Condo Insurance?

Started by MissyS • 13 replies • 2026 views

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MissyS (Florida)
Posts: 73

Posted:

Our documents are old with many conflicting articles and are in desperate need of updating. For example, our association is required to carry HO3 (homeowners) coverage and the next paragraph requires our homeowners to carry the same exact coverage.

All changes will be review by our attorney; since we will be paying by the hour I’m hoping someone might share their owner’s condo insurance wording from their documents.

GeraldT4
Posts: 1,022

Posted:

MissyS,

My COA insurance policy requires the owners to have their own HO6 policy that covers all the cash and carry, and a minimum of $5,000.00 for the dwelling. All the rest (upgrades of units, and units at time of original conveyance, roof, sheet rock, studs, primer, first coat of paint, electrical/wiring, HVAC, vinyl siding, etc. is covered by the association insurance policy minus a $5,000 deductible of which is the responsibility of the owner. It's unusual insurance, very broad form coverage but 100% required in our POS only to be amended by a vote of owners.

It sounds like your insurance has some duplication of coverage. There should be a clear separation of responsibility to prevent gray areas in the event of a dispute from a loss.

GlenL (Ohio)
Posts: 5,491

Posted:

Missy you should of course have any changes vetted by your Association's insurance agent and attorney to make sure that you're adequately protected and conform to state law. The following is for a COA in Ohio but we don't have hurricanes although it has been a wet year so far.

Fire and Extended Coverage Insurance. The Association, as a common expense, shall obtain for the benefit of all owners insurance on all building structures or other improvements now or at any time hereafter constituting a part of the condominium property against loss or damage by fire, lightning and such perils as are at this time comprehended within the terms “extended coverage” and “all risk”, and vandalism and malicious mischief in an amount of not less than 100% of the replacement value thereof. Such insurance shall be written in the name of, and the proceeds thereof shall be payable to the Association as Trustee for each of the unit owners in accordance with the percentage of ownership in the Common Areas and Facilities set forth in Article III herein.

Such insurance by the Association shall be without prejudice to the right of the owner of a Unit to obtain individual contents or chattel property insurance, but no Unit owner may at any time purchase individual policies of insurance on his Unit or his interest in the Common Areas and Facilities as real property unless the Association shall be named insured in such policy, and be advised of the same.

Such policy of insurance may contain an endorsement recognizing the interest of any mortgagee or mortgagees of any Unit.

Such policy shall also provide for the release by the insurer thereof of any and all rights of subrogation or assignment and all causes and rights of recovery against any Unit owner, member of his family, his tenant, or other occupant of the Condominium Property for recovery against any one of them for any loss occurring to the insured property resulting from any of the perils insured against under such insurance policy.

Sufficient Insurance. In the event the improvements forming a part of the Condominium Property, or any portion thereof, shall suffer damage or destruction from any cause or peril insured against and the proceeds of any policy or policies insuring against such loss or damage and payable by reason thereof shall be sufficient to pay the cost of repair or restoration or reconstruction, then such repair, restoration or reconstruction shall be undertaken by the Association and the insurance proceeds shall be applied by the Association in payment therefor; provided, however, that in the event, within thirty (30) days after such damage or destruction, the Unit Owners, if they are entitled to do so pursuant to this Article IX shall elect to sell the Condominium Property or to withdraw the same from the provisions of this Declaration, then such repair, restoration or reconstruction shall not be undertaken.

Insufficient Insurance. In the event the improvements forming a part of the Condominium Property, or any portion thereof, shall suffer damage or destruction from any cause or peril which is not insured against, or if insured against, the insurance proceeds from which shall not be sufficient to pay the cost of repair, restoration or reconstruction, then, unless the Unit owners shall within thirty (30) days after such damage or destruction, if they are entitled to do so pursuant to this Article IX, elect to withdraw the property from the provisions of this Declaration, such repair, restoration or reconstruction of the improvements so damaged or destroyed shall be undertaken by the Association at the expense of all the owners of Units in the same proportions in which they shall own the Common Elements. Should any Unit owner refuse or fail after reasonable notice to pay his share of such cost in excess of available insurance proceeds, the amount thereof may be advanced by the Association and the amount so advanced by the Association shall be assessed to such owner and such assessments shall have the same force and effect, and, if not paid, may be enforced in the same manner as hereinbefore provided for the non-payment of assessments.

