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by Sara Barry
NV Licensed CAMLicensed Insurance Producer
UNLV Certified Paralegal & Certified UNLV Legal Secretary
Former PCAM (1993 - 2018) & CCAM
Former Community Association Management Company Owner

(See "Insurance Checklist" located on FORMS page to help interview brokers and agents.)




Nevada Law Requirements

The History of Insurance



A. What does Nevada Law Require?

NRS 116.3113 Insurance: General requirements.

1.    Commencing not later than the time of the first conveyance of a unit to a person other than a

declarant, the association shall maintain, to the extent reasonably available and subject to reasonable deductibles, all of the following:

(a) Property insurance on the common elements and, in a planned community, also on property that must become common elements, insuring against risks of direct physical loss commonly insured against, which insurance, after application of any deductibles, must be not less than 80 percent of the actual cash value of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations and other items normally excluded from property policies.

(b) Commercial general liability insurance, including insurance for medical payments, in an amount determined by the executive board but not less than any amount specified in the declaration, covering all occurrences commonly insured against for bodily injury and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements and, in cooperatives, also of all units.

(c) Crime insurance which includes coverage for dishonest acts by members of the executive board and the officers, employees, agents, directors and volunteers of the association and which extends coverage to any business entity that acts as the community manager of the association and the employees of that entity. Such insurance may not contain a conviction requirement, and the minimum amount of the policy must be not less than an amount equal to 3 months of aggregate assessments on all units plus reserve funds or $5,000,000, whichever is less.

(d) Directors and officers insurance that is a nonprofit organization errors and omissions policy in a minimum aggregate amount of not less than $1,000,000 naming the association as the owner and the named insured. The coverage must extend to the members of the executive board and the officers, employees, agents, directors and volunteers of the association and to the community manager of the association and any employees thereof while acting as agents as insured persons under the policy terms. Coverage must be subject to the terms listed in the declaration.

2.    In the case of a building that contains units divided by horizontal boundaries described in the

declaration, or vertical boundaries that comprise common walls between units, the insurance maintained under paragraph (a) of subsection 1, to the extent reasonably available, must include the units, but need not include improvements and betterments installed by units’ owners.

3.    If the insurance described in subsections 1 and 2 is not reasonably available, the association

promptly shall cause notice of that fact to be given to all units’ owners. The declaration may require the association to carry any other insurance, and the association may carry any other insurance it considers appropriate to protect the association or the units’ owners.

4.    An insurance policy issued to the association does not prevent a unit’s owner from obtaining

insurance for the unit’s owner’s own benefit.

      (Added to NRS by 1991, 565; A 2011, 24452017, 1095)

NRS 116.31133 Insurance: Policies; use of proceeds; certificates or memoranda of insurance.

1. Insurance policies carried pursuant to NRS 116.3113 must provide to the extent reasonably available that:

(a) Each unit’s owner is an insured person under the policy with respect to liability arising out of his interest in the common elements or membership in the association;

(b) The insurer waives its right to subrogation under the policy against any unit’s owner or member of his household;

(c) No act or omission by any unit’s owner, unless acting within the scope of his authority on behalf of the association, will void the policy or be a condition to recovery under the policy; and

(d) If, at the time of a loss under the policy, there is other insurance in the name of a unit’s owner covering the same risk covered by the policy, the association’s policy provides primary insurance.


2. Any loss covered by the property policy under subsections 1 and 2 of NRS 116.3113 must be adjusted with the association, but the proceeds for that loss are payable to any trustee designated for that purpose, or otherwise to the association, and not to any holder of a security interest. The trustee or the association shall hold any proceeds in trust for the association, units’ owners and lien holders as their interests may appear. Subject to the provisions of NRS 116.31135, the proceeds must be disbursed first for the repair or restoration of the damaged property, and the association, units’ owners, and lien holders are not entitled to receive payment of any portion of the proceeds unless there is a surplus of proceeds after the property has been completely repaired or restored, or the common-interest community is terminated.

3. An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to the association and, upon written request, to any unit’s owner or holder of a security interest. The insurer issuing the policy may not cancel or refuse to renew it until 30 days after notice of the proposed cancellation or non-renewal has been mailed to the association and to any person to whom a certificate or memorandum of insurance has been issued at their respective last known addresses. (Added to NRS by 1991, 565; A 2003, 1210)

NRS 116.31135 Insurance: Repair or replacement of damaged or destroyed portion of community.


