HOA and condo association insurance your board can explain.

What California law makes an association carry, and the limits that protect directors

Three Davis-Stirling sections set the floors.

• §5805, general liability. A tort claim against an owner arising only from a tenancy-in-common share of the common area goes against the association alone if it carries general liability of at least $2,000,000 (100 or fewer separate interests) or $3,000,000 (more than 100).
• §5800, volunteer directors. A volunteer officer or director (a tenant, or an owner of no more than two residential separate interests) is not personally liable beyond the insurance for a good-faith act within board duties that was not willful, wanton or grossly negligent, if the association carried both general liability and individual directors-and-officers coverage, each at $500,000 (100 or fewer separate interests) or $1,000,000 (more than 100), at the time of the act and of the claim.
• §5806, crime and fidelity. Unless the governing documents require more: at least the reserves plus three months of total assessments, the same amount against computer fraud and funds-transfer fraud, and coverage for dishonest acts by the managing agent. Self-insurance does not count.

An umbrella over the general liability is one way to reach the §5805 figures. The floor varies by state: Florida Statutes §718.111(11), for example, requires property insurance at replacement cost set by independent appraisal at least once every 3 years, plus fidelity bonding of everyone who controls or disburses association funds.

What the board must tell owners every year, and immediately after a non-renewal

The annual budget report (Civil Code §5300)

It goes out 30 to 90 days before fiscal year end and must summarize the property, general liability, earthquake, flood and fidelity policies: insurer, type, limit and deductible for each. Copies of the declarations pages satisfy whatever they show. The summary carries the statute's 10-point boldface statement and tells members they may review and copy the policies. A condominium project adds two separate sheets, in at least 10-point type, saying whether it is FHA-certified and VA-certified.

Lapse, cancellation or a significant change (§5810)

If a policy in that summary lapses or is cancelled and not immediately replaced, or changes significantly (reduced coverage or limits, a higher deductible), the association must give individual notice under §4040 as soon as reasonably practicable. After a notice of non-renewal, it must immediately notify members if replacement coverage will not be in effect by the lapse date.

So: confirm the lapse date in writing, start re-marketing the same week, and draft the §5810 notice now, ready for the day it is clear the replacement will not bind in time.

Keeping units financeable: what Fannie Mae and FHA look for

Fannie Mae Selling Guide B7-3-03

• At least 100% of the estimated replacement cost value of the project improvements, "Special" form or equivalent, settled at replacement cost (roofs excepted).
• Deductibles capped at 5% of the master coverage amount and $50,000 per unit; any per-unit deductible means each borrower must carry a unit owner's policy.
• For condominiums, a Condominium Association Coverage Form or equivalent: recognition of an insurance trustee, waiver of rights of recovery against unit owners, and wording that the master policy is primary.
• Building ordinance or law coverage unless unobtainable in the association's market, and equipment breakdown at the lesser of $2 million or the buildings' replacement cost when the project has central heating or cooling.

FHA form HUD-9992 (2/25)

The questionnaire asks for a master or blanket hazard policy that includes the individual units; comprehensive liability for the entire project, common elements included, of at least $1 million for any single occurrence; fidelity insurance for officers, directors, employees and anyone else handling association funds; and, in a Special Flood Hazard Area, flood insurance at 100% of replacement cost, the maximum NFIP coverage per unit, or another stated amount.

I check every proposed declarations page against both lists; losing the trustee wording or a per-unit deductible past $50,000 can take conventional financing off the table for buyers.

Official sources

• California Civil Code §5805 (Davis-Stirling Act): volunteer director and officer liability and the association’s required insurance
• California Civil Code §5806: directors and officers liability coverage
• California Civil Code §§5800–5810 (Davis-Stirling Act, Chapter 9: Insurance and Liability)
• California Civil Code §5300 (annual budget report and insurance summary)
• California Civil Code §5551 (exterior elevated element inspections)
• Fannie Mae Selling Guide B7-3-03, Master Property Insurance Requirements for Project Developments
• Florida Statutes §718.111(11), Insurance (2026 Florida Statutes)
• HUD form HUD-9992, FHA Condominium Project Approval Questionnaire (2/25)
• California FAIR Plan: Commercial policies
• California Department of Insurance, June 25, 2025: FAIR Plan high-value commercial coverage option
• California Earthquake Authority: Condo-unit policy coverages and deductibles
• FEMA / NFIP Summary of Coverage: Residential Condominium Buildings, P-2180 (May 2024)