Condo Media - February 2020 - 31

When dealing with a water claim, he notes, you will be
evaluating damage to wall boards, floors and fixtures as well
as furniture, rugs, appliances and other personal property.
The insurance carrier's adjuster will provide that assessment.
"People assume the insurer is out to screw them, but that's
not the case," Pierce emphasizes. On the other hand, he
notes, "insurers aren't in the business of paying any more
than necessary; they will pay as little as possible to replace
damaged items and get you back to where you were before
the loss." You want to make sure the adjuster's damage
estimate achieves that goal.
"There are a lot of gray areas in valuations," Pierce notes.
That's why a public adjuster, hired by the association, can be
helpful in managing a large claim. "Adjusters are valuation
experts," he notes. They can negotiate with the insurer to
make sure the insurer's estimates are reasonable. "You can
always file a supplemental claim" to cover excess costs,
he says. But it is better to develop an acceptable settlement
amount at the outset.
"One of the worst mistakes an association can make,"
he says, "is to allow owners to make non-emergency repairs
before the insurer has approved them." If the insurer doesn't
inspect the damage first, he notes, "you're going to have a
problem with both the master policy and the owners' HO6
coverage. Why would the insurer pay for the repair based
only on the owner's assertion that it was necessary?"

WHO PAYS?
One reason condominium claims are often so complicated,
Pierce says, is because the coverages provided by the
master policy and owners' HOA policies overlap, and
because many owners don't understand how that
overlapping coverage works.
The first question owners often ask about a damage claim
is who is responsible for paying it? If a unit has been flooded
by the toilet that overflowed in the unit above theirs,
the owner of the damaged unit often assumes that the
owner of the offending toilet should be on the insurance
hook, and won't be happy to learn that fault doesn't apply.
All affected condominium owners will have to tap their
insurance policies to cover the damage they have suffered
and to pay for their share of the master policy deductible,
if master policy coverage applies.
"Property damage is always the fault of someone or
something," Pierce notes. In a condominium, owners would
almost certainly want to blame other owners, the association,
or both, for damages they have incurred. Eliminating fault
from the insurance equation avoids the legal battles that
can delay reimbursement for essential repairs. That is why
condominium master policies and most condominium bylaws
typically require owners to "waive subrogation," which
means neither the owners nor their insurance carriers can
sue the association or other owners to recover claims
an owner's HO6 policy pays.
"This doesn't seem fair or equitable or just to owners, but
it's the rule," Jared McNabb, CMCA, PCAM, general manager at the Brook House Condominium Trust, says. Managers,

he says, have to do all they can to make sure owners understand how condominium insurance works. "It is important
to educate owners about insurance long before a disaster
strikes," he says. "Standing in a unit that has been soaked
by overflow from the upstairs neighbor is not the best time
to be explaining how the claims process works or why it is
important for owners to have an HO6 policy."

EDUCATING OWNERS
McNabb suggests using the annual policy renewal as a
trigger for reviewing the association's insurance coverage
and reminding owners about the master policy deductible
and owners' insurance obligations. Sending owners a letter
or posting insurance information on the association's website
can be helpful, he says, "but I think we need to do more."
He holds an "insurance night" around policy renewal time,
at which he, the association's insurance agent, and
sometimes a public adjuster, will explain coverage and
claims and answer owners' questions.
"We walk through an imaginary claim, from the minute
a fire or flood occurs until the last coat of paint has been
applied to a damaged unit, explaining step by step how the
process works and what owners should expect," McNabb
notes. Owners who attend these sessions, he says, are
typically better informed and better-equipped to deal
with a claim when it occurs.
February 2020 CONDOMEDIA

Condo Media - February 2020

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