending institutions require “all in” coverage because it covers the entire building (two to three units per building in Division 17).
*CAU went to the open insurance market to look for optional earthquake coverage for Division 17. The pool of companies offering such coverage has been reduced. Division 17’s replacement cost value was estimatedat$46 million. Ms. Clementstalked about requesting quotes as a kind of “bait and fish” approach. CAU throws its line out in the insurance waters and hopes that a company is willing to produce a catastrophic risk quote. As of April 8th, four quotes have come in, ranging from a high of $46,680.12 with a 10% deductible and a limit of $46, 548,500 replacement costs to a low of $32,161.50 with a 10% deductible and a $30,000, 000 replacement cost. The 10% deductible applies to each building damaged.
*How the deductible is handled, whether by the HOA or by the unit owner, is in the HOA’s governing documents. The insurance kicks in after the deductible is taken out. In addition to insurance, Ms. Clements said that sometimes small business loans may be obtained by an HOA or at times, federal assistance.
*Homeowner question period: why did the regular premium go up approximately $3000 when the earthquake portion had been taken out? Answer: there has been no rate increase in Division 17’s policy for the past three years. The increase reflects current market rates. In addition, two new buildings were added to Division 17 with a total of four units. Five homeowners asked questions.
*Susan Hamman gave a brief history of Division 17’s earthquake policy. There was no earthquake insurance until 2006. In 2005, a survey was done of homeowners, who were evenly split among those who wanted the insurance and those who didn’t. In 2006, Division 17 switched from Mutual of Enumclaw to CAU; CAU’s policy included the earthquake coverage.
*Susan gave a summary of the key points in Division 17’s governing documents, namely section 8, which requires a vote of homeowners for any major, unbudgeted expenditures, such as this jump in catastrophic risk coverage and section 18, which deals with the Division’s insurance. While fire, vandalism, and malicious mischief are required of the HOA, earthquake coverage is optional.
*Susan contacted seven local Sequim HOA’s to determine whether they had earthquake insurance or not. Six of the seven had CAU as their insurance provider, so they are exploring their earthquake options as well (hard copy summary attached to the Secretary’s minutes).
* Susan went over the Insurance Committee’s search for proposals from different companies. There were three insurance companies involved: CAU (current provider), American Family Insurance (a direct writer), and Callis & Associates, an independent agent representing many insurance companies. Callis & Associates received nine responses from insurance companies: four would not write policies for an HOA of Division 17’s type, four could not match the competitive terms of CAU, and only one provided a quote, Philadelphia Insurance.
*Lindsay Busch from the Insurance Committee went over the Premium Bid Quotes from the three companies (at this point, Amy Clements left the room since the Board was reviewing the quotes). The quotes are attached to the Secretary’s hard copy minutes. Basic findings of the Insurance Committee: two of the three companies proposals were incomplete or did not match CAU’s coverage, lack of experience in dealing with an HOA of Division 17’s size, one company’s premiums were so low in comparison to the other two quotes that the coverage was called into question.
*The signed Insurance Committee’s review of the three companies and the recommendation is attached to the hard copy of the Secretary’s’ minutes. The committee recommended to the Board that Division 17 retain CAU for the regular insurance policy and continue to seek earthquake quotes to present to the membership. Tom Steffen moved that Division 17 continue with CAU, Terry Main seconded the motion and it was approved by the four Board members. Susan will complete and sign the CAU paperwork to meet the April 16, 2015 submission deadline. Amy Clements re-entered the meeting at this point.
3. Open forum for homeowner discussion regarding earthquake insurance. Among the seven homeowners’ comments: a) A homeowner survey or ballot should be worded to stress how the earthquake insurance will be paid for (the sharp increase was not anticipated or planned for in the budget). Also cautioned about using the Reserves to pay for the insurance. b) Two homeowners shared personal experiences about being in minor earthquakes; not in favor of the insurance because usually the damage never meets the deductible. c) One homeowner looked into purchasing personal earthquake insurance on the exterior of his unit through Lloyds of London. He was quote a policy of $260 per year. d) Question about the 10% deductible of the building, who pays, unit owners or HOA? According to the governing documents, the HOA pays (which means that everyone pays). e) Homeowner: earthquakes can cause a lot of damage. If the HOA is not covered, question the ability of the Division’s ability to restore and recover. Concern about people with mortgages simply walking away and those who own their homes having nothing left. f) Homeowner objection to having an “all in”policy coverage. Homeowners should be responsible for insuring the interior of their units; it is a private decision for the homeowner. The HOA should be responsible for insuring the exterior skin of the building, but nothing further. HOA has responsibility to insure its assets and therefore should have the earthquake insurance.
At 4:06 p.m., the homeowner comment period closed, having no further questions from those present.
3. Insurance Committee. Susan recommended that the Insurance Committee become a standing committee. Many issues surfaced during the process that need to be examined before decisions can be made about future policies, which will now be renewed on an annual basis. Terry made a motion to make the Insurance Committee a standing committee, Tom seconded the motion and all four Board members voted yes. Terry made a motion to disband the existing Insurance Committee, whose task was to gather and analyze the bids and make a recommendation to the Board. Tom seconded the motion and it was passed by the four Board members. Homeowner RonPayne volunteered to chair the standing Insurance Committee; Lindsay Busch and Susan Hamman will remain committee members. New members will be sought as needed.
Officer, Committee and Coordinator Reports:
1.) Secretary: In Judy Fields’ absence, Susan reported that two units have come up for resale.
2.) Treasurer: Terry Main
a) The financial status as of March 31, 2015 indicates we have $123,648 in our checking account and $179,329 in Reserve Fund accounts for a total of $302,976.
b) Reserve Study for this year will be the “Do It Yourself” study since the Division had a full reserve study done last year.
3.) Water Board Update: DavidJelin. Approximately 600 water meters have been purchased by the Water Boardthus far for Sunland. Division 17 will have to pay the installation costs of the water setters and meters (for the common areas). It is unknown at this time if Division 17 will pay one overall cost for this process or, akin to unit owners, per install.
4.) Mole situation: Tom Steffen reported that Mike Main volunteered to learn how to catch moles and help out with Division 17’s mole problem.
5.) Architecture: Cindy Meek had no requests in the last reporting period.
6.) Developed Landscape: Eldon Dennis reported that a tree is starting to impact a Division 17 transformer box and will need to be removed. The landscaper is now spraying for dandelions throughout the complex.
7.) Exterior Maintenance: Richard Helmenstine
a) Richard reported that he’s looked into getting a spray power washer to rid the roofs of moss. Local stores did not have any in stock, but will be getting more information on them. The cost will be about $400.
b) Unit painting on eight buildings will begin this summer. Paint selection was assisted by two volunteers in coordination with Richard.
c) There has been need for gutter repairs on some units.
8.) Greenbelt: Tim Paschal
a) Jim Rossi completed the first greenbelt mowing of the season.
b) Jim Rossi asked for a flat rate contract for mowing versus pay by hour. The request will be reviewed at the May Board meeting.
c) Poison hemlock is under control. John Meyer and Tom Hamman are assisting Tim in this process.
9.) Newsletter: Renee Jones reported that the next newsletter will go out in July.
10.) Welcome Committee: Barbara Paschal and the committee visited two new homeowners.
ADJOURNED AT 4:29 PM
MOTION: There being no further business, David Jelinmoved to adjourn the meeting. It was seconded and approved.
Minutes recorded by Tom Steffen