1. Any portion of the common-interest community for which insurance is required under NRS 116.3113 which is damaged or destroyed must be repaired or replaced promptly by the association unless:

(a) The common-interest community is terminated, in which case NRS 116.2118, 116.21183 and 116.21185 apply;

(b) Repair or replacement would be illegal under any state or local statute or ordinance governing health or safety; or

(c) Eighty percent of the units’ owners, including every owner of a unit or assigned limited common element that will not be rebuilt, vote not to rebuild. _The cost of repair or replacement in excess of insurance proceeds and reserves is a common expense.

2. If the entire common-interest community is not repaired or replaced, the proceeds attributable to the damaged common elements, must be used to restore the damaged area to a condition compatible with the remainder of the common-interest community, and except to the extent that other persons will be distributees (subparagraph 2 of paragraph (l) of subsection 1 of NRS 16.2105):

(a) The proceeds attributable to units and limited common elements that are not rebuilt must be distributed to the owners of those units and the owners of the units to which those limited common elements were allocated, or to lien holders, as their interests may appear; and

(b) The remainder of the proceeds must be distributed to all the units’ owners or lien holders, as their interests may appear, as follows:

(1) In a condominium, in proportion to the interests of all the units in the common elements; and

(2) In a cooperative or planned community, in proportion to the liabilities of all the units for common expenses.

3. If the units’ owners vote not to rebuild any unit, that unit’s allocated interests are automatically reallocated upon the vote as if the unit had been condemned under subsection 1 of NRS 116.1107, and the association promptly shall prepare, execute and record an amendment to the declaration reflecting the reallocations. (Added to NRS by 1991, 566; A 1993, 2370)

NRS 116.31138 Insurance: Variance or waiver of provisions in community restricted to nonresidential use. The provisions of NRS 116.3113, 116.31133 and 116.31135 may be varied or waived in the case of a common-interest community all of whose units are restricted to nonresidential use. (Added to NRS by 1991, 567)

B. Examine the governing documents and related rules, and resolutions

C. Determine if the association needs to comply with FNMA, FHLMC, FHA or VA        Requirements

D. Determine if the association has assumed any insurance or indemnity  

     obligations under a contract with a vendor, contractor , or other service    

     provider, and

E. Use good business judgment and read the insurance contracts.





The roots of insurance might be traced to Babylonia, where traders were encouraged to assume the risks of the caravan trade through loans that were repaid (with interest) only after the goods had arrived safely—a practice resembling bottomry and given legal force in the Code of Hammurabi (c.2100 B.C.). The Phoenicians and the Greeks applied a similar system to their seaborne commerce. The Romans used burial clubs as a form of life insurance, providing funeral expenses for members and later payments to the survivors.

With the growth of towns and trade in Europe, the medieval guilds undertook to protect their members from loss by fire and shipwreck, to ransom them from captivity by pirates, and to provide decent burial and support in sickness and poverty. By the middle of the 14th cent., as evidenced by the earliest known insurance contract (Genoa, 1347), marine insurance was practically universal among the maritime nations of Europe. In London, Lloyd's Coffee House (1688) was a place where merchants, ship owners, and underwriters met to transact business. By the end of the 18th cent. Lloyd's had progressed into one of the first modern insurance companies. In 1693 the astronomer Edmond Halley constructed the first mortality table, based on the statistical laws of mortality and compound interest. The table, corrected (1756) by Joseph Dodson, made it possible to scale the premium rate to age; previously the rate had been the same for all ages.

Insurance developed rapidly with the growth of British commerce in the 17th and 18th cent. Prior to the formation of corporations devoted solely to the business of writing insurance, policies were signed by a number of individuals, each of whom wrote his name and the amount of risk he was assuming underneath the insurance proposal, hence the term underwriter. The first stock companies to engage in insurance were chartered in England in 1720, and in 1735, the first insurance company in the American colonies was founded at Charleston, S.C. Fire insurance corporations were formed in New York City (1787) and in Philadelphia (1794). The Presbyterian Synod of Philadelphia sponsored (1759) the first life insurance corporation in America, for the benefit of Presbyterian ministers and their dependents. After 1840, with the decline of religious prejudice against the practice, life insurance entered a boom period. In the 1830s the practice of classifying risks was begun.

