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SheliaH
(Indiana)

Posts:79

01/16/2008 3:37 AM
A few months ago, there was a fire at one of the units in our condo community and the interior was gutted. There was also some smoke damage to two of the adjoining unit. The house had been rented and the tenant didn't have any insurance and the owner lives out of state. The owner called his insurance company, as did the Association, and the Board of Directors (of which I'm a member) assumed his insurance would pay for damages because the fire started inside the unit (apparently, someone left a burning candle too close to the curtains). Well, we recently learned that the ASSOCIATION'S insurance is paying the claim - the money's currently sitting in our reserves until repairs begin. When we discussed at last night's meeting, our property manager said she asked the agent why the Association was paying anything since it would appear this fire occured because of negligence. The claims rep said something about our insurance documents make the association responsible, so I plan to contact her for more information. And our lawyer. Our insurance will be renewed later this year, and as you can imagine, we plan to take a very close look at the terms to make sure this type of thing doesn't happen again. I'm not an expert, but it seems to me one's condo homeowner's insurance would cover this type of stuff - otherwise, why buy it? My question to you is - has anyone else had an experience like this? If so, how did your HOA handle it? Did you sue the owner?

JanP1

Posts:0

01/16/2008 6:21 AM
It doesn't surprise me. Your attorney will be the very best person to guide you. Depending on the damage, some of the damage may go into the association’s common area of the building - especially if your property lines end at one side or another of the drywall or paint. I can see where a unit owner's insurance would not want to assume the liability for the repair of what is common area of condo unit. (Example: say there is electrical wiring and the work is done incorrectly, and starts another fire - who do you as an association go after?) Check your governing documents for the association’s right to repair and duty to repair. I would guess your attorney may advise you to file a lien against the property and to subrogate against the unit owner's insurance. Let us know what you find out. And good luck!

BradP
(Kansas)

Posts:1742

01/16/2008 12:33 PM
Shelia: If you can prove the fire started in the unit and was caused because of a candle burning then I don't know why your insurance would pay anything. I guess I am not an expert on condos or insurance but it would seem to me that the owner of the condo should be responsible for all damage even if it is common areas if they caused the fire. On a side note, just because your insurance payed doesn't prevent you from suing. Courts are not bound by the insurance companies decision. I am not advocating doing this, just an fyi.

SusanW1
(Michigan)

Posts:2116

01/16/2008 1:07 PM
Original poster said "The house had been rented and the tenant didn't have any insurance and the owner lives out of state." So who is going to be sued? I'd make sure EVERY member had proper insurance, however your board determines!

GloriaM
(North Carolina)

Posts:778

01/16/2008 1:34 PM
Sheila: Since you are a condo, the insurance agent must cover the condo's per your governing documents. Therefore, if your documents read the HOA is responsible for the skin outwards, then the insurance would cover according to the doc's. Most condo owners purchase "renters" insurance which covers contents only and find themselves under insured. Condo owners should purchase HO6 or HO13 coverage making sure it covers not only their contents but any upgrades they may have made within the unit. It would be prudent for the board to place into your next newsletter informing the Owner to purchase the right insurance for your condo's. The insurance funds you received from the insurance company needs to be spent on the repairs of that unit. The board can find the contractors to perform the work and pay them from the funds. Have your agent review your policy with your documents so that the board understands the insurance needs of the community.

Dr. Gloria J. Martinez, CFO Official HOATalk.com Sponsor Author of "A Guide to Community Living" Faith Management Services, LLC (North Carolina) (704) 799-3791 www.FaithManagementServices.com *See legal notice below (end of page) or go to www.hoatalk.com/legal

JosephW
(Michigan)

Posts:753

01/16/2008 1:39 PM
This is a condo--the association insures the common areas, which includes most of the structure. The individual owner's insurance covers the interior, mostly decoration. The dividing line is usually between the primer coat and finish coat of paint. The association's insurance will probably replace cabinets, carpets etc, unless they were upgraded by the owner. The association could look to the owner at fault for recovering the deductible, but not much else. Spend some time with your insurance agent to get a better understanding of how condo insurance works, both from the association and the owner's perspective. Joe

Joseph West Official HOATalk.com Sponsor Community Associations Network, LLC www.CommunityAssociations.net *See legal notice below (end of page) or go to www.hoatalk.com/legal

DonnaS
(Tennessee)

Posts:2792

01/16/2008 2:08 PM
Joe, Most every condo in Florida is seperated by a clear definition of what is common structural elements, which is association property. Roofing and the structures that support the rafters are common elements. Anything under that, including all drywall, cabinets, plumbing and wireing within the drywall is considered owner responsibility. All associations that I know of require a copy of the owners policy which is held in office recordds. Many associations state the amount of minimum amount of coverage to ensure that something like this poster has stated, does not happen.

