Crime/fidelity coverage
Theft protection for association funds, and it covers your volunteer treasurer too.
Fidelity bond coverage, sometimes called crime coverage, reimburses the association when someone who controls its money steals or misuses it: a volunteer treasurer, a board member, an employee, or the management company. Whether it is mandatory, how much is required, and whether the board can waive it all vary by state.
What fidelity and crime coverage actually protects
Fidelity bond coverage exists for one reason: someone at your association has access to its bank accounts, and access creates risk. That is true whether the person handling deposits and disbursements is a paid property manager or a volunteer serving as treasurer.
Florida's condominium statute states the duty plainly.
"The association shall maintain insurance or fidelity bonding of all persons who control or disburse funds of the association. The insurance policy or fidelity bond must cover the maximum funds that will be in the custody of the association or its management agent at any one time."
Source: Florida Statutes §718.111(11)(h), The Florida Senate
Notice what the statute does not say. It does not say "the manager." It says everyone who controls or disburses funds, sized to the largest amount that will ever sit in that person's custody at one time. A board that assumes its bond only protects against a dishonest management company is assuming wrong: the same coverage has to reach the volunteer signing checks at the kitchen table.
How much coverage, and whether it can be waived, varies by state
How much coverage is required, and whether the requirement can be skipped, varies by state, so check your own statute rather than assuming a neighboring association's rule applies to you.
Florida runs two different rules inside the same state. Its condominium statute requires bonding sized to the maximum funds in anyone's custody, with no way to opt out. Its separate homeowners' association statute imposes the identical duty, but lets the membership vote annually, at a properly called meeting, to waive it. A condo board and an HOA board a mile apart can face opposite answers to "do we have to carry this."
California takes a different approach entirely: a fixed dollar formula rather than a "maximum funds" test.
"The association shall maintain crime insurance, employee dishonesty coverage, fidelity bond coverage, or their equivalent, for its directors, officers, and employees in an amount that is equal to or more than the combined amount of the reserves of the association and total assessments for three months."
Source: California Civil Code §5806, State of California, via FindLaw
That figure also has to cover computer fraud and funds transfer fraud, and self-insuring does not satisfy it. A board that budgets a generic "crime" line item without checking whether its own state adds a dollar formula or a fraud carve-in can end up underinsured without ever finding out.
| Jurisdiction | Required amount | Can it be waived |
|---|---|---|
| Florida condominiums | Maximum funds in any one person's custody | No |
| Florida homeowners' associations | Maximum funds in any one person's custody | Yes, by annual majority vote |
| California | Reserves plus three months of assessments, including computer and funds transfer fraud | No; self-insuring does not count |
Financed projects can face a second, higher floor
If your building relies on Fannie Mae eligible financing, a second floor applies on top of whatever your state requires. Fannie Mae sizes the required coverage to either three months of total assessments or the maximum funds in the manager's custody, depending on the association's financial controls, and it exempts small projects: twenty units or fewer, or situations where the coverage needed is $5,000 or less.
Where a state already has its own fidelity statute, Fannie Mae accepts that requirement in place of its own. The practical rule for a board: whichever number is higher, state law's or Fannie Mae's, is the one that actually governs. Never assume the lower of the two is enough.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
A volunteer board treasurer diverts association funds to a personal account. Who does the fidelity bond cover in this situation?
A Florida condominium board wants to skip fidelity bonding to save money this year. Can the members vote to waive it?
California's crime coverage statute sets a required amount and says it must also cover which additional risk?
- Florida Statutes §718.111(11), condominium association insurance, The Florida Senate
- Florida Statutes §720.3033(5), homeowners' association fidelity bonding, The Florida Senate
- California Civil Code §5806, fidelity coverage, State of California, via FindLaw
- Fannie Mae Selling Guide B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments, Fannie Mae
Related elsewhere in the Academy
Insurance
Next: see how directors and officers coverage handles a different kind of insider risk, bad decisions rather than stolen funds.
Whether fidelity or crime coverage is mandatory, the dollar amount required, and whether the board can waive it all vary by state. Associations relying on Fannie Mae eligible financing may face a separate, higher requirement on top of state law.