Condo Class

As insurance Agents, we can dazzle you all day long with the various types of policies "specifically tailored to your association", but here are some of the main lines you should have included in your overall portfolio: 

Property 

• Pays for damages to Association property from insurable events such as Fire, Lightning, Wind, and non-Flood related water damage
• See my article on Basic Form vs. Special Form Property policies for a full list of covered perils

Equipment Breakdown

• This coverage may be on a separate policy, or by endorsement on your Property policy. While damages to the Association’s machinery or equipment from a Special Form peril are already covered on the Property policy, damages outside of those specific perils must be insured with Equipment Breakdown coverage (AKA Boiler & Machinery coverage). 
• Some common Equipment Breakdown losses are due to power surge, short circuit or sudden equipment breakdown.

General Liability

• This policy is designed to pay for defense and settlement if the Association is sued with regards to Property Damage or Bodily injury. For example, if someone tripped on a broken parking bumper in the parking lot or if a unit owner has continuous damage to their unit from lack of roof maintenance and sue the Association, this is the policy that would respond. 

Crime

• This policy, required by Florida Statute, insures the Association’s money in the event that it is stolen. Statute requires that the Association insure for the maximum available funds at any one point during the year, including reserves. 

Directors & Officers

• Whereas the General Liability policy responds to suits regarding Bodily Injury or Property Damage, the D&O policy is designed to respond to suits for monetary damages such as improper assessment or improper foreclosure. Comprehensive D&O policies will also provide defense for non-monetary suits such as harassment, discrimination or emotional support animals.

Umbrella

• Just like how a personal umbrella policy protects you if your personal liability coverage is exceeded on your homeowners or auto insurance policies, a commercial Umbrella policy for your Association protects if the underlying General Liability or Directors & Officers’ limits are exceeded. For instance, if you have the standard $1,000,000 per occurrence limit on your General Liability, but a bodily injury suit settles for $3MM in damages, you could access your Umbrella policy for the additional limits. Umbrella policies can be purchased in various limits ranging from $1MM to over $100MM. 

Workers Comp 

• Yes, the General Liability policy provides coverage if the Association is sued for bodily injuries sustained by someone on Association property. However, the General Liability policy excludes bodily injury to anyone who is “working”. Due to the volunteer exposure faced by most Associations, this policy is essential to protect both your volunteer workers and the Association for their potential injuries. Volunteer work should be discussed and approved ahead of time by the board or a committee, and use of power tools or ladders should be reserved for paid/insured vendors. Please be sure that any vendors hired by the Association provide proof of insurance for both General Liability and Workers Comp coverage prior to beginning any work. 

Flood

• The word “flood” is thrown around a lot when it comes to any type of water damage. However, flood coverage is specifically for damages from rising water. Rising water could be due to storm surge, an overabundance of rainfall, or even backup of sewers or drains due to flooding in the area.
• See my page on Association vs Unit Owner Responsibility for a list of what is covered by the Flood policy, as this differs from the Property policy.

Although rare, there are still some Basic Form Property policies floating around the marketplace. 

A Basic Form Property policy provides coverage for damage to Association property from:

• Fire 
• Lightning
• Explosion
• Smoke
• Windstorm
• Hail
• Riot or Civil Commotion
• Aircraft or Vehicles
• Vandalism
• Fire Sprinkler Leakage 
• Sinkhole or Catastrophic Ground Cover Collapse (check your policy)

However, there are some crucial perils excluded from Basic Form policies such as:

• Falling Objects (like a tree…)
• Water Damage (not from flooding)
• Collapse

In order to guarantee that you have these other important perils, you need to have either a Special Form Property policy, which includes all Basic Perils plus the 3 above <OR> you can purchase a Basic Form policy and a Difference in Conditions policy which together give you Special Form coverage. 

Before the wind starts blowing, it’s important to check your Association’s policy to see what type(s) of deductible you may incur should your structure sustain wind damage. 