MikeS1

Posts:0

01/16/2008 2:41 PM
If the renter had a "renter's" policy, and they were able to prove negligence on the part of the renter, there might be $300,000 liability coverage available here. The HOA might have been able to file a 3rd party liability claim against the renter. If the HOA collects from their own insurance company, their insurance carrier would be nuts if they didn't subrogate the claim back against the renter so that the renter's insurance reimbursed the HOA's insurance carrier for all damages to include the HOA's deductible. The loss goes against the HOA's overall loss ratio or loss experience and this hurts them whenever they start shopping for more insurance. All insurance companies analyze the risk based on many factors, but they take "loss experience" seriously. Also if you have an investment property with a renter, write the lease so that it's required that the renter acquire and maintain a renter's policy with at least $300,000 liability coverage. Renter's can not only cause fires or floods in Condo's, but they can also be responsible for personal injury claims that arise out of use of the home or other losses. We'll talk about additional insureds on another day, or ask your insurance agent if you have an investment rental property.

SheliaH
(Indiana)

Posts:79

01/17/2008 1:32 PM
Thanks everyone - I will keep you posted (whatever happens, I hope other communities can learn from this!) Right now, I'm just taking a deep breath and hanging on to my knickers (fortified with Depends!) because I have a feeling THIS is going to be a wild ride. So far, I will say the owner of the burnt unit is as baffled as we are - although I suspect he's more upset because he won't be able to dictate what type of materials go to repair the unit (it's the Association's money, so we get to decide). If he indicates he's willing to cooperate, we may be able to avoid a messy lawsuit (we don't need this on top of the other legal action we have against delinquent owners!

ThomasR5
(Texas)

Posts:1

01/29/2008 11:38 AM
Although I am not legal counsel, negligence is difficult to prove. In this case both insurance carriers (homwoners/condo) will pay for damages related to the established condominium guidelines (charter), and then determine if there is a possiblity of subrogation. Any additional action by the association would depend on cost over and above what their insurance policy pays. In most cases it's not worth the time and cost involved in litigating these matters, as it is easier to repair the damage and move on.

hoatalk

Posts:486

01/29/2008 12:01 PM
Posted By DonnaS on 01/16/2008 2:08 PM Joe, Most every condo in Florida is seperated by a clear definition of what is common structural elements, which is association property. Roofing and the structures that support the rafters are common elements. Anything under that, including all drywall, cabinets, plumbing and wireing within the drywall is considered owner responsibility. All associations that I know of require a copy of the owners policy which is held in office recordds. Many associations state the amount of minimum amount of coverage to ensure that something like this poster has stated, does not happen. Just curious: In this case, what if an owner causes this type of fire and it destroys an entire 20 unit condo building? Might the owner be liable for $millions in damage beyond his unit?

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DonnaS
(Tennessee)

Posts:2792

01/29/2008 12:11 PM
Not being an insurance expert, I cannot answer that correctly but any exterior damage would fall under the Association policy because that is what it covers. My one condo requires a $300,000 liability even tho it is a $100,000 unit. Somewhere we must have an insurance agent in our members here to answer us from expertise.

JosephW
(Michigan)

Posts:753

01/29/2008 12:22 PM
Usually, the owner who caused the fire would only be liable for the damage in their own unit (and possibly for the associations' deductible). The association's insurance would cover the common areas, and the individual's policies would cover the areas they were responsible for. If there was some kind of gross negligence involved, I guess the association could sue, but a cigarette left smoking or a scented candle that burned too far down probably wouldn't make the cut. Most of the condo's up north the common areas include all perimeter and load-bearing walls, floors and ceilings, usually up to the primer coat. Interior non-load bearing walls would fall under the owner's coverage. Often doors, windows and floor coverings are included in the master policy. That's why its so important to match up the documents, master coverage and personal coverage. Joe

Joseph West Official HOATalk.com Sponsor Community Associations Network, LLC www.CommunityAssociations.net *See legal notice below (end of page) or go to www.hoatalk.com/legal

GeraldT4

Posts:932

01/29/2008 12:43 PM
JosephW - You're correct that most northeast insurance policies cover as you described. However....my COA is very unique and let me be clear this is not mistake because our gov. docs. require this, and I voted to renew the insurance policy to cover as follows: In the event of a loss, the owner is responsible for the deductible (currently $5,000), the association is responsible to restore the inside and outside of the unit to it's original condition at conveyance to the owner. This includes the upgrades (granite, tile, hardwood floors, sheet rock, interior walls, builder's paint, studs) and not just replacement cost of builder standard. It's very unique coverage, and a very good selling point for our COA.

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