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Subject:  Flood Expense Management Strategies
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Author Messages
SusanH21
(Washington)

Posts:5


04/05/2016 10:19 PM  
My HOA has 40 units built in 1967. Three claims against the Association for accidental homeowner flooding (two toilets, one W&D) to other units and common areas triggered insurance cancellation and a higher premium on the secondary market. A $5,000 flood this year was paid out of operation funds to avoid becoming uninsurable. Our Board wants to bring a proactive flood management plan to the Annual Meeting for a vote and amend the by-laws as needed. Current by-laws are silent on this issue if there is no fault. We are considering a special assessment for a flood management reserve account and requiring proof of homeowner liability insurance so a claim can be made against the homeowner whose unit caused the damage. We have been told by our insurance broker that liability only applies if there is fault so the Association has no recourse. We are hoping other HOAs have tackled this issue and will share their solutions! Thanks!
TimB4
(Virginia)

Posts:16379


04/06/2016 2:51 AM  
Susan,

I'm surprised that your governing documents do not require members to carry homeowners insurance.
If the member does not carry insurance, the Association should have brought legal action against the owner personally to recoup damages.


Some Associations do have a line item to set aside funds for insurance deductibles.
MelissaP1
(Alabama)

Posts:8281


04/06/2016 8:00 AM  
You may want to look into the insurance laws and responsibilities. Your HOA may be taking on more responsibility of insurance and claims than it should. I'd shop around and consult more insurance carriers. Our HOA carried liability insurance but it did not cover anyone's homes. It covered the board members decisions, pool, and clubhouse replacement.

Note: Here in Alabama one does NOT have to have flood insurance. You only have to have it IF your home has been determined to be in a flood zone. Which I believe the EMA determines that and has a map. We did have 2 homes that routinely flooded due to a bad drain situation. The owners could not get flood insurance because our HOA was NOT in a flood plain. However, we worked with the insurance company and EMA to have them determined those 2 properties were in a flood zone of their own. We the HOA just took step to prevent the flooding as we owned the property around the home. We were NOT responsible for the owner's flood damages/claims.

Best advice is to get the right definition of your needs and requirements. You may find your over/under insured overall. We found that our clubhouse was under insured when we re-evaluated. Today's prices would not have paid out the full replacement cost if something were to happen. It paid out 80K replacement but today's value would have been closer to 100K. That means the HOA would have had to pay the difference of 20K plus the deductible to replace. Which reducing or increasing the deductible and percentage of coverage can save you money. Plus how you set up payments can also save money. We paid on a 10 month schedule instead of a 6 month policy.

Former HOA President
JeffT2
(Iowa)

Posts:476


04/06/2016 8:17 AM  
Is this a condo? Two or three story?

Some plumbing policy suggestions (especially upper floors):

All washer hoses must be burst-proof.

Washer must have a drain pan under it

Install timeout valve for washer.

Hot water heater must have a drain pan beneath it

Replace water heaters after 10-15 years.

Consider alarms and cut offs.

Owners shall only use licensed and insured plumbers (no handymen or DIY).

Add-ons such as water filters and ice makers, and the installations must be approved. Or not allowed at all?

Yearly inspections inside units.

Evaluation of your building by a master plumber or engineer or architect. Consider modern code upgrades.
SusanH21
(Washington)

Posts:5


04/06/2016 9:11 AM  
Thank you for the helpful responses. This is a 40 unit complex in WA state. Each building has two floors.
JohnC46
(South Carolina)

Posts:8419


04/06/2016 11:02 AM  
Susan

Typically each unit will carry their insurance. Any damage to their unit is reported/claimed to their insurance company. Their insurance company will then look to subrogate (regain expenses/costs) from any other insurance company of any party involved which will be the association's insurance company.

Common examples:

A pipe in between floors (a common area thus the associations responsibility) breaks and floods a single unit. Unit owner's insurance company and the association's insurance company in play.

A pipe in a top floor unit breaks and floods that unit, plus the unit below, and the common area between the two units. Both unit owner's insurance companies and the association's insurance company in play.

When damage is near an association's deductible, some associations will not file a claim but pay for the damage directly.

Flood insurance is not the same as say a pipe breaking and flooding a unit.



JimR24
(Texas)

Posts:352


04/06/2016 11:04 AM  
Posted By SusanH21 on 04/05/2016 10:19 PM
My HOA has 40 units built in 1967. Three claims against the Association for accidental homeowner flooding (two toilets, one W&D) to other units and common areas triggered insurance cancellation and a higher premium on the secondary market. A $5,000 flood this year was paid out of operation funds to avoid becoming uninsurable. Our Board wants to bring a proactive flood management plan to the Annual Meeting for a vote and amend the by-laws as needed. Current by-laws are silent on this issue if there is no fault. We are considering a special assessment for a flood management reserve account and requiring proof of homeowner liability insurance so a claim can be made against the homeowner whose unit caused the damage. We have been told by our insurance broker that liability only applies if there is fault so the Association has no recourse. We are hoping other HOAs have tackled this issue and will share their solutions! Thanks!




Hi Susan - here in Texas - may be different in your state, however; we are being told (by our attorney) that our condo Association cannot require require a homeowner to carry insurance. In other words, if a homeowner wants to self-insure, that is a homeowner decision and is not up to the Association to force the creation of homeowner insurance carriers for all.

oljim, in texas

Lovin' life with my honey!
and, Treasurer of Condo Association
JeffT2
(Iowa)

Posts:476


04/06/2016 12:32 PM  
Have a vacation policy: anyone who will be away from his or her unit for one week (or whatever time period you decide) must turn the water off to the entire unit. If not, then that owner is responsible or all water damage.
SusanH21
(Washington)

Posts:5


04/06/2016 9:08 PM  
Thank you for your response. That is exactly what has happened to the tune of three claims for $43,000 and we were dropped by our insurance. We are now paying a higher premium on the secondary market. When another toilet flooded a common storage area we were told by our property manager not to make a claim or we would risk becoming uninsured. So we paid $5000. We have had to go into reserves to manage these water flood damages. I don't understand how the Association has any 'common area' between the floor and the ceiling of two units. We will make a decision in a quorum meeting in May of all owners. We are either facing an increase in dues or a special assessment if there is no insurance solution.
Thanks again for your interest. Very helpful!
JohnC46
(South Carolina)

Posts:8419


04/07/2016 6:12 AM  
Susan

Typically in a condo the owner is responsible for the walls, floor, ceiling in. Thus anything in the walls, floor, ceilings is the responsibility of the association. As an example the space between walls might contain piping, wiring, venting, etc. which would be the responsibility of the association.
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