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Because of their unique legal structure, Condominium Associations require special insurance forms to cover both Property and Liability risks of loss. The key to arranging both types of insurance properly is to carefully study the association by-laws and other organizational documents. For example, improvements, appliances and fixtures are covered as part of the association’s Building insurance, but only if the association agreement requires this.


The association’s directors and officers are exposed to being sued by others for their activities managing the association’s business – D&O coverage can (and should) be in place to protect the personal finances of these individuals. If the association is also an employer (maintenance, grounds care, etc.), then Employment Practices Liability should be arranged, on either a standalone basis or included in the D&O policy.


There should be clear communication between the association and its unit-owners regarding the respective responsibilities for arranging insurance – we can help you draft an explanatory memo for your unit-owners (and can also provide unit-owners’ insurance, on request).

One potentially confusing issue in condominium associations is who insures what.  In the past, most condominium association policies would cover whatever the association owned. Other association policies extended coverage into the units - for example, the sheetrock walls and ceiling, the plumbing, and the electrical within each individual unit.  Association policies would often be written broad enough to cover the floor, kitchen cabinets, appliances, and carpeting.

In recent years, with the rising cost of insurance claims and the ambiguous language in some association CC&R's, insurance coverage has changed dramatically.  Many condominium documents specifically detail what is to be covered - - for example:  roof repair and replacement only.  In this instance, the documents are explicitly pointing out that all other structure is not covered.

A Master Package Policy will generally include property coverage that can be categorized by:
Bare walls – coverage for the common elements, usually excludes property within the      unit such as interior walls, permanently installed appliances, fixtures, finishings, floors      and ceilings
Single entity – coverage for the common elements, usually includes initially installed      property in accordance with the association's original plans and specifications
All in – coverage for the common elements, plus initially installed property, plus      improvements and betterments made at the expense of the unit owner  

An Association should survey and identify owned property which is to be covered by the association master insurance package:
Buildings – residences, clubhouses, garages, carports; Building definition could include      foundations, pipes, wires, conduits, utilities, heating, cooling, security systems,      machinery and equipment, balconies, porches, decks, and patios
Structures – arbors, awnings, cabanas, sport courts, fences, fountains, gatehouses,      gazebos, recreation fixtures.
Other property – could include antennas, indoor/outdoor furnishings, signs, landscaping,      fine art.
Non-covered property – could include bridges, roadways, walks, underground      infrastructure.

Common causes for the loss of covered property are categorized accordingly:
Special form – this is known as an “all risk” form and usually provides coverage for all      perils, except those specifically excluded, such as flood, earthquake, war/military      action, nuclear reaction
Broad form – this includes loss as a result of fire, lightning, wind, smoke, hail,      vandalism, sprinkler leakage, accidental discharge of water, collapse of building
Basic form – most limited coverage of the three types of coverage  

In the event of a loss of covered property, the payment of the policyholder will be valued based on:
Guaranteed Replacement Cost – replacement cost with no limit and does not state a      specific property limit
Replacement Cost – payment for the loss is based on the actual replacement and may      be limited to stated value
Actual Cash Value – loss payments are based on the cost of new product, less      depreciation and usage  
A deductible will apply to the property insured in the association's policy.  The deductible could be on an occurrence basis, or could apply separately to each building or unit.  There may be different deductibles for the different covered property.  One aspect of the deductible to consider is how the deductible will be handled with the unit owner.  Unless the association documents specify who is responsible, the association or the unit owner, then the association should adopt a policy which describes the circumstances under which a unit owner would be responsible for paying the deductible.

It is important that the association Board and its management company understand the scope of the association coverages.  Homeowners should be advised on what is covered. Even where the association covers improvements, alterations, fixtures and appliances within units, it is advisable for the homeowner to continue to carry coverage on their own separate policy.

Also ask us about the following additional coverages:

Unit assessment.
This reimburses you for your share of an assessment charged to all unit owners as a result of a covered loss. For instance, if there is a fire in the lobby, all the unit owners are charged the cost of repairing the loss.

Water back-up.
This insures your property for damage by the back-up of sewers or drains. Water back-up may not always be included in a policy. Check to see that it is included.

Umbrella liability.
This is an inexpensive way to get more liability protection and broader coverage than is included in a standard condo/co-op policy.

Flood or earthquake.
If you live in an area prone to these disasters, you will need to purchase separate flood and earthquake policies. Flood insurance is available through FEMA's National Flood Insurance Program ( ). Both flood and earthquake insurance can be purchased through your insurance agent.

Floater or endorsement.
If you own expensive jewelry, furs or collectibles, you might consider getting additional coverage since there is generally a $1,000 to $2,000 limit for theft of jewelry on a standard policy.

Also don’t forget to ask about all available discounts. You can reduce your rates by raising your deductibles and by installing a smoke and fire alarm system that rings at an outside service. If you insure your unit with the same company that underwrites your building’s insurance policy, you might also get an additional reduction in premiums.




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