Check Your Condo Association Insurance Policy Coverage

It appears it has become more complicated in determining what a condominium association insurance policy covers as a result of a recent reported 4th District Court of Appeals case; Citizens Property Insurance Corporation v. River Manor Condominium Association, Inc (River Manor) that was decided on April 10, 2013.

Before this case, it was assumed that all condominium insurance policies, no matter who the carrier, covered the same common element items pursuant to Section 718.111 (11)(f), Florida Statutes which currently provides that: “Every property insurance policy issued or renewed on or after January 1, 2009, for the purpose of protecting the condominium must provide primary coverage for: 1. All portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications. 2. All alterations or additions made to the condominium property or association property pursuant to s. 718.113(2). 3. The coverage must exclude all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and counter tops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any insurance thereupon is the responsibility of the unit owner.”

The statute also says an association shall use its best efforts to obtain and maintain adequate property insurance to protect the association, the association property, the common elements, and the condominium property that must be insured by the association pursuant to the statute. The statute also provides that the association may consider deductibles.

In the case of River Manor, the condominium association policies issued by Citizens each excluded from coverage “other structures on the demised locations, set apart from buildings by clear space,” including such things as carports, cabanas, swimming pools, Jacuzzis, piers, sea walls bridges, ramps, walks, decks, patios and similar structures, trees, shrubs, plants and other landscaping.”

The policies also contain provisions that require them to be amended to “conform” to any conflicting statutes of the State where the property is located. Under the applicable 2005 Statute at the time, Section 718 (11), Florida Statutes was worded a little different from today, but still required issued condominium policies to provide coverage for all portions of the condominium property located outside the units and all portions of the condominium property for which the declaration of condominium requires coverage by the association.

The appellate court said then that the only question is whether the exclusions in the policy in fact conflict with Section 718.111 (11), Florida Statutes. The trial court thought there was a conflict and awarded amounts attributable to the excluded items in the policy.

In reversing the trial court, the appellate court said that Section 718.111 (11) was not intended to impose a mandatory insurance obligation upon carriers. It said that the statute is intended to regulate the insurance obligations of condominium association by merely distinguishing what the association is responsible for covering versus what items the unit owners are responsible for covering and requiring associations to use their “best efforts” to obtain the coverage it is responsible for securing. The appellate court said that “as its title suggests, the ‘Condominium Act’ regulates condominiums — not insurance companies.”

The appellate court rejected a literal reading of Section 718.111 (11) because it said that doing so would force private parties, condominium associations and their insurers, to enter into commercial transactions that one or both may not desire.

The court further said that “In our view the statute was intended to impose upon condominium associations an obligation to use their “best efforts” to secure the designated coverage, implicitly recognizing that market forces may in some instances prevent this objective from being achieved.”

So it appears now that condominium association insurance policies no longer have to provide the same coverage as described in Section 718.111 (11), no matter the carrier. If this is the case under the ruling in River Manor, and if the case is not appealed or overturned by the Supreme Court of Florida, then condominium associations should start being very careful to review exactly what items are being covered under their existing insurance policies and any renewals to make sure they fully understand what is and is not being covered under their supposedly “standard policy”.

If particular common element items are not covered under the association’s policy (such as pools, cabanas, decks or carports), the association may wish to have the carrier add coverage for such items at an additional reasonable price. This will only work if such additional coverage is actually provided by the carrier at an additional reasonable price. If not, the association may wish to start a reserve account to cover such uninsurable items to cover future losses.

Source:  Naples News

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