Condominium Association and Community Association Property Insurance Claims
When a disaster results in damage to condominium or community association properties, the association’s manager and board of directors are responsible for filing insurance claims. For those who are new to condominium association responsibilities, or for those who undertake the responsibilities as a volunteer, it may seem a daunting task. Common ownership is defined by state statute, deed, or association declarations and bylaws. These instruments define the coverages required and apportion responsibility between the community association and individual owners.
Filing a property insurance claim for association property is easiest when the task is broken down into clear and manageable steps:
When a loss occurs, the association must first determine where the damage occurred — is the damage contained within association property or does it extend into any individual unit, and has the structure suffered damage as well. The location and extent of damage will determine the coverage, insureds, and the applicable policy or policies of insurance. In most states that have enacted condominium or community association laws, associations are required to insure every common building and structure to some extent, including the portions deeded as individual unit owner property when the individual units are separated by horizontal boundaries. The extent of coverage varies among states and associations.
Once the association determines the cause of a loss, extent of the loss, and the respective responsibilities of the association and unit owners, the next step is to review the applicable policies of insurance, including: primacy of any association and individual owner insurance policies, the terms of insurance coverage, limits of insurance coverage, deductibles, exclusions, limitations, endorsements, and coinsurance provisions. The specific terms of one policy may fill coverage gaps in the other or provide insurance coverage to meet the other policy’s deductible. It may be helpful to prepare a chart to define and compare the coverages, exclusions, endorsements, and limitations in each insurance policy.
The association should recognize and document the damage, coverage issues, and the scope of the loss and claims under each applicable policy. The benefits may be payable to the association or a trustee charged with supervising repairs
Settlement and recovery under an association policy will necessarily involve the association board members and directors. The association, not the individual unit owner, will likely be the loss payee and may have the authority to accept or reject proposed repairs and offers to settle the claim.