1. Forms
2. HO
3. HO-04-35

What the form is

The HO 04 35 Supplemental Loss Assessment Coverage endorsement is designed to modify a standard Homeowners insurance policy. Its primary purpose is to increase the amount of coverage available for loss assessments levied by a homeowners association (HOA), condominium association, or cooperative against the insured. Standard homeowners policies (like HO-3, HO-4, HO-6) typically include a base limit for loss assessment coverage (often $1,000). This endorsement allows the policyholder to purchase higher limits, providing greater financial protection against unexpected assessments for covered losses to common property or for liability claims against the association.

Classes of business it applies to

This endorsement is crucial for individuals who own or reside in properties governed by a community association. Specific scenarios include:

• Condominium Unit Owners (typically insured on an HO-6 form): These insureds have a direct exposure to assessments for damage to common building elements (roofs, hallways, amenities) or for liability incidents occurring in shared spaces. For example, if a fire damages the condominium complex's clubhouse and the association's master policy deductible is $50,000, the association might assess each unit owner their share of this deductible. The HO 04 35 could cover this assessment up to the increased limit purchased.
• Homeowners in a Planned Unit Development (PUD) or other HOA (typically insured on HO-3 or HO-5 forms): These homeowners also share ownership of common areas (e.g., private roads, pools, parks) and can be assessed for their upkeep, repair after a loss, or for liability claims.
• Tenants in a cooperative or those renting a unit in an association (HO-4 form): While less common, tenants might also face assessments depending on their lease and the association's rules, or they may want to ensure the owner has this coverage if it indirectly affects them.

Special considerations

There are several important points to consider when using or recommending the HO 04 35 endorsement:

• Earthquake Exclusion: Loss assessments resulting from earthquake damage are typically not covered by this endorsement. A separate endorsement, such as HO 04 36 Loss Assessment Coverage for Earthquake, is usually required for this specific peril.
• Association Deductibles: Historically, older editions of the HO 04 35 (pre-05/11) often contained a sublimit (e.g., $1,000) for assessments that were solely to cover the association's master policy deductible, even if the insured had purchased a higher overall loss assessment limit. Newer editions (05/11 and later) may have removed this restriction, allowing the full purchased limit of the HO 04 35 to apply to assessments for the master policy deductible. It is critical to check the specific policy's edition date and wording.
• Covered Perils: The assessment must be for a loss that would be covered under Section I (Property) or Section II (Liability) of the unit owner's policy. For property assessments, the damage to common property must be caused by a peril insured against under Coverage A of the homeowners policy.
• Governmental Assessments: Assessments levied by a governmental body are not covered.
• Scheduled Locations: The endorsement can be used to provide loss assessment coverage for the "residence premises" and can also be extended to cover other scheduled locations where the insured owns a unit (e.g., a vacation condo).
• Policy Period: Coverage generally applies to assessments charged during the policy period, regardless of when the actual loss to the association property occurred, though specific policy language should always be reviewed.

Key information for agents and underwriters

• Importance of Offering Increased Limits: The standard $1,000 loss assessment limit in most base homeowners policies is often inadequate given the potential for large assessments from HOAs or condo associations, especially with rising master policy deductibles. Agents should proactively discuss and offer higher limits using the HO 04 35 endorsement. This is a significant area of potential E&O exposure if not properly addressed.
• Cost-Effectiveness: Increasing loss assessment coverage via HO 04 35 is generally very affordable, making it a valuable addition for most eligible policyholders.
• Risk Assessment: Underwriters may consider the financial stability of the association, the adequacy of its master insurance policy (including deductibles), and its history of levying assessments when evaluating the risk.
• Client Education: Agents should clearly explain what the endorsement covers, including the types of assessments (property vs. liability), the typical earthquake exclusion, and how the coverage interacts with the association's master policy, particularly regarding deductibles.
• Edition Dates Matter: Due to significant changes in how assessments for association deductibles are handled, it's crucial for both agents and underwriters to be aware of the specific edition date of the HO 04 35 being used on a policy.
• Available Limits: While limits can vary by insurer, ISO rules have historically allowed for limits up to $50,000, with some carriers offering even higher amounts.