INSURANCE

What Insurance Coverage Does my Association Carry?

Your association's insurance varies based on your declaration of covenants, conditions and restrictions (CC&Rs) and your state statutes.  Washington and many other states require specific scope for property insurance that serves as primary in the event of a loss and for other types of insurance such as director and officer's (D&O) coverage.  Notably, regardless of your state, individual units / homes are often responsible for paying in-unit claim deductibles.

The Damage / Loss Flow Chart below is one example applicable condominium communities.  Your governing documents may have different requirements.

MULTI-FAMILY PROPERTY INSURANCE REMINDERS

1) unit owners/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?  This is a commonly overlooked risk.  <<<

>>> DOES your Declaration + Master Policy: INCLUDE or EXCLUDE equipment, improvements, and betterments within units?  <<<

Does Your Association's Insurance Match the Requirements of your Declaration / CC&Rs?!

An association's violation of its own governing documents to procure specific insurance coverage does not bind an insurance company to cover losses outside of the policy actually purchased / in force.

• Metropolitan Property and Casualty Insurance Company v. West Bend Mutual Insurance Company (2023) — Indiana Court of Appeal

Farmers’ App. Vol. II p. 116 (emphasis added). Though it appears that the condominium association may have failed to fulfill its obligations under the Declaration, we conclude that it is of no moment. The trial court did not err in granting summary judgment to West Bend.

• Pike & Va. No. 8, LLC v. Pike &Virginia Condo. Association — Washington Court of Appeal

Understand the difference between gross negligence / willful misconduct and ordinary negligence.

Statutory provisions in some states extend owners' liability beyond insurance deductible limits.

• Gross negligence is the failure to exercise slight care. It is negligence that is substantially greater than ordinary negligence. Failure to exercise slight care does not mean the total absence of care but care substantially less than ordinary care.

• Negligence is the failure to exercise ordinary care. It is the doing of some act that a reasonably careful person would not do under the same or similar circumstances or the failure to do some act that a reasonably careful person would have done under the same or similar circumstances.

• Reference RCW 64.90.480(6) and (7):

  • (6) To the extent that any expense of the association is caused by willful misconduct or gross negligence of any unit owner or that unit owner's tenant, guest, invitee, or occupant, the association may assess that expense against the unit owner's unit after notice and an opportunity to be heard, even if the association maintains insurance with respect to that damage or common expense.

  • (7) If the declaration so provides, to the extent that any expense of the association is caused by the negligence of any unit owner or that unit owner's tenant, guest, invitee, or occupant, the association may assess that expense against the unit owner's unit after notice and an opportunity to be heard, to the extent of the association's deductible and any expenses not covered under an insurance policy issued to the association.

  • (8) In the event of a loss or damage to a unit that would be covered by the association's property insurance policy, excluding policies for earthquake, flood, or similar losses that have higher than standard deductibles, but that is within the deductible under that policy and if the declaration so provides, the association may assess the amount of the loss up to the deductible against that unit. This subsection does not prevent a unit owner from asserting a claim against another person for the amount assessed if that other person would be liable for the damages under general legal principles.