Hurricane

• If a hurricane watch or warning is issued for any part of Florida, your hurricane deductible is triggered. This deductible will remain in effect until 72 hours AFTER the watch/warning is lifted. 
• Hurricane deductibles are a percentage of the insured value of the structure and typically range from 2% to 5%. 
• Can be written on a “Calendar Year” basis (most common); an “Occurrence” basis; or an “Aggregate” basis
• See my article on Calendar Year vs. Occurrence deductibles for more details

Named Storm

• Same as the hurricane deductible, however, this will apply to any type of watch/warning issued for a named storm (tropical depressions, tropical storms), not just hurricanes. 

Wind/Hail

• This deductible would apply to ANY type of wind or hail damage including hurricanes, named storms, no-name storms, tornadoes, etc. 
• Since this is for any type of wind, this is on an “Occurrence” basis

All Other Wind

• Simply put, the AOW deductible would be all other types of wind besides the type already specified in your policy. 
• For instance, if you have a 3% Hurricane deductible, and a 1% All Other Wind deductible, any wind damage not from hurricane would incur a 1% deductible. 
• The AOW deductible is on an occurrence basis.

Your Property policy likely includes a variety of deductibles. These deductibles may also reference a “calendar year” or “occurrence” basis. 

Calendar Year 

• Your Hurricane or Named Storm Deductibles may be written on a Calendar Year basis. 
• Similar to a medical deductible, you will eat away at this one should you have damage from more than one hurricane or named storm during the Calendar Year (January to December). 
• For instance if you have a building insured at $1,000,000 with a 5% Hurricane Deductible, your Calendar Year deductible is $50,000. 
• If you have hurricane damage in July in the amount of $20,000, your remaining deductible is reduced to $30,000.
• Should you have damage in August in the amount of $30,000, your remaining deductible is your All Other Wind, or All Other Perils deductible. 
• Check out my article on Hurricane and Wind deductibles for more details on the different types of deductibles for wind

Aggregate

• These are fairly uncommon, but work exactly the same way as the Calendar Year deductible. However, they are based on your specific “policy year, or policy term” rather than on the “calendar year”. 

Occurrence 

• Any type of deductible can be written on an Occurrence basis, but this is not ideal. Ideally, the Occurrence deductible should be reserved only for your All Other Perils deductible (non-hurricane or non-named storm)
• An occurrence deductible applies to every occurrence, or every event. 
• For instance, if you have a fire in July, you may incur a $5,000 deductible
• If you have another fire in August, you would incur another $5,000 deductible since this is a separate “occurrence”.

Not too long ago, most Associations were all insured by Citizens. So we never heard the words “Ordinance or Law” unless it was part of a claim denial letter. Reason being: Citizens did not offer Ordinance or Law coverage. This endorsement to the Property policy didn’t become popular until the private carriers began competing for Association business. 

So what is Ordinance or Law Coverage? This endorsement covers the additional expenses from enforcement of ordinances or laws regulating construction and repair of damaged buildings. 

It is broken down into 3 parts: 

A) Undamaged Portion – Typically, insurance policies only cover the damaged portion of your property. However, sometimes building code requires that you repair/replace the undamaged portion as well. Example: 50% of a roof is damaged but code requires full reroof.

B) Demolition – Demolition/removal of that undamaged portion.

C) Increased Cost of Construction – Increased cost of bringing up to code following a loss. Example: Hurricane Impact Glass

Ordinance or Law Coverage can be purchased in several ways, each of which can make a difference in your overall policy premium. 

Examples: 

• Full Coverage A) and B/C) as a flat amount 
• Full Coverage A) and B/C) as a percentage of the insured amount
• ABC) shared at one flat amount

Oh no… You’ve just received a call from a Unit Owner. There’s just been a heavy rainstorm and they’ve got that tell-tale water spot on their ceiling. It doesn’t take a detective to figure out that you probably have a roof leak. Your next call is probably going to be to…well…me. And you’re not going to like my response. 

“Are roof leaks covered?” you ask. My response, “Generally…no.”

As I’ve told the majority of my clients when they ask “what’s covered” by the policy, let’s just jump to the section on “what’s not covered”. Whereas something may seem to be covered, exclusions often rip that rug right out from under us. 