The term “uninsured damage or destruction”, as used herein, shall mean loss occurring by reason of a hazard not covered by the insurance policy of the Association. The term “underinsured damage or destruction”, as used herein, shall mean loss occurring by reason of a hazard covered by the insurance policies of the Association, but for which the proceeds are insufficient to cover the cost of repair, restoration or reconstruction.

The final determination made with the insurers as to insured, uninsured and underinsured damage or destruction shall govern.

Non-Restoration of Damage or Destruction. In the event of substantial damage to or destruction of a majority of the Units, the Unit owners by the affirmative vote of those entitled to exercise not less than 75% of the voting power may elect not to repair or restore such damage or destruction. Upon such election, all of the Condominium Property shall be subject to an action for sale as upon partition at the suit of any Unit owners. In the event of any such sale or a sale of the Condominium Property after such election by agreement of all Unit owners, the net proceeds of the sale together with the net proceeds of insurance, if any, and any other indemnity arising because of such damage or destruction shall be considered as one fund and shall be distributed to all Unit owners in proportion to their respective percentages of interest in the Common Areas and Facilities. No Unit owner, however, shall receive any portion of his share of such proceeds until all liens and encumbrances of his Unit have been paid, released or discharged.

Hazardous Uses and Wastes. Nothing shall be done or kept in any Unit or in the Common or Limited Common Elements which will increase the rate of insurance of the buildings or contents thereof, applicable for residential use, without the prior written consent of the Association. No Unit Owner shall permit anything to be done or kept in his Unit or in the Common or Limited Common Elements which will result in cancellation of insurance on the building or contents thereof, or which would be in violation of the law. No waste will be committed in the Common or Limited Common Elements.

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GlenL (Ohio)
Posts: 5,491

Posted:

I apologize for the long posts but you did ask. This is from the "Homeowner's Handbook":

The Homeowner should have an individual Homeowner insurance policy. This policy should cover all personal contents, carpeting and any change and/or additions that have been made to the unit’s interior or exterior since the original walk thru.

The insurance policy which is purchased by your Association is very broad coverage. Your policy affords the following property coverage's:

1. Cabinetry, kitchen, bath, etc. All cabinets built in forming a part of the building are covered.
2. Floor coverings, wall to wall carpeting, linoleum, tile, etc. are covered. *Oriental, Persian, area rugs are not covered.
3. Wall coverings, paint, wallpaper are covered. Pictures, mirrors, decorations are not covered.
4. Plumbing and electrical fixtures are covered. Hot tubs are not covered.
5. Built in appliances, dishwashers, ranges, are covered. Refrigerators, washers and dryers are considered personal property and are not covered.
6. We do provide coverage for back up of sewers and drains.
7. Glass forming a part of the building is covered on an unlimited basis.
8. Heating and cooling elements are covered. Maintenance, etc., repairs or
replacements are not covered.

All property losses are settled on a replacement cost basis subject to a $1000 deductible per occurrence.

Because the Association’s policy is very comprehensive, the amount of optional coverage one should purchase when selecting a condominium unit owner policy is minimal.

If you own a unit and occupy that unit, you should select an H06 (Condominium Unit
Owners) policy. Under no circumstances should you purchase another type of policy.
Inquire about an “All Risk” contract.

Unit owners are responsible for insuring:

1. All personal property, clothing, furniture and furnishings, etc.
2. Personal liability and medical payments - the Association policy does not provide personal liability coverage for unit owners.
3. Loss assessment coverage is an optional coverage.

Additions and alterations, improvements and betterments are coverage which duplicates the master Association’s policy. This type of coverage is not needed provided the Association policy is in force.

If you are renting a unit, you should request an HO4 (Tenants) policy. Again, you are responsible for insuring

1. Personal Property
2. Personal Liability and Medical Payments

Unless you are under contract by the owner, loss assessment coverage is not necessary for the tenant.

If you own a unit and are renting or leasing, you should:

1. Have your personal liability extended from your primary residence.
2. Be aware of loss of rents or fair rental value coverage. This type of coverage can protect your rental income if a loss should occur.
3. Protect any of your personal property left in the unit.
4. You may require your tenant to maintain their own policy to protect possible
liability claims that could arise.

