Party Room Rentals

Should we ask homeowners who rent out the party room for a one-day certificate of insurance? How do other communities deal with party room rentals?

Some homeowners and condominium unit owner insurance carriers are willing to add an association common space to the owner’s policy. But this is becoming rarer as the market hardens. In addition, there are questions of how extensive this endorsement is, specifically whether it would cover a fire caused by the owner while in control of the common area. In general, we recommend the owner secure a single-day event liability policy to protect the association and membership.

The liability exposure remains with the owner’s insurance, which safeguards exposure to the association and its own insurance policies.

The association should require the clubhouse renter to provide a copy of a certificate of insurance naming the association as an additional insured as part of the rental agreement. By requiring this, the association membership is protected in the event something bad happens and an injured party decides to sue everyone — the party thrower, the association, etc.

Yes, it is always recommended that a community association have some sort of protection secured if they rent out common facilities to a member. This is typically either by way of an additional insured endorsement on the homeowners’ insurance policy or a standalone special event policy. If an incident occurs during the owner’s event, the association is usually brought into the claim. By having the owner’s insurance extend protections for the association, it puts the owner’s insurance in the first position for defense and indemnity even if the claim is only made against the association and doesn’t name the owner.

The liability exposure remains with the owner’s insurance, which safeguards exposure to the association and its own insurance policies. In the current insurance climate, it may be more advisable for owners to take out special event policies for renting common facilities as insurance is getting harder to come by. A claim on the homeowner’s policy may cause complications for renewal while a claim on the special event policy is less impactful since it’s not a recurring policy.