The New York fire of 1835 called attention to the need for adequate reserves to meet unexpectedly large losses; Massachusetts was the first state to require companies by law (1837) to maintain such reserves. The great Chicago fire (1871) emphasized the costly nature of fires in structurally dense modern cities. Reinsurance, whereby losses are distributed among many companies, was devised to meet such situations and is now common in other lines of insurance. The Workmen's Compensation Act of 1897 in Britain required employers to insure their employees against industrial accidents. Public liability insurance, fostered by legislation, made its appearance in the 1880s; it attained major importance with the advent of the automobile.

In the 19th cent. many friendly or benefit societies were founded to insure the life and health of their members, and many fraternal orders were created to provide low-cost, members-only insurance. Fraternal orders continue to provide insurance coverage, as do most labor organizations. Many employers sponsor group insurance policies for their employees; such policies generally include not only life insurance, but sickness and accident benefits and old-age pensions, and the employees usually contribute a certain percentage of the premium.

Since the late 19th cent. there has been a growing tendency for the state to enter the field of insurance, especially with respect to safeguarding workers against sickness and disability, either temporary or permanent, destitute old age, and unemployment (see social security). The U.S. government has also experimented with various types of crop insurance, a landmark in this field being the Federal Crop Insurance Act of 1938. In World War II the government provided life insurance for members of the armed forces; since then it has provided other forms of insurance such as pensions for veterans and for government employees.

After 1944 the supervision and regulation of insurance companies, previously an exclusive responsibility of the states, became subject to regulation by Congress under the interstate commerce clause of the U.S. Constitution. Until the 1950s, most insurance companies in the United States were restricted to providing only one type of insurance, but then legislation was passed to permit fire and casualty companies to underwrite several classes of insurance. Many firms have since expanded, many mergers have occurred, and multiple-line companies now dominate the field. In 1999, Congress repealed banking laws that had prohibited commercial banks from being in the insurance business; this measure was expected to result in expansion by major banks into the insurance arena.


In recent years insurance premiums (particularly for liability policies) have increased rapidly, leaving unprecedented numbers of Americans uninsured. Many blame the insurance conglomerates, contending that U.S. citizens are paying for bad risks made by the companies. Insurance companies place the burden of guilt on law firms and their clients, who they say have brought unreasonably large civil suits to court, a trend that has become so common in the United States that legislation has been proposed to limit lawsuit awards. Catastrophic earthquakes, hurricanes, and wildfires in late 1980s and the 90s have also strained many insurance company's reserves.




ACV  or Actual Cash Value – The most widely-used valuation concept in commercial property insurance is actual cash value because of the principle of indemnity. In other words, most property insurance contracts need to be endorsed to obtain insurable replacement cost coverage. The Replacement cost, less depreciation.  This is the basic approach to property insurance.


AI – Advertising Injury.


AICPA – American Institute of Certified Public Accountants’.


Aircraft, autos and water craft -  Common Exclusion.


All-in – Extends the single-entity concept to insure a variety of improvements and betterments within the unit at the time of a loss.


ARM – Associate in Risk Management.


Bailees Customers Insurance – There are numerous policies in this area.  However, they all protect association interest because of potential liability for loss to another person’s property and the customer’s interest in the property.


BAP – Business Auto Policy.


Bare Walls – Treats the unit and common elements as entirely separate.  Therefore, the owner would have to insure not only personal property, but also partitions, paint, cabinets, etc.


BCEG – Building Code Effectiveness Grading.


BI – Bodily Injury.


BIC – Business Income Insurance.


BOP – Business Owners Policy.  


Building Ordinance or Law - This relates to a building code or ordinance that may require the association to tear down an undamaged portion of a building because a certain percentage of the total structure has been destroyed.   


Business Interruption – Results from a reduction in profits (or revenue) because of an insured cause of loss at the association’s premises.


CGL - Commercial General Liability – This coverage part of the commercial package provides most of the legal-liability protection a common interest community requires. In 1986, general liability forms were significantly revised to include a “plain English” format and broadened coverage.  Virtually all insurers now offer this expanded form.  


CIC – Certified Insurance Counselor


CIRA - Audit Guide for Common Interest Realty Associations


Casualty Insurance - Insures against accidents, not necessarily tied to any specific property.


Commercial Automobile Coverage


CGL - Commercial General Liability – This coverage part of the commercial package provides most of the legal-liability protection a common interest community requires. In 1986, general liability forms were significantly revised to include a “plain English” format and broadened coverage.  Virtually all insurers now offer this expanded form.  


