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Subject: insurance: HO vs HOA coverage??

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BonnieE
(Illinois)

Posts:176

08/03/2008 10:08 AM
Hi everyone, First, I made a mistake posting my questions to another thread on 8/1. I am sorry, Missy, for posting my questions to your thread (re condo insurance dated 7/3). I was reading it as it had some great information and should have started a new post for my questions. So, here goes. 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), etc. Is my understanding correct so far? 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? Next, what about the limited common elements for which my HOA has a policy stating the HO is responsible for - who covers the deck, patio, chimney, garage door, front stoop, etc. – should there be a loss? Do I need to cover this under building property coverage? Finally, my insurer offers extended protection coverage. According to my agent, 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. An example given – 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 a 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, in your response to Missy dated 7/4, 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 have not requested proof of insurance from HOs, but am now thinking we should request it. Thank you for any help you can provide! Bonnie

SusanW1
(Michigan)

Posts:2316

08/03/2008 10:20 AM
RE: "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." You need to take this paragraph to your next Board meeting and ask them to tell you how this applies to the HOA's insurance coverage. The key word in the Act is "may". The Condo Act gives Board permission to do all these things, UNLESS there is something in your own coverage or bylaws that is different. Ask for cliarification from your Board or PM.

BonnieE
(Illinois)

Posts:176

08/04/2008 6:20 AM
Thanks, Susan – that is exactly what I will do. As for my other questions regarding which policy covers what, does anyone have any thoughts? Thank you!

GeraldT4

Posts:934

08/04/2008 8:46 AM
Bonnie - Insurance coverage, and deductible of units in the event of loss varies from association to association. First look in your governing documents and provide us detail of The Description of Units.

GlenL
(Ohio)

Posts:1466

08/04/2008 9:12 AM
Bonnie I'm sorry I missed your post the first time around. I am not an insurance specialist but I went to the carrier's website and searched for the terms you asked about: All Risk - provides "all-risk" protection for your possessions. This means that your personal property is covered in most situations, regardless of the cause of loss. Loss Assessment Coverage: Condominium coverage provides up to $1,000 of protection against financial loss if damage to commonly owned property exceeds the amount of coverage in the Master Policy. If your condo association is forced to assess all unit owners for the additional loss (or for personal liability claims against the association), you're covered! I would presume that damage to your limited common element would be covered by the master policy but probably not for liability of any guest injured on them. All of our owners receive a copy of the master policy each year so they can see just what is covered. For specific answers to your questions I would suggest you address them directly to the Association's insurance and your agent to make sure you are covered in a manor you are comfortable with.

BonnieE
(Illinois)

Posts:176

08/05/2008 2:14 PM
Gerald and Glen - Thanks for your replies! This is from our Declaration (paraphrased) – it is pretty much word for word from the IL Condo Act: Definitions: Common Elements (CE: all condo property except dwelling unit Dwelling Unit (DU): that part of condo property intended for independent residential use; the space enclosed and bounded by planes/boundaries on Plat; includes fixtures & improvements located wholly within such boundaries and which serve DU exclusively DU does not include: structural components; nor the component of such a system serving more than one DU & is integral part of such system & not intended to serve DU exclusively. Limited common elements (LCE): that part of CEs which serve 1 or more DUs but not all DUs – and – shall include the Exclusive LCEs (elements which serve a DU exclusively): including perimeter doors and windows serving DU exclusively, interior surface of perimeter walls, ceilings, floors which define boundaries of DU, a system component part serving DU exclusively Insurance: Association maintains: property insurance on CEs; DUs; including LCEs and except as otherwise determined by BOD; the bare walls, floors, and ceilings of the Unit. Insurance must include Units, LCEs except as otherwise determined by the BOD, and CEs. In 2006, the BOD provided a clarification with regard to “maintenance responsibility”. Specific changes from the previous unwritten but implemented policy was that the unit owners would now be responsible for certain LCEs and Exclusive LCEs – skylights, patios, decks, front stoop/steps, outdoor lights by front door and patio or deck door, privacy fences, chimneys. In the past, the Association paid for repairs, maintenance and replacement of these items. My question is whether the master policy covers these specific items or the HO policy should there be a loss. One insurance agent said the master policy would cover these, but another said otherwise (same company). I will also ask our MC – but am interested in knowing if this delineation of coverage has been addressed by other HOAs. Thank you, Bonnie

RogerB
(Colorado)

Posts:3725

08/05/2008 7:31 PM
Posted By BonnieE on 08/03/2008 10:08 AM ..... 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? ...... Bonnie Bonnie, I suggest you read your Declaration's clause on insurance. Look for the words 'subrigation' and 'all in indorsement'. After reading this section of the Declaration phone the HOA's insurance company (or broker) and ask them to explain what is confusing to you.

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

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