Policy: Insurance Guidelines

Riverwood Homeowners Association, P. O . Box 20453, Portland, OR 97294

March 14, 2022

Dear Riverwood Homeowner,

I am writing to let you know that at the March 2022, Board meeting, the Board voted to increase the deductible of the Riverwood Master Insurance Policy with State Farm. Moving forward, the new deductible will be $25,000.00 (twenty five thousand dollars). Every Homeowner in the Riverwood Homeowners Association is responsible for updating their insurance company and increasing their individual policy to cover this change to the Master Policy deductible. Homeowners have 30 days from the date of this letter to accomplish this change.

The reason for the increase in the deductible was an unexpectedly high increase in tine premiums for the Riverwood Master Policy. Due to three claims in the last two years (all paid in 2021), our annual premium went from $35,000.00 to $54,955.00. That’s an increase of 57% of the previous payment. Along with this premium increase, Riverwood was also notified that the garbage service would be increasing by more than $5,000.00. Everyone at Riverwood pays this insurance premium, as well as the garbage service, through their monthly assessment (also called HOA fees). These fees make up the Riverwood budget and it absolutely cannot handle a sudden hit like this.

A special committee looked into options for dealing with this situation. These were a) a Special Assessment, b) finding adifferent insurance company or c) increasing our deductible with State Farm. The results: a) no one likes a Special Assessment, b) only one insurance company was willing to give us a quote and they required conditions Riverwood could not meet right now and c) State Farm offered a premium of just under $43,000.00 if we increased the policy deductible to$25K. This was by far the best option.

There have been questions about how the Riverwood Master Policy works. To help answer those questions, we havescheduled a visit with our insurance agent. Please join us to learn about our Master Insurance Policy and meet our agent:

Mark Nguyen, State Farm Insurance Agent, Thursday, March 31, 2022 at 7:00 PM, Riverwood Community Room

Here is what the committee learned in their search for insurance options:

1. Increasing the HOA Master Policy deductible would shift some of the risk and responsibility for claims to eachHomeowner’s individual insurance policy. In the event of a claim, the hit to Riverwood’s umbrella policy would besignificantly reduced. Remember, we all pay for the Master Policy premium through our monthly fees.
2. Increasing the policy deductible would also point to a change in how we view claims at Riverwood, almost a culturechange. Prior to last year, we all believed that incidents that originated inside of an owner’s walls were not covered bythe master policy. In the process of reviewing the claims submitted last year, we learned that that is not the case.
3. However, our Master Policy is actually “All-Inclusive,’ which means it covers damages (not maintenance) toindividual unit interiors, as well as exteriors and common areas. This type of policy is required by our Conditions, Covenants and Restrictions (Article IX). It is meant to protect the HOA in case of fire, earthquake or other catastrophic events that could destroy some or all of our homes. Since not every Homeowner might be carrying sufficient insurance to replace their entire unit and the HOA needs functioning units in order to bring in revenue, this insurance protects the HOA.
4. Here is how All-Inclusive insurance is meant to work

a. Homeowner makes a claim on their insurance policy for damage to their unit. At the same time, they notify the Insurance Committee and/or the Riverwood Board!

• i. The Homeowner’s insurance company or a Riverwood representative contacts State Farm and initiates a claim on the Master Policy.

b. A Maintenance Committee person or a Contractor should review the damage, assess the cause and decide whether this is the HOA’s responsibility or the Homeowner’s responsibility (was the system maintained?), in which case a claim could be denied:

“The Association will not be responsible for the cost of replacement or repairs of garage doors,windows, exterior doors, outdoor homeowner-installed lighting, sunken garbage can liners, orplumbing, heating, or electrical problems within the exterior property line of a Living Unit Lot.”(Bylaws, Article XIV, Section 4)

Riverwood’s legal counsel says that we have some recourse with claims. If the Board decides a homeowner has not maintained their unit property, Riverwood can contest an insurance claim. Ofcourse, there are legal costs to contesting a claim and those costs would be shared by everyone in the HOA. So it is in the best interest of us all to take care of our units properly and to see that our plumbing, heating and electrical systems are well maintained.

c. If the claim goes forward, the Homeowner’s insurance would cover the Master Policy deductible (which is now $25,000.00) and the Master Policy would cover the balance of the cost of repairs, within the limits of the policy.

Obviously, Riverwood cannot begin to honor every claim that is made for interior repairs to 92 units; the premiumincreases would be unsustainable. Instead, we will continue to inform Homeowners that they are responsible fortheir plumbing, heating, and electrical problems within the exterior property line of their Unit. Here are two examples: 1) We suggest that Homeowners hire someone to scope their sewer lines, or keep any scoping reports that were done when they purchased their Unit.

2) If a Homeowner has an old fuse box or aluminum wiring and it causes a fire, that Homeowner would be responsible for the problems with their electrical system and the HOA could deny a claim. Then the Homeowner’s insurance would be responsible for the entire claim.

For example, if a home sustains $100,000 damage due to an electrical problem within the house, the owner or their insurance is responsible for the entire amount. If a home sustains $100,000 due to damage from a tree falling on the house, the homeowner or their insurance is responsible for the $25,000 deductible and the H0A Master Policy coversthe remaining $75,000.

Please come to the March 31st meeting with our insurance agent and get answers to any questions you may have! And please remember to contact your insurance agent and increase your Master Policy deductible coverage!!

Thank you,

Larry Dashiell, President, Riverwood HOA