A fidelity bond (also called employee dishonesty or crime coverage) protects association funds against theft, fraud, or dishonesty by anyone who has access to or control over association money — board members, officers, employees, management company staff, bookkeepers, and vendors with financial access.
Florida’s statutory requirement
For condominium associations, Section 718.111(11)(d) requires fidelity bonding for all persons who control or disburse funds of the association. The required coverage amount must be equal to the maximum amount of funds that will be in the custody of the association or its management agent at any one time. For HOAs governed by Chapter 720, similar requirements exist.
In practice, this means your fidelity bond limit should reflect the total of your operating account balance, reserve fund balance, and any other funds the association holds — at their peak levels, not their average. An association with a $300K operating account and $1.2M in reserves needs a minimum $1.5M fidelity bond.
The problem: outdated bond limits
Fidelity bonds are often set at formation or when the association first purchases coverage, and then renewed at the same limit year after year without adjustment. Meanwhile, reserve balances grow. Special assessment collections temporarily inflate fund balances. An association that needed a $500K bond five years ago may need $2M today. If the bond limit hasn’t kept pace with fund balances, the association is carrying coverage that doesn’t meet the statutory requirement — and more importantly, doesn’t actually protect the funds.
What’s covered
Direct loss of money, securities, or property due to dishonest acts by covered persons. This includes embezzlement, fraudulent transfers, forgery, and computer fraud in many modern policy forms. Some policies extend to cover social engineering fraud (a board treasurer tricked by a phishing email into wiring funds to a fraudulent account), but this coverage varies significantly between carriers and often has sublimits.
What’s NOT covered
Indirect losses, lost income, or consequential damages. Acts by persons not covered under the bond. Losses discovered after the policy period and outside the discovery period. Some policies exclude volunteer board members or require separate coverage for them.
Management company coverage
If your association uses a management company that handles financial transactions, the management company should also carry its own fidelity coverage. However, the association should not rely solely on the management company’s bond — the association’s own fidelity bond should cover the full fund exposure regardless of who has custody.
Common Elements will ensure your fidelity bond coverage meets Florida’s statutory requirements and actually matches your fund balances when we launch. Join our waitlist.