1. Forms
2. DL
3. DL-24-14

What the form is

The DL 24 14 Loss Assessment Liability Coverage endorsement is designed to be added to a dwelling policy. Its primary purpose is to provide coverage for the named insured's share of a loss assessment levied by a corporation, association of property owners, or similar organization. This assessment must be the result of direct loss to property owned collectively by the association members or for a covered bodily injury or property damage liability claim for which the association is legally responsible. The endorsement specifies that the limit of liability applies to each loss, and importantly, all acts committed by directors, officers, or trustees are considered a single act, regardless of the number of individuals involved. Coverage under this endorsement is not governed by the policy period condition.

Classes of business it applies to

This endorsement is primarily applicable to personal lines, specifically for individuals who own a dwelling unit within a planned community, condominium, or cooperative where they are members of a homeowners association (HOA) or a similar property owners' association. These entities typically have master insurance policies covering common areas and shared liabilities, but sometimes these policies are insufficient, or an assessment is made for a deductible or an uncovered portion of a loss.

Real-world example: Sarah owns a condominium unit and is a member of her condo association. A visitor slips and falls on a poorly maintained common area sidewalk, resulting in a significant liability claim against the association. The association's master liability policy covers a large portion of the claim, but there's a remaining amount that exceeds the policy limits (or falls within a large deductible). The association decides to levy a special assessment against each unit owner to cover the shortfall. If Sarah has the DL 24 14 endorsement on her dwelling policy, it would respond to cover her share of this assessment, up to the limit specified in the endorsement.

Special considerations

• Not Automatic Coverage: This is an optional endorsement and is not automatically included in a standard dwelling policy; it must be specifically added.
• Limit of Liability: The endorsement will have its own limit of liability, which is chosen by the insured and stated on the Declarations page. This limit is separate from other liability limits on the policy.
• Covered Assessments: Coverage typically applies to assessments resulting from bodily injury or property damage liability claims. It may also apply to assessments for damage to collectively owned property if covered by the endorsement's terms.
• Association's Insurance: The need for this coverage often depends on the adequacy of the master insurance policy carried by the homeowners association. However, even with a robust master policy, assessments can occur.
• Acts of Directors/Officers: The provision stating that acts of directors, officers, or trustees are considered a single act is crucial for determining how the limit applies, especially in situations involving multiple decisions or individuals contributing to a loss.

Real-world example: A homeowners association's board of directors makes a series of decisions that lead to a liability lawsuit. Even if multiple board members were involved in these decisions over time, the DL 24 14 endorsement would likely treat this as a single occurrence for the purpose of applying the coverage limit for any resulting assessment.

Key information for agents and underwriters

• Agents: Agents should proactively discuss the risk of loss assessments with clients who are members of HOAs or live in community associations. Explaining the potential for large, unexpected assessments and the relatively low cost of this endorsement can be a valuable service. It's important to help clients select an adequate limit based on their potential exposure, considering the value of common property and the association's master policy deductibles or limits.
• Underwriters: While the primary underwriting focus is on the individual insured's dwelling, underwriters might indirectly consider the type of association. However, the DL 24 14 is generally a standard endorsement with pricing based on the selected limit. The risk is somewhat diversified as it depends on the actions and insurance of the association, which is external to the individual insured's direct control over common areas. Coverage gaps in the HOA's master policy (e.g., high deductibles, specific exclusions) can increase the likelihood of assessments, making this endorsement more valuable.
• Pricing: The premium for this endorsement is usually modest, making it an affordable way to protect against a potentially significant financial burden.
• Coverage Gaps: This endorsement helps fill a critical coverage gap for individuals in community living situations, protecting them from financial responsibility for shared liabilities or property losses that result in assessments.