Over the years I have received various telephone calls from prospective purchasers, and handled many cases involving condominium insurance claims. Condo owners are often laboring under the misconception that the Condominium Owners Association insurance policy covers them in the case of disaster. This article from the Washington Post helps explain some of the differences between home owners coverage for the interior of the Condominium and the Home Owner’s Association coverage that covers damage to existing for already constructed portions of the unit.
Let’s take the example of a water valve break in an upstairs condominium unit. The water line breaks, flooding the upstairs apartment, and running down into, and ruining, interior walls, existing floors, and plaster ceilings of the unit below. In the case Klose & Associates handled, the water valve was originally installed by the condominium association when the unit was built, and there was a faulty water pressure regulator on the main water line coming into the stand alone building containing the five (5) units. The failure to regulate the pressure of the water caused the water filter to rupture many years later.
The condominium association had insurance coverage (but refused to pay) for the lines coming into the building (faulty regulator), and that insurance policy should have responded to the damage to the existing walls, floors and ceilings in the downstairs unit. The owner of the upstairs unit received payment from her insurance company of items damaged inside her apartment, and the owner of the downstairs unit received some coverage for items that she had installed in her unit, but the “master” insurance policy owned by Condominium Association should have paid for the damage caused by the failure of the pressure regulator to originally existing items in both Units. The condominium association refused to permit its insurance carrier to pay for any of the damage. [Whether that was appropriate or not should be the topic of another blog entry].
As the article points out, as a condominium owner, there are several steps you should take to set up the proper HO-6 coverage for your Unit (and avoid the problems set forth above):
- List of the items, fixtures, etc. not covered by the master policy: hardwood floors, tile floors, kitchen cabinets, plumbing and electrical fixtures, built-in appliances, owner improvements.
- Estimate the replacement cost of major items, and add an extra 20 percent to the total to allow for estimating errors.
- Add “special perils” coverage (water damage to walls and ceiling from roof leaks), and increase coverage for losses subject to the master policy deductible, or not covered at all.
- Request a copy of the association’s master policy, learn the maximum deductible authorized in the condo documents, and contact different insurance companies if yours does not offer an amount high enough to cover a potential master deductible assessment.
The Bottom Line—You need to understand and consider the interplay between the various types of insurance in a Condominium BEFORE you need the coverage for a claim!