Regardless of your situation, be certain to give your insurance agent a copy of the insurance requirements found in your documents.

The material presented herein has been abbreviated to give you a clear and broad understanding of coverage. This summary is not all-inclusive, nor does it alter or waive provisions of the actual insurance contract.

If you ever have a question as to who’s insurance is responsible for a particular incident, call our office at:

Studies show that 5 out of 4 people have problems with fractions

MissyS (Florida)
Posts: 73

Posted:

Glen, thanks so much for the great post.

BonnieE (Illinois)
Posts: 338

Posted:

Hi!
I have a few insurance questions. I live in a condo and have an HO6 policy. It is my understanding that the HOA policy covers “everything attached” as originally built (building, pipes, cabinets, flooring, counters, appliances, sinks, etc.). The HO policy covers personal property (“unattached” items) – furniture, decorative items, clothing, appliances not included in the original package (washer, dryer in my case), dishes, etc.

It is also my understanding that I need coverage for those items which I have replaced with upgraded replacements (under building property coverage?) – windows, sliding door, flooring, appliances, counters, sinks, lights – since the HOA policy would only cover the cost of the original. For example, say the original sliding door cost $1,000 and I replaced it with a better quality door costing $2,500, I need coverage for the $1,500 difference. Otherwise, should there be a catastrophic loss or damage, without that coverage, I would receive the original sliding door, not the one I put in. Am I correct in this?

Secondly, what about the limited common elements which my HOA has a policy stating the HO is responsible for? Deck, patio, chimney, garage door, front stoop, etc. Which policy covers their replacement should there be a loss? Do I need to cover this under building property coverage?

Finally, my insurer offers extended protection coverage. It covers damage to your unit for which the HOA would normally cover, but the BOD decides not to cover the loss because the loss is less than the HOA policy deductible (according to my insurer). An example – there is a fire to my unit (not my fault) and repairs covered by HOA policy would cost $4,500. But the deductible is higher, so BOD decides that HOA is not responsible for a loss to only my unit. Therefore, my insurance company recommends this type of coverage to a HO. Can the BOD make decision to not pay for such repairs? Is this common? Is this coverage commonly purchased by HOs?

I did a quick check of the IL Condo Act. It states:
c) Deductibles. The board of directors of the association may, in the case of a claim for damage to a unit or the common elements, (i) pay the deductible amount as a common expense, (ii) after notice and an opportunity for a hearing, assess the deductible amount against the owners who caused the damage or from whose units the damage or cause of loss originated, or (iii) require the unit owners of the units affected to pay the deductible amount.

Which leaves me somewhat confused - the BOD can make the repairs and require the HOs affected to pay the deductible – do I understand this correctly?

Finally, Glen, you provided excellent information. I have 2 questions: What is an “all risk contract”? What is “loss assessment coverage”?

One final question: do BODs typically require proof of insurance from the HOs? According to my agent, other IL BODs require proof. We do not – that is, we can require it per IL Condo Act, but have not requested proof of insurance from HOs.

Thank you for any help you can provide!
Bonnie

RobertR1 (South Carolina)
Posts: 5,164

Posted:

MissyS,
In a practical sense: Unless you have tons of money I would advise just turning over your documents to some lawyer and tell him to write new one.
Much easier and less expensive to amend the Old. Ours was 25 years old and we amemded them. As far as insurance goes, I really think you are not going to cover HO6 insurance with your documents, that is a privite matter as long as it meets any requirements in the covenants. Another thing to consider; you documents were written by some lawyer and now you want to pay to have this redone. If you have anyone with insurance experience, I would solicit them to form an insurance committee, and let them sort it out and write a proposal for inclusion in the amendments.
Three or four ownwers over the age of 20 can sit down and hammer out a rough proposal of what should be changed. Take some of the information you have been given here and make a strong proposal to these amemders that they read all your documents nd spend some time discussing them with each other. In other words, get prepared, and walk into your lawyers office and tell him where your concerns are. Demonstrate you are going to spend your money wisely and are not looking to reinvent the wheel. See how you all mesh as a team and get a cost pinned down, if it's too high, go back and re-discuss how you or he can do better. Your BOD should handle your insurance agent, your Board should contract with your lawyer. God knows what it would cost for the lawyer to set up and control an insurance agents input for new documents. Maybe you just want to sit down with lawyer, pay him by the hours and sit there and delete everything in your old documents that are absolutly no good. Then rewrite a rough from this and start more discussions.

