INSURANCE
Every condominium declaration contains specific language relating to insurance. What does yours say?
State statutes vary. In Washington 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; however, the responsibility for paying the claim deductible is often an owner responsibility.
The Damage / Loss Flow Chart below is applicable to the general responsibilities outlined in multiple condominium governing documents, but keep in mind that your specific governing documents may have their own nuances. READ: How to Avoid Insurance Gaps
MULTI-FAMILY PROPERTY INSURANCE REMINDERS
1) unit/homeowners are almost always responsible for in-unit/home losses up to the association's primary insurance deductible
> IF something in Unix X causes a loss, Unit X is probably responsible for costs up to the association's primary insurance deductible
2) except for #1, responsible parties for losses within a deductible limit are generally in proportion to the areas damaged
3) governing documents typically require owners to carry insurance that covers any potential deductibles and loss assessments for ANY insurance coverage held by the Association including optional coverage such as earthquake and earth movement
4) While a Board often has discretion to file claim, the responsibility to restore a loss is governed by statute and your declaration.
Unit owners / homeowners are generally NOT required to wait for their association to "manage" losses within their unit.
>>> Does your association MONITOR and ENFORCE owners' insurance requirements? It's an often overlooked risk.
H06 "WALLS-IN" COVERAGE BREAKDOWN
Want to know more? VIEW INSURANCE EXPLAINER
DWELLING
Covers permanent improvements that reside within the boundaries delineated by outside wall studs, the sub-floor and the ceiling
DRAIN / SEWER / WATER BACKUP
Damage resulting from drain / sewer / water backups is almost always excluded from standard dwelling coverage
Owners can add a specific rider for these types of losses
EARTH MOVEMENT & EARTHQUAKE
This is always an additional type of coverage rider that can add significant additional expense
If major earth movement and/or earthquake damage occurs, units/homes are typically assessed a portion of of the association's primary EM and/or EQ deductible which is often a percentage of the building value (e.g. 2%, etc.)
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
KEY TERMS & COVERAGES
Business insurance is a general term that includes a gamut of different coverages.
General Liability insurance covers certain types of bodily injury and other liabilities. Many General Liability policies include $5,000 of no-fault liability coverage where the insurance carrier pays up to $5,000 without the need for litigation.
Workers' Compensation insurance often excludes volunteers. Five states (North Dakota, Ohio, Washington, West Virginia, and Wyoming) run their own programs for workers' comp coverage. Washington State Department of Labor & Industries (L&I) does not offer coverage for volunteers.
Many CICs do not realize that they possess little to no insurance coverage for bodily injuries incurred by their volunteers.
READ: What Is Not Covered by a D&O Insurance Policy?
READ: Does my Association Really Need D&O Liability Insurance?
___________________________________________
Washington State Administrative Code (WAC) clarifies statutes related to workers' compensation and risk classifications.
Condominium and HOA employees are generally included with either Classification 4904 (clerical) OR the much broader (more expensive) Classification 4910 (property management services).
2023 base rate and payroll deduction for Classification 4904
2023 base rate and payroll deduction for Classification 4910
WA State L&I also tracks hourly wage rates for specific risk classifications that may receive alternative forms of non cash-compensation. 2022's average wage for class 4910 = $33.50/hour.
Notably, according to WAC 296-17-31018(4), many classifications (incl. 4910) exclude coverage for alterations and new construction.
Alterations are changes made to a building during its remodeling, such as increasing or reducing floor area, making or closing openings, erecting or demolishing walls, etc.
Workers' Compensation Coverage:
Questions to Ask
What type of job is the employee going to perform? [These are examples from Washington State]
If they are performing jobs that are maintaining or repairing the existing property, such as replacing windows, plumbing, flooring, or repainting, you would report them in 4905 or 4910. See examples below.
If they are performing jobs adding new construction or altering the interior of an existing building from an earlier condition (remodeling), or enlarging an existing structure by building and attaching rooms (new addition), you would report them in the applicable construction classification. See examples below.
EXAMPLES
Maintenance and repair: Bringing something back to its original state or functionality. An apartment complex has a set of stairs in need of repairs. Tearing out the old stairs and replacing them with new stairs would be considered maintenance and repair. This work would be reportable in risk classification 4910.
Windows: Replacing one or all windows in a building for weatherization purposes is considered general maintenance and repair, reportable in 4905 or 4910.
Painting: Repainting the interior or exterior of a building, whether it’s part or all of the building, is considered general maintenance and repair and is reportable in 4905 or 4910.
Flooring covering: Replacing flooring in a building, whether you are replacing the old flooring with the same type or a different type (changing from vinyl to hardwood), is considered general maintenance and repair, reportable in 4905 or 4910.
Roofing: Re-roofing a building, whether you’re replacing a small section of the roof or the entire roof, and regardless of whether you’re replacing with the same type of material, is considered general maintenance and repair, reportable in 4905 or 4910.
Improvements: An apartment complex decides to install a sprinkler system (inside or outside) on the premises. The installation of the sprinkler system would be considered an improvement to the property, and this work would be reportable in the applicable construction classifications. Repairing an existing sprinkler system is considered maintenance and reportable in 4910.
New Construction: An apartment complex owner wants to build an outbuilding on the property for their landscaping tools. They are building something that does not currently exist. This work would be reportable in the applicable construction classifications.
Alteration: A property management company wants to add some interior walls in an apartment of one of their complexes. The walls did not exist previously and they are changing something that currently exists into something different. This work would be reportable in the applicable construction classifications.
SPECIAL NOTE
Construction contractors who own and manage their own rental properties must report all construction, maintenance and repair activities in the applicable construction classification for workers preparing properties for initial occupancy or to sell. When properties are ready for occupancy, any future maintenance and ordinary repairs performed by the construction contractor’s workers may be reported in 4910, if applicable.
Preoccupancy clean-up may be reported in 6602.
Employees who only perform clerical duties are to be reported separately in classification 4904.
Employees who perform sales duties such as collecting rents, showing and advertising the facility, conducting auctions, or a combination of clerical and sales duties are to be reported separately in classification 6303.
Washington State: Insurance for Volunteers
Learn how Volunteers Are (NOT) Covered
Need some practical advice to understand insurance?
Want a jump start to reinvigorate your governing documents?
Interested in gauging owner and resident satisfaction or increasing engagement?
Does service delivery from your management company meet all your expectations?