Coinsurance – This is a condition of a commercial property policy that the insurer uses to obtain insurance-to-value.  Broadly speaking, coinsurance allows an insurer to value the property twice: once at the inception of coverage and again at the time of a loss.  If property insurance limits are insufficient at the time of loss, the insurer can contractually demand the insured to share in the loss.  Most commercial package policies have several examples of the application of coinsurance.


'Combined ratio' (calculated by dividing the sum of incurred losses and expenses by earned premium) = (incurred losses + incurred underwriting expenses) ÷ earned premiums; (or) = loss ratio + expense ratio + dividend ratio. A lower number indicates a better return on the amount of capital placed at risk by an insurer.


Content Coverage – Most contents exposures can be insured through the commercial package policy. The agreed-amount endorsement should apply to both the building and the contents.  Certain items that appear to be contents, such as building maintenance equipment, are usually included in the definition of a building.  Read the property insurance contract.  


Contingent Business Interruption – Results when the cause of loss occurs away from the association’s premises.


Contingent Liability – This is the value of the undamaged portion of the buildings that were involved in the community.


Contractors Equipment Floaters – This provides coverage for the largest class of inland marine insurance.  Contractor’s equipment floaters insure everything from hand tools used by the maintenance staff, to tractors, portable offices, and scaffolding.


Contractual Liability – Common Exclusion


CPCU – Chartered Property and Casualty Underwriter


CPP – Commercial Package Policy

CRS – Commercial Risk Services is a division of the Insurance Services Office (ISO)


Decreased Collections of Accounts Receivable – Occurs when the association’s records of accounts receivable are damaged to the extent that the association cannot collect accounts.


Decreased Rental Income – Occurs because of damage to real or personal property rented by the association to others when the damage excuses the lessee from paying rent.


Demolition – The commercial property policy contains demolition coverage for the part of the building that has been damaged by a covered cause of loss.  Demolition in building ordinance coverage, however, is for the undamaged portion of the building.


DIC - Difference in Condition


Directors and Offices Liability Insurance – Covers wrongful acts that allege mismanagement of association affairs, failure to maintain adequate reserves, failure to maintain books and records, failure to enforce rules, regulations and covenants, and breach of contract. It does not, however, cover failure to obtain adequate insurance.


Duty to Defend – The insurer has a duty to defend the insured, even if the legal claim is groundless, false, or fraudulent.  In or outside the limits of the policy is important.


Earth Movement – Any earth movement (other than sinkhole collapse), such as earthquake, erosion, and mud slide.


Employee Benefits Liability – This coverage applies to errors and omissions that may occur in the administration of the association’s employee benefits program, such as a 401(k) retirement program.


Fire Legal Liability – Common Exclusion – The CGL provides coverage for an association that negligently causes fire damage to property for which it is legally responsible.


Flood Insurance -


General Property Damage – This exclusion is extensive, but is basic purpose is to avoid paying for damage to the association’s property that should be insured in the commercial property coverage.


Glass Damage – Coverage is often provided on a limited basis, such as $100/pane and $500/occurrence for specific causes of loss, such as vandalism.


Governmental Action – Seizure or destruction of property by order of governmental authority is excluded unless the destruction helps prevent the spread of a fire.


Guaranteed Replacement – Recently, an additional option has become available with respect to commercial property valuation – Guaranteed replacement.  This concept, borrowed from personal lines, insures the property without any limit.  The property limit of insurance purchased is only for premium determination purposes and does not act as a limitation of any loss payments.


FAIR – Fair Access to Insurance Requirements


FASB – Financial Accounting Standards Board


FEMA – Federal Emergency Management Agency


FIA – Federal Insurance Administration


Fidelity Insurance – Personnel exposures from a fidelity perspective occur primarily because an association employee, association member (director, office or volunteer), or association manager (who is not an employee) steals money.  Unless it specifically includes the association manager and company, it could be a problem.


Flood Insurance


FHA – Federal Housing Administration


FHLMC – Federal Home Loan Mortgage Corporation (Freddie Mac)


FNMA – Federal National Mortgage Association  (Fannie Mae)


GKLL - Garage Keepers Insurance –


Glass Insurance -


Hired Auto – This covers vehicles are not owned by the Association, but may be rented for association use. It is excess over  other valid and collectible insurance.


