Fidelity / Crime Bond (Employee Dishonesty)
What this clause says
The Association shall maintain fidelity or crime coverage against dishonest acts by officers, directors, employees, and any managing agent handling Association funds, in an amount not less than the maximum funds in the custody of the Association or its managing agent at any time, and in no event less than the sum of three months of aggregate assessments on all units plus the Association reserve funds.
What this means in plain English
A fidelity or crime bond protects association funds against theft or dishonest acts by anyone who handles them, including board members, employees, and the management company. The Fannie Mae Selling Guide (section B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments) requires this coverage for projects of more than 20 units, in an amount at least equal to three months of aggregate assessments on all units plus the association reserve funds. California Civil Code 5806 (Davis-Stirling) sets a parallel requirement: crime or fidelity coverage equal to the combined reserves plus three months of total assessments, and it must extend to a managing agent that touches the money.
What it means for an HOA board
This is a warrantability gap that hides in plain sight, because associations reflexively size the bond to a flat number the prior agent picked rather than to reserves plus three months of assessments. As reserves grow, a static bond quietly falls out of compliance. If a managing agent handles the operating and reserve accounts, confirm the bond is endorsed to cover the agent and its employees, which both the Fannie standard and California Civil Code 5806 require. Recompute the required amount at each renewal against current reserves and the current assessment roll.
Program notes
Fidelity limits are inexpensive to raise relative to the exposure, so there is rarely a pricing reason to run thin. The managing-agent endorsement is the piece most often missing.
How this evaluates
The Policy Checker applies these rules in order; the first match wins.
fidelity bond months is at least $3 -> Compliant: Three or more months of assessments plus reserves meets the Fannie Mae B7-4-02 and California Civil Code 5806 fidelity standard. fidelity bond months is at least $1 -> Borderline: Some fidelity coverage is present but below the three-months-plus-reserves floor. Confirm the exact limit against current reserves.
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Check this clause against your master policy.
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