Condo Media - April 2011 - 26

INSURANCE

by Brendon Kilcoyn

Water Damage Claim
The Case of the Burst Pipe
ne of the most common, and troublesome, association claim scenarios, is the pipe burst. If you are an association manager, or long-time community resident, you have undoubtedly run into at least one messy water claim. Major troubles can arise in finding where the coverage from one policy ends, and another begins; as we will examine further, this may cause a long drawn out claims

Association Insurance Checklist ✓ ❏ Package policy that includes ✓ ❏ Building covered for replacement cost
building and liability coverage

process, which can be even more complicated by unclear bylaws and inadequate insurance coverage. As always, making sure you have an insurance agent who is familiar with your particular association, and the bylaws in place, is crucial to making sure you are properly covered in the event of a claim. The master policy will conform to the insurance section of the bylaws, however, if your bylaws state that improvements and betterments and interior walls are not covered, an “all in” endorsement with improvements and betterments will supersede the bylaws.

mold problems often arise with this type of claim, and if unchecked can cause issues for months and years to come. After the water is gone, and most likely walls and floors are destroyed, the task of hiring a contractor to put the pieces back together begins. All of these steps have different policies reacting, and hopefully most parts are covered by association and unit owner policies to make the process as smooth as possible.

Damage to the Units
Unit 201-Ms. Jones Jones’ unit sustained damage to her plumbing, kitchen cabinets, kitchen rug, walls and hardwood floor. Unfortunately the plumbing, which is the cause of the loss, will not be covered by any policy; this is the case with any company or policy language you may have. Jones’ kitchen cabinets could be covered in one of two ways. If the association has “all in” coverage with improvements and betterments, which is recommended, the association policy should cover any cabinets that are permanently installed in the unit; this is also the case with her walls and hardwood flooring. If the policy isn’t “all in,” Jones would need a comprehensive unit owner policy that has coverage for these fixtures in the dwelling portion. The kitchen rug should be covered under the unit owner policy, under the personal property section. It is important to remember that there is no coverage for personal belongings under the association policy. There also is no coverage for “loss of use,” (i.e., any time Jones will need to spend at a hotel or other type of living because her unit is uninhabitable). This is true whether

The Scenario
Ms. Jones in unit 201 has plumbing problems in her kitchen sink; a pipe burst causing water to rush from the water main into her unit, as well as seep down to Mr. Smith’s unit 101. Among the damaged items in unit 201 are piping, dry wall, hardwood flooring, rugs and cabinets. Unit 101 has sustained damage to its ceiling, kitchen countertops, hardwood flooring, rugs, cabinets, dry wall, groceries and an attached light fixture. Smith comes home to find the mess, and immediately contacts his association manager, who begins the claim process. To start the process, stop the rushing water; this will most likely involve an emergency visit from a plumber to mend the burst pipe. The next calls should be to the insurance agent/company, as well as to a restoration company who can remove the water that has accumulated in the units; this includes water that is seen, as well as water that may still be in the walls, floors and ceiling. It is important that a restoration company is hired that is mold certified;

✓ ❏ Liability limits of $1 million on the package policy ✓ ❏ “All in” coverage

✓ ❏ Directors and Officers coverage of at least $1 million ✓ ❏ Improvements & Betterments coverage

✓ ❏ Back up of sewers and drains ✓ ❏ Ordinance & Law coverage ✓ ❏ Demolition and increase cost of construction

✓ ❏ Boiler & Machinery coverage

✓ ❏ Hired and non-owned auto liability ✓ ❏ Employee Dishonesty coverage with a value of least six months of condo fees

✓ ❏ Umbrella policy of at least $5 million

✓ ❏ Workers compensation policy to cover onsite association employees, or any contractors or subcontractors that may not have their own

CONDO MEDIA • APRIL 2011

Condo Media - April 2011

Table of Contents for the Digital Edition of Condo Media - April 2011