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Condominium Association

Everything You Need to Know About Condominium Associations and Insurance

Everything You Need to Know About Condominium Associations and Insurance

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
  • Appliances
  • Floor coverings

…And more!

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

Condo Associations and Insurance

Condo Associations and Insurance

Everywhere you turn, you will see new residential construction. However, the construction occurring is no longer all single family houses, each with a white picket fence and a porch swing. In an effort to keep up with the concept that less is more, new construction now includes condominiums. The concept of a condo has been around for decades, and began as a great way to allow for home ownership and saving space in larger cities. However, it has spread to the suburbs as an opportunity for individuals to purchase rental properties or even downsize as their children move on with life. The difference between a condo and an apartment is that in condos, each unit is individually owned. Then, there is an association of individuals who help manage the common grounds and issues.

Who Is Responsible?

Condominiums have become desirable for people because of the minimal risk in comparison to single family homes. Certain large-ticket repairs are the responsibility of the condominium association as opposed to the unit owner. The unit owner is responsible for his or her own personal property, such as clothing, interior appliances, electronics, interior furniture, and interior fixtures. Furthermore, their homeowner’s insurance will cover any injuries that occur inside of their property. Repairs such as interior painting, interior door replacements, new carpets, and cabinets lay on the unit owners’ shoulders. And that is where their responsibility ends. Exterior issues, such as roof repair, broken windows, exterior door repairs, and even patio furniture issues, as well as holes in the walls, ceiling repairs, and bare floor issues or foundation problems are the responsibility of the homeowners’ association. Even issues appearing in common stairwells, elevators, or walkways must fall on the association’s shoulders. The association itself must maintain an insurance policy to cover damage to the exterior and common grounds of the entire property, this is more times than not, referred to as the Master Policy.

The Responsible Party

Since the condo association has a large portion of responsibility, there is often a board of directors for the association. These may be individuals paid by the unit owners or volunteers who want to ensure their properties are always safe and in great condition. Either way, this group is responsible for maintenance and repair of the exterior and common area. Sometimes issues may arise simply because people are fallible and make mistakes. Furthermore, when with the board is comprised of volunteers, oftentimes managing the association is only one of the many tasks they will handle. However, a typical condo association liability policy will not cover the errors or omissions of the people managing the association. A separate policy must be purchased to cover officers and directors. Additionally, another policy strictly for volunteers must be purchased to ensure all people involved in managing the association and property are covered in the event of any issues.

The Proper Coverage

Like most insurance-related issues, the proper coverage and the mandated coverage are not uniform from state to state. Each state has its own set of rules that may or may not be similar to another state’s. However, the goal should not be to do what is required, but to do what is the best practice. Insurance is not designed to keep you legal. It is designed to protect you. Therefore, a person can sue for perceived injury, whether you are required to have insurance coverage or not, and if they win, the money must come from somewhere. Therefore, do not rely on the state to tell you the amount of coverage you need and what must be covered. Rely on the facts. It is a fact that a person whose interior is damaged as the result of a faulty exterior issue will file a lawsuit to cover the damage to their property. A person who is financially wronged by another’s misrepresentation or omission will sue to recover losses. As a result, it is important to fully cover your condo association for any issues which may occur, no matter the likelihood, to protect your association from going bankrupt and folding, leaving the condominiums unable to sell.