Condo Media - February 2021 - 37

insurance, covering all occurrences
commonly insured against for bodily
injury or property damage arising
out of or in connection with the use,
ownership, or maintenance of the
common elements;
l Fidelity insurance; and
l Where the community is comprised
of one or more multi-unit buildings,
the statute additionally requires the
association to insure the units - but
not owner improvements to units or
personal property within units.
The last type of insurance on the list
above is well worth noting, because it
appears in a separate section (Section
3-113(b), rather than 3-113(a), like the
others) and because it affects many
communities. Briefly stated, where the
units share common vertical walls or
where they are " stacked. " The Official
Comment explains the distinction,
which it acknowledges represented
a departure from prior practice, due
to " the great interdependence of the
unit owners " in such situations, and
the desirability of simplifying claims
procedures and avoiding disputes
among insurers in the event of damage
or destruction.
Amount of Insurance
VCIOA specifically requires that the
property insurance on the common
elements be at least 80 percent of the
actual cash value of the property not
only at the time it's purchased but at
each renewal. It does not provide any
specific amount required for general
liability insurance, other than that coverage must include medical payments:
instead, it must be in an amount determined by the executive board, and
must satisfy any minimum set out in
the declaration. It's worth noting that
the official comment to Section 3-113
expressly notes that the 80 percent
requirement is intended as the minimum coverage, not a recommendation.
It also states that many governing

documents require insurance equal to
100 percent of the replacement cost of
the insured property.
Availability and Cost
And if the insurance coverage required
by VCIOA is either unavailable or unreasonably expensive - whatever that
means - what happens then? The statute addresses that unfortunate circumstance: the association must notify all
unit owners of that fact. Presumably,
the unit owners must then secure such
coverage as they deem appropriate
and are able, or, if the impediment to
maintaining coverage is the executive
board's determination that it is unreasonably expensive, to provide input to
the executive board.
Other Insurance
Of course, the declaration may require - and the association may elect
to carry - such other insurance as it
deems appropriate. VCIOA Section
3-113 states this expressly, but even the
executive boards of communities not
subject to that section have authority
to make contracts and incur liabilities
and regulate the use, maintenance, repair, and replacement of the common
elements, and therefore arguably have
authority to secure insurance coverage
at least with respect to the common
elements.
Required Details
The importance of a good insurance
agent is clear here. VCIOA includes
specific details concerning the required
coverage. It must include:
l Liability coverage for each unit
owner arising out of their interest
in the common elements or
association membership;
l Waiver of the insurer's right to subrogation against any unit owner or
member of the owner's household;
l That no act or omission by any
unit owner, unless acting for the

association, will void the policy or be
a condition to recovery under it; and
lP
rimary coverage by the association
policy in the event the unit owner
has other insurance to cover the
same risk.
Degree of Care
In determining what and how much
insurance to secure, the association's
executive board must exercise the
degree of care that applies to directors
of nonprofit corporations. That is, they
must act in good faith, with the care an
ordinarily prudent person in similar
circumstances, and in a manner they
reasonably believe to be in the best
interests of the association. In so doing, the directors are entitled to rely
on others with respect to matters they
reasonably believe to be within their
professional or expert competence.
These standards apply to all common
interest communities, including preexisting communities, unless they are
within the narrow exclusions set out in
the VCIOA.
Owner Insurance
Unsurprisingly, unit owners are entitled
to obtain insurance at their own expense. Some declarations even require
it, although the requirement may be
qualified by defining the insurance to
be obtained as being such as the owner
deems appropriate. Unit owners should
be aware, however, of the extent of any
coverage maintained by the association
for their units and any deductible for
which they may be liable to permit
them to make an informed decision.
n CHRISTINA A. JENSEN, ESQ.
IS WITH THE LAW FIRM OF
LISMAN LECKERLING, P.C.

SOURCE
1 HTTPS://WWW.NYTIMES.COM/2020/12/08/ARTS/
BLOOM-COUNTY-40-BERKELEY-BREATHED.HTML ,
FOR YOUR READING PLEASURE

February 2021 CONDOMEDIA

Condo Media - February 2021

Table of Contents for the Digital Edition of Condo Media - February 2021