The 2 exclusions that trip us up here are: 

Wear/Tear/Deterioration

• Roofs by their very nature are designed to prevent water from entering the building. Most commonly, the roof is leaking from wear/tear/deterioration, which is ALWAYS excluded in your policy. 
• Think about it, if insurance policies would pay for a new roof if we had a leak, we’d all just wait for a leak to get a brand new roof. So, no. The Association’s property policy will not pay to repair a roof that is damaged from wear & tear, nor will it pay for the repairs to the drywall that result from the old roof.

Construction Defect

• But what if it’s a NEW roof? Then the damage is probably due to some type of construction defect, which is also excluded. 
• Get with the roofer, check the warranty, and if necessary, file suit against the roofer for damages sustained. 

“But, Michelle! My unit owner is furious! They want us to pay for their damages.” Okay. I get it. 

• Tell the unit owner to go ahead and file a claim on their personal insurance policy. Explain that the association’s Property policy, per FL Statute, does not provide coverage for the interior of their unit. Advise that the roof and bare drywall will be repaired as soon as possible to prevent any further damage.
• If the unit owner’s insurance company feels that the Association is liable for their damage, they will subrogate against the Association and reimburse the unit owner their deductible. Subrogation claims can be filed on the Association’s General Liability policy.
• If the unit owner chose to self-insure, then they will need to pay for their interior damage out of pocket. 
• If the unit owner feels that the Association is liable for their damage, they can hire an attorney and send a demand letter to the Association. The legal demand can be filed as a claim on the Association’s General Liability policy. *see the Negligence tab on my Assn vs. Unit Owner page

However, if the roof was damaged by a covered peril (wind, lightning, etc.) that thereby caused the leak, then you could claim the roof damage under the policy and the damage to the drywall, subject to your deductible. 

You’ve noticed some new and significant cracks on the side of your building and are concerned that you may have a sinkhole. 

Some policies and carriers provide sinkhole coverage whereas others only provide Catastrophic Ground Cover Collapse. It’s important to know the difference so you know what to expect should you have a sinkhole concern. 

First, all Catastrophic Ground Cover Collapses are Sinkhole, but not all Sinkholes are Catastrophic Ground Cover Collapse. Still with me? 

If you have sinkhole coverage, the policy will pay for the necessary testing to determine if you have a sinkhole and will pay for repairs. There must be structural damage to the building, including the foundation. 

For catastrophic ground cover collapse coverage to be triggered, you must have ALL of the following: 

1. The abrupt collapse of the ground cover; 
2. A depression in the ground cover clearly visible to the naked eye; 
3. "Structural damage" to the building, including the foundation; and
4. The insured structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order for that structure.

So sinkhole coverage is more comprehensive in that it only requires 1 of the 4 conditions that CGCC requires. 

Availability, annual cost, and proximity to other known sinkholes in your area should be carefully considered and discussed with your Agent. 

As a general guide, you should have: 

HO-6 Unit Owners Policy (including Wind)

This policy will provide several forms of coverage: 

• Property Coverage for the Paint-In
• Improvements & Betterments Coverage
• Loss of Use – pays for hotel & additional expenses after a covered cause of loss when the unit is not livable
• Personal Liability – pays for damages caused by the unit owner to association or other owners’ property (IE: negligence)
• Loss Assessment – pays at least $2,000 for any assessment to the owners by the association for a covered peril (IE: hurricane deductible, damages below deductible, etc.)

Flood

If your Association does NOT carry a flood policy, then you're likely located outside of the "flood zone" or Special Flood Hazard Area. This does not mean that you won't be flooded, just that you have a lessor chance. I recommend purchasing a Preferred Risk policy for a couple hundred bucks a year. This will provide assessment coverage should you be assessed for flood damage to the building, and contents coverage if you have damage to your personal belongings from rising water. 

If your Association DOES carry a flood policy, you may want to consider a Contents Only flood policy if you believe that flood waters may actually rise to your floor. Keep in mind that contents is only insurable based on actual cash value (depreciated value) not replacement cost. Contents must also sustain "direct physical loss by or from flood. There must be evidence of physical changes to the property."

I encourage you to visit my Assn vs. Unit Owner page for further details on who pays for what.