No matter how bad the are or how important it seems to change them, odds are you got by till now and a year or two won't make a difference. Make it a learning experience for the Board.

MissyS (Florida)
Posts: 73

Posted:

Robert thanks for the response. You're right the old docs have worked fine for over 25 years until 2004 when our complex got hit by 3 hurricanes all within 6 weeks. Because of the wording in our docs, many owners were under insured. Like many Associations in Florida our insurance was cancelled and we had no other option but to go thru Citizens at 3 times the cost. Our new insurance agent strongly recommended changing our documents so there are no conflicts. The boards since the hurricanes didn't get around to amending the docs.

There are really only a few things I'd like to see amended. Besides the insurance issue our HOA doesn't have the power to levy fines; and I always thought this was nuts....you don't have to be an owner to serve on the board.

I was just hoping to get some wording so we could hand the lawyer the amendments and have him look them over without having to start from scratch.

Hey it was worth a shot lol.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Missys,
I see no problem, your are taking the right raod by amending your documents. You have outlined a few thing you want to address. As you go along there will be more. I would suggest some of your interested owners have a number of workshops so you will having your ducks in line and save some on that hourly rate price set by lawyer. Better to tell him what you all want and let him fill in the banks than have him tell you what you should have and force you to pick and choose. Cheaper that way, if there is such a thing anymore.

GlenL (Ohio)
Posts: 5,491

Posted:

Quote:

Posted By MissyS on 08/03/2008 12:44 PM

and I always thought this was nuts....you don't have to be an owner to serve on the board.

Missy what about spouses or live-in significant others who may not for whatever reason be on the deed and what about units that are owned by a corporation? This is Ohio's requirement and you'll note it also ignores live-ins.

5311.08 Unit owners association.

(A)(1) Every condominium property shall be administered by a unit owners association . All power and authority of the unit owners association shall be exercised by a board of directors, which the unit owners shall elect from among the unit owners or the spouses of unit owners. If a unit owner is not an individual, that unit owner may nominate for the board of directors any principal, member of a limited liability company, partner, director, officer, or employee of that unit owner.

Studies show that 5 out of 4 people have problems with fractions

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Glen,
How much of these requirements were put in there to serve the other owners? I would venture to say that special interests were well represented at this workshop. You can bet there would be few experienced HOA residents that would promote this. I am not saying there won't be special needs from time to time and a non-resident owner could qualify, but I doubt that anyone in my Homeowner group would even consider voting for a non-owner.

In the case of spouses who are not on the deed a simple letter assigned them would be sufficient, at least here it is, as we don't have any provisions for non=owner Board members. Thereis already too many husbands and wives on Boards, even though it is wrong. I see nothing remiss about a wife serving on the Board and a husband serving on the committee that the wife happens to chair.

I agree with MissyS, if for no other reason than there is already enough crap is the game, generally speaking.

GlenL (Ohio)
Posts: 5,491

Posted:

Robert what about the spouse who's name is not on the deed? Remember Monica from Nevada who was removed from the ballot after already serving on the BOD simply because her name was not on the deed and the MC decided she couldn't serve any longer because of the way the rule was written? I seem to remember that you were outraged over it. What about a gay or long term non married couple who for whatever reason one partner's name is not on the deed so technically they're not an owner? What about an adult child who moves back in with mom or dad to take care of them but their name is not on the deed or how about the professional who has their deed in the name of an LLC for tax purposes? Should all of these people be precluded from serving?

I didn't espouse having non residents on the BOD; I was just reminding Missy not to overlook a qualified party with a poorly written rule.

Studies show that 5 out of 4 people have problems with fractions

KirkW1 (Texas)
Posts: 1,665

Posted:

I think you should call your state insurance board and see if anyone will discuss the issue with you. For condos, I know the issue is regulated in Florida as there was a recent court case changing the requirements.

EllenS1 (Florida)
Posts: 1,148

Posted:

Missy,

My understanding is that the condo insurance covers exterior problems and homeowners' insurance covers the interior. Your agent should be able to explain this.

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