Fidelity coverage of the management company

When a management company handles the association's operating and reserve accounts, the fidelity or crime coverage protecting those funds against theft has to sit on the association's own policy and name the agent as a covered party. The current lender rule is specific on this point. The Fannie Mae Selling Guide (section B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments), as revised by Announcement SEL-2022-10 in December 2022, provides that a fidelity policy carried by the management agent alone is not an acceptable substitute. The association must carry its own fidelity or crime policy that covers the agent and the agent's employees who have access to association funds. Relying on the management company's separate corporate policy, which the association does not control and cannot see cancelled or exhausted, no longer satisfies the requirement.

This is the fidelity detail that quietly breaks warrantability after a management change, because boards often assume the management company's own coverage stands in for the association's. Under the current Fannie Mae B7-4-02 rule it does not. A management-agent policy can be cancelled, sublimited, or drained by a claim from another client without the board ever knowing, and it names the agent as the insured rather than the association as the party whose money is at risk. Confirm the association's own fidelity or crime policy is endorsed to name the managing agent and its employees, get that endorsement in writing, and re-confirm it whenever the community switches managers. If your prior agent leaned on the management company's policy to keep the association's limit low, treat that as a live gap to close at the next renewal, not a formality.

The specialty community-association markets add the managing-agent name to the association's own fidelity or crime coverage by endorsement at little or no additional premium, so there is rarely a cost reason to lean on the management company's separate policy. The endorsement naming the agent is the piece most often missing on accounts placed before the December 2022 rule change, and it is worth pulling the declarations to confirm the agent is actually listed rather than assumed.