INSURANCE

Every condominium declaration contains specific language relating to insurance. In WA State, common interest communities are required by law to carry certain types of property insurance that serves as primary in the event of a loss. Please see the flow chart below which is generally applicable to most condominiums. Insurance takeaways:

1) unit owners are almost always responsible for in-unit losses up to each association's insurance deductible

2) responsible parties for losses within a deductible limit are in proportion to the areas damaged

3) your governing documents likely require owners to carry insurance that covers any potential deductibles and loss assessments for ANY insurance coverage held by the Association (even optional policies like earthquake)

>>> Are you monitoring and enforcing requirements for owners' insurance policies?! This is a major and often overlooked risk.

Remember to review recommendations and lessons learned in our blog articles and online content!

H06 "WALLS-IN" COVERAGE BREAKDOWN

  • DWELLING

    • Drain / Sewer / Water backups are almost always excluded from dwelling coverage. Triple-check!

  • EARTH MOVEMENT / EARTHQUAKE

    • This is always an additional type of coverage rider that can add significant additional expense

  • PERSONAL PROPERTY

    • Covers items that are not permanently attached to your Unit ceiling, floor and/or walls

    • Certain types of personal property (e.g. fine art, jewelry, etc.) require a rider

  • LOSS OF USE

    • Covers expenses such as hotel rooms and moving costs during a period of time when your Unit is uninhabitable

  • LOSS ASSESSMENT

    • Covers amounts assessed to individual Units based on a loss covered by a property's master insurance policy

  • LIABILITY

    • Covers losses incurred by others resulting from your Unit

EXAMPLE DAMAGE / LOSS FLOW CHART

Damage and Loss Responsibility Flow Chart.pdf

EXAMPLE SEISMIC PROBABLE LOSS STUDY

KEY TERMS & COVERAGES

Here's some robust insurance language. How do your governing documents compare?

13.7.1 Owner’s Additional Insurance. Each Unit Owner shall obtain and maintain an individual insurance policy which provides coverage for the Owner’s Unit (in an amount at least equal to the Association’s deductible) and personal belongings therein, and, to the extent reasonably available:

A) Loss of use, loss of rental income, and loss Assessment exposures;

B) Comprehensive Personal Liability coverage for any damage to other Units or Common or Limited Common Elements arising or resulting from the Owner’s negligence, carelessness, or acts or omissions, or from damage caused by fixtures or appliances maintained by the Owner; and

C) The minimum Real Property coverage for an Owner policy shall not be less than the amount of the deductible for the Association’s policy of Property insurance, or any greater amounts as may be established by the Board.

D) The minimum Loss Assessment coverage shall be the amount of the deductible for the Association’s policy of Property insurance.

E) The Association may choose to purchase earthquake insurance for the Condominium. If it does, the Board may choose to require all owner’s to purchase earthquake insurance to cover the deductible under the Association’s policy that relates to their Unit.

F) The Owner or Commercial Tenant of each Commercial Unit shall obtain and maintain property insurance covering all trade fixtures, equipment, appliances and improvements within the Commercial Unit made by any Commercial Owner or Commercial Tenant.

G) The failure of an Owner to purchase insurance required under the Declaration does not reduce that Owner’s obligation to pay for amounts within the Association’s policy’s deductible, or any other amount for which the Owner is responsible under the Declaration.

13.7.2 Proof of Coverage. Unit Owners shall file a certificate of insurance for such individual policy or policies with the Board within thirty (30) days of any request by the Board. The Association shall have the right but not the obligation to monitor the maintenance of such insurance by Owners, and shall further have the right, but not the obligation, to obtain such insurance if the Owner or User fails to obtain or maintain the same and to levy a special assessment for the expense against the Unit(s) of the Owner(s) related to such Common Expense.

13.7.3 Unit Owner Obligations. The Association’s obligation to insure shall not relieve Unit Owners of their obligations under any other Article of the Declaration, including, but not limited to, the obligation to perform and pay for repairs, maintenance, care and replacement of the Unit and/or Limited Common Elements for which the Owner is responsible.

