Condo Media - April 2010 - (Page 28)

INSURANCE by Stephen M. Marcus, Esq. The Responsible Party Who Pays the Condominium Insurance Deductible? ith foreclosures still soaring, this year we are seeing more cases of units abandoned by the unit owner. To make matters worse, in many cases, the utilities are not being paid and therefore, the heat gets shut off. In many instances, the lack of heat results in frozen pipes, which burst and cause damage to the unit without the heat, as well as surrounding units. The question raised by many associations is who is responsible for the deductible. Association deductibles have increased over the years from $1,000 to $5,000, $10,000 or more, so it has become increasingly important as to who pays the amount. In addition, with abandoned units that sustain damage, there is a question as to what measures the association should take to fix the abandoned units. The concern in Massachusetts is that if the association pays for emergency repairs to the unit with the idea of billing it back to the unit owner, the amounts expended by the association do not have priority over the first mortgage holder in the event of a foreclosure. Therefore, the advice for associations is to perform minimal repairs to the abandoned unit to eliminate any further damage. The answer to the question of the deductible is more interesting. We take the position that the condominium association is only responsible for placing insurance covering the units (if 28 CONDO MEDIA • APRIL 2010 W that’s what the condominium documents require) and that the insurance is subject to a reasonable deductible as determined by the board. Since the condominium documents typically require the unit owner to maintain his Educating Unit Owners In order to be sure that unit owners know this assessment of the deductible policy, we typically suggest that associations adopt an insurance deductible resolution that is distributed to all unit owners and is recorded at the registry of deeds. Such insurance resolution makes it clear to all unit owners that, in the event of an insurable loss causing damage to the unit, the unit owner will be responsible for the amount of the deductible. The resolution includes language that states that the “Trustees shall have the right to assess the deductible to Unit Owners as the Trustees may determine, in their sole discretion, including, but not limited to, assessing and apportioning the deductible to Unit Owner(s) sustaining property damage to their unit(s).” The resolution goes on to suggest to the unit owners that they purchase a unit owner insurance policy that will pay the deductible in addition to covering other types of losses. If the claim is for more than the insurance deductible, the resolution sets forth the procedures for either the unit owner or association to make the necessary repairs as determined by the association. In most cases, the unit owner is responsible for repairs to his or her unit, which makes sense, since the unit owner is going to be most concerned about how the work is performed. However, in the event of a substantial loss, the association might decide to undertake the repairs since it might be more efficient for the association to arrange for repairs to multiple units. If or her unit, we are of the opinion that the deductible should be assessed to the unit owner who sustains the damage and we take this position regardless of where the water originated. In other words, if a severe storm causes water to leak from a common area roof into a unit, the unit owner is still responsible for the deductible. Unless the association’s negligence caused the damage, we think this is the appropriate result. It should be noted that many unit owner insurance policies would pay the unit owner the amount of the association’s deductible subject to the much smaller deductible of the unit owner’s policy (typically $500).

Table of Contents for the Digital Edition of Condo Media - April 2010

Condo Media - April 2010
Table of Contents
From the CED’s Desk
President’s Message
CAI News
CAI Regional News
Asked & Answered
Homeowner’s Corner
Risk Management
Rising Fears
Vendor Spotlight
Industry Perspective
CAI National Law Conference Was Tops … Now for the Bottom Line
.2010 CAI-NE Insurance & Restoration Directory
Advertisers Index
Classified Service Directory

Condo Media - April 2010