Have you ever watched someone try to finish a jigsaw puzzle with pieces missing? There are still a few hundred pieces to place, but there is one open space in the middle of a grove of trees that beckons to be filled. The puzzler spends hours combing through pieces that look like that hole. Eventually, he realizes that the one piece he’s been searching for is missing.
That’s what it is like to try to understand coverage on a condominium. It’s a huge jigsaw puzzle full of mismatched and missing pieces. The jigsaw puzzle gets even more complicated when we add lines of business to the mix. Condos need property, liability, directors and officers, and workers’ compensation coverages (maybe others). For now, let’s consider the property exposures.
Condo insurance can be easy if the association’s policy and the unit owners’ policies are all written by the same carrier or if they are all written on the ISO policy. This is simply because they are designed to work together. In fairness, many carriers write policies that are very similar to one another in the basics, only making changes to details here and there.
Here are excerpts from the ISO Condominium Association Policy and Unit-Owners Policy.
CP 00 17 Condominium Association Coverage Form
- Coverage 1. Covered Property a. Building
6) Any of the following types of property contained within a unit, regardless of owner-ship, if your Condominium Association Agreement requires you to insure it: (a) Fixtures, improvements and alterations that are a part of the building or structure; and (b) Appliances, such as those used for refrigerating, ventilating, cooking, dishwashing, laundering, security or housekeeping.
HO 00 06 Homeowners 6 – Unit-Owners Form
- Coverage A – Dwelling
- We cover: a. The alterations, appliances, fixtures and improvements which are part of the building contained within the “residence premises”.b. Items of real property which pertain exclusively to the “residence premises” c. Property which is your insurance responsibility under a corporation or association of property owners agreement…
Did you notice how neatly they fit together? The association’s form provides coverage for certain items that could be called personal property of the unit owner. In fact, that property is covered on the residential (homeowners’) unit owners’ form. On the CP 00 17, certain items are required to be covered on the association policy if the association agreement requires it. It doesn’t say that specifically in the HO 00 06. In fact, that form extends coverage to anything that the association agreement requires the unit owner to insure.
Later in the association policy, there is a paragraph that tells us if property is covered on the unit-owner’s policy, the association policy is primary, and the unit owner’s policy is excess. There is similar language on the unit-owners’ policy that states the unit owner’s policy is excess and will not contribute until the loss exceeds the limits of the association’s policy.
It appears that the insurance policy is not the only document that you need to decide if a unit-owner or association is properly insured. You may also need to read the association documents, specifically the insurance requirements. The association documents will spell out what the individual unit owners’ and the association’s responsibilities are.
One more thing to consider is the state condominium law. Some states are very specific about the responsibility of the association and unit-owner. Florida, for example, requires that the association’s policy must exclude, “all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures…within the boundaries of the unit and serve only such unit.”
Condominium insurance is a complicated subject, and one not easily (or quickly) solved. In the end, if you’re working with a unit-owner, or association, it is certainly worth looking at the state law, the association documents, and several of the attendant policies. Who knows, you might find gaps that you know how to fill.
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