Increased Cost of Construction - Once the undamaged part has been demolished and reconstruction begins, the cost of this new construction may be increased because of changes in building code requirements.

Inland Marine Insurance


Insurance - (ĭn-shʊr'əns)  n.

  • The act, business, or system of insuring.

  • The state of being insured.

  • A means of being insured.

  • Coverage by a contract binding a party to indemnify another against specified loss in return for premiums paid.

  • The sum or rate for which such a contract insures something.

  • The periodic premium paid for this coverage.


Increased Operating Expenses – May be necessary when the association decides to resume operations at another location rather than close down an income-producing facility or its on-site office because of a loss.


Intentional Injury -  Common Exclusion


IRIS – Insurance Regulatory Information System


ISO  Insurance Services Office (Individual homeowner’s or Unit Owners; Coverage.)


Landscaping Insurance


Liquor Liability – Common Exclusion


Maintenance Exclusions – Damage caused by wear and tear, rust, corrosion, etc., is excluded unless loss or damage is caused by a specified cause of loss.


Mechanical breakdown and electric arcing – If mechanical equipment, such as pumps, fans, and electric switch gate accidentally breaks down, damage is excluded. (Used to be called Boiler Insurance)


NFIP - National Flood Insurance Program


Negligence – Common Exclusion


NFIP – National Flood Insurance Program


Non-owned Automobile Liability – This covers vehicles that are not owned by the association.  It is excess over other valid and collectible insurance.


OASDHI – Social Security Insurance Program


PD – Property Damage


PI – Personal Injury


Pollution Cleanup – Common Exclusion - By the mid-1980’s, insurers were refusing to grant any liability protection for pollution.  Insured’s then began to make pollution claims under the debris removal section of the property insurance.  In turn, insurers eliminated virtually all direct damage property coverage for pollution cleanup, except for $10,000 as an aggregate limit.


Power Failure – This excludes damage caused by off-premises power or utility services failure.  Coverage can be obtained for this exposure.


RCV Replacement Cost Value  – RCV usually must be added by endorsement to supersede the ACV indemnity concept.


SMP – Special Multi-Peril Policy


Single Entity – Treats the unit and common elements as one.  The package policy insures paint, partitions, cabinets, fixtures and similar real property that was part of the original unit.  Personal property is excluded.


Unique Property – Large-scale master planned communities, sometimes referred to HOA’s or POA’s often have unique and special property issues.  For example, these associations may have ski hills, dams, retaining walls, docks, piers, stables, and golf courses.  Associations must correctly value these exposures and read the policy to determine if unique property exposures fall within the definition of insured property.  If they do not, the board should develop endorsements that need to be added.


VA – Federal Department of Veterans Administration


War & Military Action – Losses caused by such perils are usually so catastrophic that they are not insurable.


Water Damage – The water damage that is insured pertains to damage caused by leaking roofs, plumbing, and similar causes.  Water damage cause by the following, however, is usually excluded:  Leakage and seepage, whether continuous or not, Backup of sewers and drains, Surface and subsurface water, Flood and Wind-driven rain without prior damage to the building. In other words, if the wind blows a window open and water enters and causes damage, the ensuing water damage is insured.


Worker’s Compensation and Similar Statutes – Common Exclusion  - Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred due to a job-related injury.


TRANSLATIONS FOR "INSURANCE" ... Just in case you wanted to know!


Nederlands (Dutch)
verzekering, zekerheid, verzekeringspremie, verzekeringswezen


Français (French)
assurance, protection


Deutsch (German)
n. - Versicherung, Versicherungssumme, Versicherungsvertrag


Ελληνική (Greek)
n. (νομ., οικον.) ασφάλεια, ασφάλιση


Italiano (Italian)


Português (Portuguese)
n. - seguro (m)


Русский (Russian)
страхование, страховая премия, сумма страхования, гарантия


Español (Spanish)
n. - seguro


Svenska (Swedish)
n. - försäkring(ssumma), försäkringspremie(r), assurans(summa), assuranspremie(r)


中国话 (Simplified Chinese)
n. - 保险, 保险费, 保险业


中國話 (Traditional Chinese)
n. - 保險, 保險費, 保險業


日本語 (Japanese)
n. - 保険, 保険業, 保険金


‏(الاسم) التأمين على شيء ما, ضمان‏


עברית (Hebrew)
n. - ביטוח, אמצעי לקידום פני צרה

Nevada Insurance Law
History of Insurance

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