14.1 General Requirements. Commencing not later than the time of the first conveyance of a Lot to a Person other than the Declarant, the Association shall maintain, in its name, to the extent reasonably available, a policy or policies and bonds necessary to provide: (a) commercial general liability insurance; (b) property insurance; (c) fidelity bonds; (d) workers' compensation insurance to the extent required by applicable laws; (e) directors and officers liability insurance; and (f) such other insurance as the Board deems advisable. The Board shall review at least annually the adequacy of the Association's insurance coverage. All insurance shall be obtained from insurance carriers with a minimum A VIII Best's financial rating and authorized to do business in the state of Washington, and, if required, meet the specific requirements of any Federal Mortgage Agency regarding the qualifications of insurance carriers. Notwithstanding any other provisions herein, the Association shall continuously maintain in effect liability insurance and fidelity bonds that meet any applicable requirements established by any Federal Mortgage Agency so long as any of them is a holder of a Mortgage or Owner of a Lot, except to the extent such coverage is not available or has been waived in writing by them. All such insurance policies and fidelity bonds shall provide that coverage may not be canceled or substantially modified without at least thirty days' (ten days' cancellation for nonpayment of premium) prior written notice to any and all insureds named therein, including Owners, Mortgagees, and designated servicers of Mortgages.
14.2 Property Insurance. The policy for property insurance shall insure the Common Element, insuring against risks of direct physical loss commonly insured against, which insurance:, after application of any deductibles, must be not less than 80% of the actual cash value of the insured Property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations, and other items normally excluded from property policies
14.3 Liability Insurance. The policy of public liability insurance, including medical payments insurance, shall insure the Board, the Association, the Owners, and any managing agent, and cover all of the Common Elements in the Subdivision with a "Severability of Interest Endorsement" or equivalent coverage which would preclude the insurer from denying the claim of an Owner because of the negligent acts of the Association or of another Owner, and shall cover liability of the insureds for property damage and bodily injury and death of persons arising out of the operation, maintenance, and use of the Common Elements, liability in connection with employment contracts of the Association, host liquor liability, employers' liability (stop gap) insurance, non-owned and hired automobile liability insurance, and such other risks as are customarily covered with respect to projects of similar construction, location and use. The limits of liability shall be in amounts generally required by mortgagees for projects of similar construction, location and use but shall be at least $1,000,000 bodily injury and property damage per occurrence and $2,000,000 general aggregate.
14.4 Insurance Trustee; Power of Attorney. The named insured under the policies referred to above shall be the Association, as trustee for each of the Owners. The insurance proceeds may be made payable to any trustee with which the Association enters into an insurance trust agreement, or any successor trustee, who shall have exclusive authority to negotiate losses under the policies. Each Owner appoints the Association, or any insurance trustee or successor trustee designated by the Association, as attorney-in-fact for the purpose of purchasing and maintaining such insurance, including the collection and appropriate disposition of the proceeds thereof, the negotiation of losses and execution of releases of liability, the execution of all documents and the performance of all other acts necessary to accomplish such purposes.
14.5 Additional Policy Provisions. The insurance obtained shall contain the following provisions and limitations:
14.5.1 Each Lot Owner is an insured Person under the policy with respect to liability arising out of the Owner's interest in the Plat or membership in the Association.
14.5.2 Such policies shall not provide for contribution by (or Assessment against) Mortgagees or become a lien on the Property superior to the lien of a First Mortgage. If, at the time of the loss under the policy, there is other insurance in the name of the Owner covering the same risk covered by the policy, the Association's policy provides primary insurance.
14.5.3 Coverage shall not be prejudiced by (a) any act, omission or neglect of the Owners when such act or neglect is not within the scope of the Owner's authority on behalf of the Association, or (b) failure of the Association to comply with any warranty or condition with regard to any portion of the premises over which the Association has no control.
14.5.4 A waiver of subrogation by the insurer as to any and all claims against the Association, the Owner, and/or their respective agents, members of the Owner's household, employes, or lessees, and of any defenses based upon co-insurance or upon invalidity arising from the acts of the insured.
14.5.5 A standard mortgagee clause which shall:
14.5.1.1 Provide that any reference to a mortgagee in the policy shall mean and include all holders of Mortgages of any Lot or Lot lease or sublease in their respective order of preference, whether or not named therein;
14.5.1.2 Provide that such insurance as to the interest of any mortgagee shall not be invalidated by any act or neglect of the Board or Owners or any Persons under any of them;
14.5.1.3 Waive any provision invalidating such mortgagee clause by reason of the failure of any Mortgagee to notify the insurer of any hazardous use or vacancy, any requirement that the Mortgagee pay any premium thereon, and any contribution clause; and
14.5.1.4 Provide that, without affecting any protection afforded by such mortgagee clause, any proceeds payable under such policy shall be payable to the Association or the insurance trustee.
14.6 Fidelity Bond/Directors and Officers Insurances. The required fidelity bonds shall afford coverage to protect against dishonest acts on the part of Officers, Board members, trustees, and employees of the Association and all other Persons who handle or are responsible for handling; funds of, or funds administered by the Association. All managers hired by the Association shall maintain fidelity bonds for its officers, employees, and agents who handle or who are responsible for handling funds of, or funds administered by the Association. All such fidelity bonds shall name the Association as an obligee and shall be not less than three months' aggregate Assessments. The bonds shall contain waivers of any defense based upon the exclusion of Persons who serve without compensation from any definition of "employee" or similar expression. The Association shall obtain directors and officers liability insurance which shall at a minimum insure each Board member and Officer of the Association against any loss arising from any claim for any alleged wrongful act made by such person while acting in his/her capacity as Board member or Officer of the Association.
14.7 Owner's Insurance. Each Owner shall maintain property insurance in reasonable amounts on all Improvements located on its Lot. The Board shall have the authority to further define or expand such requirement by rule, and to prescribe enforcement mechanisms.