13.7.4 Tenant or Occupant Insurance. Unit Owners shall require any Tenants, Related Parties, or other Occupants to obtain Renter’s Insurance to protect their personal property, provide for loss of use, and to provide general liability insurance for acts and omissions by the Occupants and their guests, agents, pets and invitees.

13.7.5 Owner’s or Occupant’s Insurance Deductible. Under no circumstances shall the Association pay any insurance deductible due under a Unit Owner’s individual insurance policy or any Tenant’s or Occupant’s policy of insurance.

The Board may require a Unit Owner to file a claim under the Owner’s policy if the Owner is responsible for damage and has not otherwise paid their obligations for the necessary repairs.

13.7.6 Allocation of Repair Costs for Property Damage. In accordance with the provisions of this Declaration, including but not limited to the subparagraphs of this section, the costs for repair or damage events are apportioned as follows:

13.7.6.1 Damage Covered by Association Insurance. For damage events that are covered by the Association’s insurance, repair costs over the Association’s standard insurance deductible are paid for by Association insurance, or by the Association if the Board decides not to file a claim. Repair costs within the Association’s standard insurance deductible are the responsibility of the Unit Owner and are allocated:

(a) to the Owner if the damage resulted from neglect or misconduct of the Owner, the Owner’s Tenants or Occupants, or any of the Owner’s, Tenant’s, or Occupant’s guests, invitees, visitors, agents, or pets;

(b) if there is no neglect or misconduct, then to an Owner, if the damage resulted from any vehicle, equipment, appliance or fixture (or wiring or pipes related thereto) within the Owner’s Unit or belonging to the Owner, the Owner’s Occupants or Tenants, or any of the Owner’s, Tenant’s, or Occupant’s guests, invitees, visitors, or agents;

(c) if neither (a) nor (b) apply, then to an Owner whose Units or Limited Common Elements were damaged or benefited by the repairs;

(d) if the damage is to more than one Unit and/or the Common or Limited Common Elements, and neither (a) nor (b) apply, the deductible is prorated between the Unit(s) and/or Common or Limited Common Elements based on the total benefit to each, as follows: (i) repairs to Units and Limited Common Elements that benefit only one Unit will be assessed solely to the individual Unit Owners; (ii) repairs to Limited Common Elements that benefit more than one Unit will be assessed to the Unit Owners benefitted; and (iii) repairs to Common Elements will be assessed as Common Expenses, divided among Owners in accordance with the formula specified for other Common Expenses.

13.7.6.2 Damage Not Covered by Association Insurance. For damage events that are not covered by the Association’s insurance, repair costs shall be assessed:

(a) to the Owner if the damage resulted from neglect or misconduct of the Owner, a Related Party, the Owner’s Tenants or Occupants, or any of the Owner’s, Tenant’s, or Occupant’s guests, invitees, visitors, agents, or pets;

(b) if there is no neglect or misconduct, then to an Owner, if the damage resulted from any vehicle, equipment, appliance or fixture (or wiring or pipes related thereto) within the Owner’s Unit or belonging to the Owner, the Owner’s Occupants or Tenants, or any of the Owner’s, Tenant’s, or Occupant’s guests, invitees, visitors, or agents;

(c) if neither (a) nor (b) apply, then to an Owner whose Units or Limited Common Elements were damaged or benefited by the repairs; or

(d) to the extent that the damage to the Property is not insured, and not the responsibility of an individual as noted above, then the Association shall restore all Common Elements and Limited Common Elements as a common expense, and Owners shall restore their Units at their own expense.

13.7.7 Maximum Damage Assessment. Except to the extent covered by an Owner’s or Tenant’s insurance policy, the maximum one Unit can be assessed for any one damage event is the deductible under the Association’s standard Property policy. Amounts within deductibles for earthquake or flood damage in excess of the standard Property deductible, combined with contributions required of Owners as provided for in this Declaration, shall be a common expense. This maximum shall not apply to Owners who cause damage through negligence or misconduct, or for their responsibility for equipment failure.