Condo Media - July 2019 - 48
M
TO PER UNIT ... OR NOT TO PER UNIT ...
Master insurance programs have a
deductible on the property insurance
that needs to be met before it begins
to pay out proceeds from a covered
cause of loss (fire, wind, water, etc.).
This deductible could be shared by
individual units and the association.
If a unit owner has obligations to pay
the deductible on the master it would
be in the insurance section of the
condominium governing documents.
However, not all documents are the
same and it is imperative these are
reviewed with an attorney to make
sure these still operate in the best interest of the board and the association.
If these are not clear, a refresh should
be done alongside guidance from your
insurance agent and attorney as soon
as possible.
LOSS AND DEDUCTIBLE
Let's understand how deductibles
work within a community association and how these obligations affect
everyone.
An example would be best. Pretend
for a moment we have Happy Hearts
Condo Association. They have a total
of 50 units spread equally among 10
buildings (five units in each building).
These were built in the 1980s and
retain their original asphalt shingle
roofs. They have had a good run with
no major losses until a summer storm
blows through. Fantastic winds and
rain lash the building. One building
has the roof blown off with all five
units inside experiencing water damage. This is an all-too-real scenario.
Now what?
The unit owners and association
notify their insurance agent/carriers.
Insurance adjusters tasked by the carriers arrive at the scene to understand
the scope of damage and help provide
funds for remediation and rebuilding.
Everyone involved should be looking
at insurance policies to confirm they
are covered and what the deductible
might be. At this point, the decision
made on the deductible structure will
play a key role in how this claim is
adjusted and the carriers' settlement.
48
CONDOMEDIA July 2019
PER OCCURRENCE DEDUCTIBLE
If the master was set up as a per occurrence deductible on the property, there
would be one deductible for the "occurrence" or the event that occurred. If
the deductible were $10,000 per occurrence, it would be shared among those
five units affected. The total damage
from the loss being $100,000, the carrier
would subtract $10,000 from the final
settlement for the deductible and pay
out $90,000 to the association.
The condo documents would likely
detail how the proceeds are distributed,
but, typically, this is at the discretion
of the board. What most likely would
occur is each unit owner would pay their
portion of the deductible based on the
percentage of their own loss against the
total loss percentage. This rate would
be the portion of the $10,000 deductible
applicable to each unit owner.
PER UNIT DEDUCTIBLE
If the deductible was instead $10,000
per unit all perils, this would go much
Condo Media - July 2019
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Condo Media - July 2019 - Contents
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