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 NEW
POOL/SPA
SAFETY REQUIREMENTS
Drowning is the second leading killer of
children under the age of 14. On January 5, 2008, President Bush signed into law
the the Pool and Spa Safety Act of 2007. The Act imposes mandatory federal
requirements that:
-
Prohibit the
manufacture, sale or distribution of drain covers that do not meet
new anti-entrapment safety standards;
-
Create an
incentive grant program for states to adopt comprehensive pool and spa
safety laws;
-
Establish a
national drowning prevention education program; and
-
Require public
pools be equipped with anti-entrapment drains.
Associations. Even though the
legislation does not directly impact homeowner
associations, the insurance industry is adopting the new standard in its
underwriting. St. Paul Travelers, umbrella carrier for many associations, is now
requiring it for all pools. This will likely work its way through the entire
industry so that all existing pools and spas will be required to meet the new
standards.
RECOMMENDATION.
Associations should immediately install anti-entrapment, anti-entanglement drain
covers in all pools and spas. It goes without saying, the installer should be properly licensed and insured.
Thank you to Joel Meskin of
McGowan & Company and Dorothy McCorkindale of Wells Fargo Insurance
Services for alerting me to the insurance industry's adoption of the new standards. Their contact information
can be found under "Insurance" in the
Service
Directory
ALCOHOL AT
THE POOL
 QUESTION:
Our association allows the consumption of alcohol at the pool/spa. What
liability do we have in the event someone is injured while intoxicated at the
pool? The board is reluctant to restrict alcohol because it would be unpopular
with owners.
ANSWER:
If anyone is seriously injured or dies in your pool or spa, the
association will almost certainly be sued. Even if the association is ultimately
found not liable for the injury/death, the claim will drive up insurance rates. When alcohol is added to the mix, the
likelihood of an incident increases. If directors don't mind stressful litigation
and spending their time in depositions, they could look the other way
when people bring alcohol to the pool.
READER
COMMENT REGARDING
INSURANCE
DEDUCTIBLES
COMMENT: Regarding your response about
insurance deductibles. You are absolutely correct that deductibles do not belong in
either operating or reserves. Basically, an association is a not-for-profit (or should
be) entity which operates on a modified fund basis. It is very simple.
Deductibles should be classified as a fund separate from reserves on the
financial statements of the association, but in my opinion they may be kept in
the same account as reserves. I would suggest that the balance sheet simply have
an additional line, “Reserve for Insurance Deductibles.” The statement would
show that the amounts in both reserves equals the total in the reserves account.
-Barry M. Greenberg, Esq., CPA
ADRIAN ADAMS:
I agree. Boards could put a line item in their budgets for "Insurance Deductible Fund" and build the fund over 2
or 3 years. If
the
insurance deductible is $10,000, boards could budget a modest $278 per month to the fund. At the end
of three years, the insurance deductible would be fully funded. At that point,
the contribution could be discontinued until an insurance claim is made, at
which point the
deductible would be replenished with new contributions.
In the alternative, the contribution
could be
permanent so as to avoid ups and downs in the budget. At the end of the three
years, and thereafter, any excess funds in the deductible fund could flow into the reserves. This provides for a smoother budget and has the added
benefit of building the reserves.
Very truly yours,
Adrian Adams, Esq.
Adams Kessler PLC
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