Ed Mackoul, President, explains why the sponsor or developer should have their own policy to cover their interest on any unsold units.
A community association’s policy should not provide coverage for the sponsor or developer. Once an insurance policy is provided for the association, typically the date of the first closing, the developer should obtain their own policy to cover their interest on the unsold units. Occasionally, the developer will try to include themselves as a Named Insured on the association’s policy. This does not benefit the association, as their policy could conceivably provide coverage within a unit, for something that isn’t their responsibly. In the long run, any claims could result in a higher premium for the association. Much like any other owner in the building, the developer is an insured as it relates to their ownership in the association, but they should have their own policy when it comes to their responsibility within the unit.