A common dispute that arises in homeowners associations between individual homeowners and the association’s management personnel deals with the right on the part of the homeowner to report insurance claim to the association’s insurance carrier. Such disputes are generally triggered by an “occurrence,” such as a water leak, that has caused damage to the homeowner’s unit in a condominium.

The homeowner, being desirous of having insurance proceeds pay for the resulting damages, requests the association’s property manager and/or an officer or director to report the occurrence and the homeowner’s resulting claim to the association’s insurance carrier. Not fully understanding the association’s responsibilities, the manager or board makes an assessment of the circumstances and, wanting to avoid unnecessary claims to the association’s insurance carrier out of concerns that making claims will trigger increases in the association’s insurance premiums, the board takes the position that the damages suffered by the homeowner are not the association’s responsibility. Therefore, the association subsequently refuses to tender the homeowner’s claim to the association’s insurance carrier. The homeowner then contacts the association’s insurance carrier on their own and makes a claim under the association’s policy thereby creating the conflict between the homeowner and the association.

When a homeowner suffers a loss that results in a request for a claim to be made to the association’s insurance carrier, the proper course of conduct for the association’s management personnel is to report the claim and leave the decision as to whether or not the policy provides coverage benefits for the homeowner up to the insurance carrier. A failure to timely report a proper claim can result in a denial of coverage by the insurance carrier when the claim is tendered at a later date. Ultimately, the specific language contained in the insurance policy and the provisions contained in the association’s governing documents will dictate whether or not the insurance carrier accepts or rejects the homeowner’s claims. While a desire to avoid insurance premium rate increases is a legitimate concern for the association’s management personnel, that concern is outweighed by the consequences of a loss in coverage that can result from the failure to timely report the claim to the insurance carrier.

When homeowners association’s management personnel become aware of an actual or potential claim, the association’s board of directors should immediately notify the association’s insurance carriers in writing. A “potential” claim is different from an “actual” claim and the reporting of potential claims to the association’s insurance carrier will not generally impact the association’s future insurance premiums because the insurance carrier does not incur all of the expenses that are incurred in the handling of actual claims. If the association’s board fails or refuses to report a homeowner’s claim to the association’s insurance carrier, the homeowner should review the language contained in the association’s CC&Rs and insurance policies to determine if owners have a right to make claims.

Frequently, association insurance policies contain language that includes individual owners as “Insureds” thereby giving the individual owners a right to tender a claim to the association’s insurance carrier. The following is an excerpt of language that is contained in a homeowners association’s insurance policy that contains such language:

SECTION II WHO IS AN INSURED:
Each of the following is also an insured:

Any unit-owner including:

(1) The declarant, builder, sponsor, developer
or promoter in the capacity as a
unit-owner, but only with respect to the
declarants, builders, sponsors, developers
or promoters liability arising
out of:

(a) The ownership, maintenance or
of that portion of the premises
which is not owned solely by the
declarant, builder, sponsor, developer
or promoter; or

(b) The declarants, builders, sponsors,
developers or promoters
membership in the association.

(2) Each other unit-owner of the described
condominium association or similar
community association, but only with
respect to that persons liability arising
out of:

(a) The ownership, maintenance or
repair of that portion of the premises
which is not owned solely by the
unit-owner; or

(b) Membership in the association.

In order to review the language contained in the association’s insurance policy, it may be necessary for the homeowner to obtain a copy of the association’s insurance policies from the association. Because association insurance policies are records that a homeowner is entitled to review, owners who do not have access to copies of their association’s insurance policies should make a proper written request to their association for copies of all association policies in order to determine their right to make a claim and the nature and extent of the insurance coverage.

Homeowners who suffer losses from damage to their condominiums should also be mindful of the requirements for the association members to carry their own insurance on their individual units. Those policies provide coverage for certain damage within their units that is not covered by the association’s insurance policy and also provide coverage for liability the owner may have to other third-party owners who suffer damage to their unit as a result of a condition within the homeowner’s unit such as an overflowing toilet or broken dishwasher that causes flooding to units located below the owner’s unit.

The following educational “how-to” guides will assist homeowners and association management personnel in dealing with the issues addressed by this article:

 

Educational “How-To” Guides related to this Article:

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