By Marc Markel and Lisa Gambrell
Spring is almost here and in Texas that means higher temperatures and the opening of community pools are right around the corner. Before pool season gets into full swing, property owners associations (POAs) should be reviewing their Pool Management and Maintenance Master Services Agreement (Pool MSA) to ensure that the contract adequately addresses the level of risk associated with operating a pool. In this article, we will review several of the items that POA managers and board members should look for in the Pool MSA regarding insurance.
Today’s reality regarding insurance for pool services:
First and foremost, there is no way to adequately insure against all risks associated with pools, but the general premise is that more insurance is always better. Some Texas pool contractors claim that they are no longer able to obtain adequate amounts of primary and excess liability insurance. The question arises: Are contractors refusing to obtain higher coverage amounts due to the cost, or are they unable to obtain the coverage at all? We are aware of some pool contractors that have been able to obtain sufficient amounts of coverage, both primary and excess, as to the communities for which they provide lifeguarding and maintenance services. Unfortunately, there are other contractors that refuse to provide sufficient coverage due to cost or cannot obtain sufficient coverage due to one too many claims. It is critical for the contractor to obtain pricing from its carrier as to the coverages being requested in the association’s Pool MSA so that the board can make an informed decision. It might mean that the cost for the services outlined in the Pool MSA are increased in order to cover some of the costs associated with the insurance coverage. The association should be presented with this option.
It is also noteworthy that some excess policies may not cover events that occur on certain pool amenities, for example, slides, dives, beaches, etc. Additionally, some liability policies and excess policies are not a per incident (or even a per property) basis but might be an aggregate format where the coverage pertains globally to all of the properties at which the contractor provides services, or at best, there will be a limit to the number of times the insurance will be available. It is of paramount importance that the Association be provided with copies of the policies and the certificate of insurance, and that they be reviewed by Association counsel and its insurance broker, so that it can ensure that the coverage that the contractor has in place actually tracks the coverage requirements in the Pool MSA. Thus, it is imperative that pool contractors have:
- Sufficient insurance in place;
- The insurance is per property as to the limits of insurance; and
- The contractor and its insurance carrier agree to the terms, including not settling on behalf of the pool contractor without also obtaining the release of the Association.
A decision on which route to take is complicated and is ultimately a business decision for the board. The board should consider what options provide the most security for the association, both from a financial perspective and a liability/insurance coverage perspective. The board should always have the pool contractor’s insurance reviewed by knowledgeable counsel as well as its insurance broker. If board members or managers have questions regarding the association’s Pool MSA or insurance policies, they should reach out to the association’s legal counsel and insurance brokers.