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Homeowner’s Insurance in Community Associations

Are you sure enough that you’re insured enough?

Let’s face it, having the right insurance coverage can be a little complicated if you live in a unit that is part of a community association. But everyone residing in a one needs to understand what they are responsible for if a loss should occur, and have an insurance policy in place to protect their interests.

Responsibility for both the Association and the owner are usually dictated according to the Association’s bylaws or other governing documents.

Sample loss:

A pipe under the sink in unit 2C bursts and causes damage to the walls in unit 1C, as well as unit 1C’s TV and new kitchen cabinets.

In most cases, the pipe repair would likely fall under the responsibility of the owner of 2C, as they are responsible for the maintenance of the pipe.

However, the TV in 1C would fall under the responsibility of the owner of 1C because they are responsible for their own personal property. The cabinets will also be the responsibility of the owner of 1C, as these were an improvement or betterment to the unit.

The responsibility of the walls in 1C would be determined by the bylaws. (It could be 2C’s responsibility, or the Association’s.)

There are typically two areas in the bylaws that relate to responsibility within the unit. One is maintenance of the unit. The other is damage to or destruction of the unit.

But let’s look at negligence.  (Accidents can and do happen to everyone.)

Sample loss:

Someone in unit 4L left the bathtub running, and it overflowed, causing damages to units 3L, 2L, and 1L below.  It would be considered negligence on the part of the owner of 4L, and would be their responsibility to make repairs or replace what was damaged.

It’s been pointed out by an article in The Cooperator that Unit owners and Shareholders are responsible for any action (or lack of action) they take that results in damage to another unit. The article further points out that this specific scenario would be covered not by a building’s bylaws, but by standard negligence law.

Outcome of sample losses:  If the Unit owner of 2C doesn’t have their own personal insurance policy would have to pay out-of-pocket for any damages to their own unit, and regardless of whether they have insurance, the replacement of the pipe will be theirs because they have exclusive access to it.

If the owner of 1C doesn’t have their own policy, they would have to pay out-of-pocket for a new TV, and replacement of the damaged kitchen cabinets after newly installing them as an upgrade. Just who will pay for the walls of 1C will be determined by the bylaws.  In some condominiums once an item has been improved, it becomes the owner’s responsibility so if there was damage to say improved kitchen cabinets and the owner did not have insurance, it is possible that the insurance company for the association is just going to pay to repair the walls, floor (if not improved) and ceiling in the kitchen and no cabinets!

Who knows what the unit owner of 4C who left the bathtub running will have to face if he didn’t have an insurance policy of his own! But you can bet that any residents of 3C, 2C, and 1C won’t be going up to 4C to play a friendly game of Go Fish anymore.

It’s no wonder residents get confused about who pays for what when a loss occurs.

Having your own insurance in place not only protects you, but it protects your neighbors as well. So try to think of your insurance policy as a “Good Neighbor Policy” too.

More and more associations are amending their bylaws to require all owners to maintain insurance to avoid situations in which owners are uninsured when they really need it most.

As always, reach out to us with any questions. Board Members and Property Managers, click here to request a quote for Homeowner’s Insurance Monitoring that we offer.

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