Condominiums are popping up all over the United States – and the world. From high-rise buildings in urban areas to townhomes in the suburbs – it's hard to miss these new development efforts. Typically, every condominium offers a few distinctive features:
Common Areas: Places that all residents use like stairs, elevators, and hallways are jointly owned by the unit owners. Each owner's interest is proportionate to the value of his or her unit.
Dwelling Units: The housing unit that is individually owned by the person who bought it.
Administrative Framework: Often, a condominium has an association. This is usually made up by a board of managers, who typically own a unit. The organization manages the common areas and assets. They also set the rights and obligations of the unit owners.
What Condo Owners Need to Know
With the basics out of the way, it's time to talk about insuring condominiums associations. Here are a few items potential condo owners must understand before buying a condominium and having to work with an association:
1. Responsible Associations:
The condo association is only responsible for insuring the common areas of the complex. The interior of the individual units is the responsibility of the owners. Nearly every state requires the association to have insurance for all common elements and bare walls. When insuring a condominium, you'll be quoting for mostly, “walls –in” coverage; unless your condo’s association’s Master Insurance Policy says otherwise.
2. Important Documents:
Before gathering coverage for a condominium association, you'll need some important documents. These sets of documents offer the information needed to see the scope and full extent of coverage required.
- The declaration of the condominium, which is subjected to a condominium act.
- The condominium property act that is in effect in the association's state. This defines the boundaries of coverage and responsibilities.
- To further understand the scope of coverage, you'll need bylaws and various instruments that clarify what is permitted under the act.
Once you have these documents, you'll find condo coverage becomes a lot easier. It'll be simple to itemize and identify which areas will be covered. Then you'll be able to add limits and subject items to coverage.
3. Personal Property:
Condo associations do not offer coverage for personal property. Common items that condo associations like to cover include:
- Outdoor furniture
- Fire extinguishing items
- Floor coverings
4. Errors & Omissions:
No one is perfect. The board of directions for a condo association is no different. Condo association insurance does not cover errors and omissions of board members in a standard policy. For this reason, most associations choose to purchase Errors & Omissions Liability Insurance.
Certain states require the coverage, but some do not. Other states limit the liability of errors & omissions, but many do not.
5. Safe Volunteers:
The Volunteer Protection Act of 1997 does not cover volunteers within the condo association, as the act does not defend volunteers against lawsuits. The act protects against tort liability stemming from acts of bodily injury and property damage.
When liability for criminal misconduct, gross negligence, flagrant indifference or safety of others is brought to attention, the act does not cover anything. In these situations, general liability insurance often comes in handy.
It's important to note that certain states have opted out of the Volunteer Protection Act and created provisions concerning these issues within their legislation. Often, a state's legislation will limit the personal liability of volunteers within the condo association.
For more information about insuring a condominium association contact Skyline Risk Management, Inc. at (718) 267-6600