Condo Media - February 2021 - 16

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Insurance Resolutions

This is the case with provisions
concerning insurance - oftentimes,
provisions were drafted at a certain
date in time without flexibility for
future circumstances (such as a
substantially higher deductible)
or were drafted without sufficient
detail to inform both the association
and unit owners of the procedure to
follow (and respective obligations of
each) in the event of a casualty loss.
These deficiencies are often not easily
remediable; as everyone reading this
knows, it takes substantial effort to
garner support to amend a condominium's governing documents, and a
matter relating to insurance may not
be one in which unit owners have the
time and energy to invest. Faced with
a need to modernize a condominium's
insurance provisions to provide additional detail about the procedures
to be employed, but lack of unit owner
support, associations may consider
adoption of an insurance resolution.
WHAT IS AN
INSURANCE RESOLUTION?
An insurance resolution is a document
adopted by a board of trustees or managers, frequently as an amendment to
its rules and regulations. Because it is
adopted by the board as a component
of its rules and regulations (and not as
an amendment to the condominium's
governing documents), unit owner
approval is not required. Rather, the
insurance resolution is - at its essence
- a policy resolution, the intention
of which is to outline the insurance
obligations of both the association
and unit owners. While an insurance
resolution may not be enforceable to
the extent it is inconsistent with the
governing documents (that is, a board
cannot simply override the contrary
provisions of, or definitively resolve an
ambiguity contained in, the governing
documents by adopting a resolution),
it is helpful in establishing the board's
interpretation of those provisions and
of setting forth a procedure for resolution of claims, which may be wholly
lacking in the governing documents.

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CONDOMEDIA February 2021

As discussed in greater detail below,
an insurance resolution typically
includes standard provisions relative
to insurance coverage amounts, unit
owner obligations, establishment of a
framework for allocation of insurance
deductibles, and reporting requirements. Upon adoption by a board, the
insurance resolution should be executed
and witnessed by a notary and filed or
recorded with the registry of deeds. It
is also recommended that the board
provide a copy to the unit owners with
direction that they should check with
their individual insurance agents to confirm that they have proper coverage.
WHAT SHOULD BE INCLUDED IN
AN INSURANCE RESOLUTION?
A typical insurance resolution should
include the following provisions, though
unique circumstances and provisions in
a condominium's governing documents
may compel the exclusion of certain of
these provisions or compel the inclusion
of additional provisions to address the
distinct situation presented.
l Describe insurance coverage.
An insurance resolution should identify the provisions of the condominium's
governing documents that set forth
the controlling language concerning
the condominium's master insurance
policy. It should set forth that the
board has discretion to determine the
amount of the master insurance policy
deductible (to the extent not inconsistent with the governing documents)
and may identify the current deductible and maximum deductible.

l Mandate unit owner insurance
obligations. An insurance resolution should identify the unit owners'
insurance obligations, including
setting forth that the unit owners
are responsible for payment of the
master insurance policy deductible
and stating that the board may, in its
sole discretion, assess and apportion
the deductible to unit owners causing property damage. Additionally,
the insurance resolution should state
that unit owners are obligated to
obtain an HO-6 policy, which may
provide coverage for the unit owners'
personal property, liability, and improvements made to the subject unit.
The HO-6 policy should also include
coverage for the master insurance
policy deductible, which should be
expressly stated therein.
l Provide a framework for allocation of insurance deductibles.
An insurance resolution should
identify the procedure that should
be followed in the event that damage
is less than the master insurance
policy deductible and in the event
that damage is more than the master
insurance policy deductible. If a
unit owner sustains damage less
than the master policy deductible,
they should be obligated to resolve
any such claim with their individual
insurance agent or carrier. If a unit
owner sustains damage greater than
the master policy deductible, then
the claim process procedure set
forth in the insurance resolution
should be followed.
Condo Media - February 2021

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