By Mike Schleich, National Business Development Leader for Community Associations
Nevada’s 2023 legislature passed a new HOA law requiring community associations to carry Cyber Liability insurance if they utilize a website or electronic portal to collect monthly assessment fees online. Community associations receive and store unit owners’ bank account numbers and/or credit cards, as well as other personally identifiable information that hackers can use for nefarious reasons.
The amount of Cyber insurance an association is required to buy is based on the association’s size. An association with 150 units or fewer must buy Cyber limits of $250,000; an association with more than 150 units and not more than 250 units must purchase $500,000 in limits; and an association with 250 or more units must buy limits of $1 million.
If an association has contracted with a payment processor to collect funds, the processor must carry Cyber insurance in Nevada with a minimum coverage limit of $5 million. The Nevada law also requires HOA payment processors to use special encryptions and other data protection measures to protect information provided to them, like homeowners’ bank account numbers, credit card numbers, names and addresses, user names, and unique identifiers, including passwords combined with emails.
According to the law, the Cyber policy must cover losses due to data breaches, unauthorized intrusion into an information system, computer viruses, ransomware, identity theft, and similar exposures.
Will Other States Follow Nevada’s Lead in Requiring Cyber Insurance for HOAs?
States have various rules community associations must follow and potentially can add a version of Nevada’s law into their rules to strengthen cybersecurity. In any event, having Cyber Liability insurance is a good business practice to implement, with the volume of online transactions that take place and the potential for an incident to occur.
Why Should Community Associations Buy Cyber Insurance?
Many associations, unfortunately, don’t purchase Cyber insurance, especially if they use a third-party payment processor or their property management company to collect fees. However, since the association is the entity ultimately receiving the fees, carrying coverage is prudent, as most unit owners will look to their association for recourse if a cyberattack occurs. Additionally, the property management company may not have enough Cyber insurance to cover all the associations they manage.
If a data breach or other type of cyberattack impacts an association’s unit owners, the association and property manager or payment processor would most likely all be named in a lawsuit. If the association carries Cyber coverage, it can ensure there is enough insurance to cover its exposure, and the HOA can work with its carrier on claims management and handling.
Our Cyber Program
Distinguished Programs provides Cyber Liability insurance for community associations, including first- and third-party coverages, Cyber Breach Response services, effective risk management services, and a 24/7 claims line. Our Cyber program includes limits up to $1 million, with higher limits available upon request.
About Mike Schleich
Mike is an accomplished insurance sales executive with more than 25 years of experience on the carrier, broker, and program manager side of the industry. He is responsible for the sales and marketing of all of Distinguished’s community association products.
Mike has a bachelor’s degree in English from Kenyon College in Ohio and an MBA from Cleveland State University.
About Distinguished Programs
Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.