Condo Media - April 2021 - 33

● Address Insurance
Claim Questions
Understandably, associations generally
do not like to put a claim in with their
master policy because of potentially
increased premiums, and in the case of a
burst pipe, the association's first instinct
may be to instead pursue the alleged culpable unit owner for the costs to repair
any damages. But it is important to bear
in mind that the master insurance policy
is also each owner's insurance policy for
the structure of their unit. The owners
should receive the benefit of master
insurance proceeds if the pipe burst is
a covered loss. Hopefully, any impacted
owner will also have a homeowner's
policy, which typically covers damage to
the unit not covered by the master policy
(basically the master policy deductible);
liability of the unit owner (if someone
slips and falls in the unit, rather than
common area); personal property of the
unit owner (if you flip the building over,
whatever falls out); loss of use of the unit;
and loss assessments. The association
can direct each owner to put a claim in
with their homeowner's policy.
● Address Drying and
Safety Issues
Once a claim is put in, the carrier will
assign an adjuster who will want to
investigate the loss. Simultaneously,
the board will be handling the very wet
situation on the ground. No matter what
space was impacted, common area or
unit, the board should focus on getting
the building dry. If soggy materials
are left rotting while the association
discusses what caused the problem, who
is at fault, or how much it will cost - the
association will be left with a much
bigger (and more expensive) problem
down the road. Getting dry will almost
always require the association to engage
a disaster relief company to come out
as soon as possible. Getting dry does
not involve fully repairing any impacted
space. Rather, it might mean cutting
out wet dry wall or removing certain
flooring material that cannot be salvaged.
The association may have to take other
emergency measures to shore up the
building. Perhaps the burst pipe was a
sprinkler that needs to be immediately
repaired so there is an operational fire

suppression system. Once the association
has been assured by a professional that
the threat of mold is gone, and the unit(s)
and/or common area is safe, then it can
focus on the adjustment of the loss.
● Address Loss Adjustment
and Payment
According to many documents, the
board's role in the adjustment of the
loss is that of " insurance trustee, " which
is distinct from the board's duties as
condominium trustees. If the insurance
company determines there was a covered
event that caused damage above the
deductible, they will write the association
a check, which will include all proceeds
from the adjustment of the loss - no
matter that the money may ultimately
end up with unit owners. Depending on
what the individual documents provide,
the association then generally pays the
unit owners and/or itself according to
the adjuster's report that accompanies
the check. The adjuster's report will often
allocate the deductible as well. If not,
documents permitting, the deductible
can be allocated proportionally based
on damages. Hopefully, this is where the
mess ends. The condominium is dry, the
money is in hand, and the association and
owners can turn to the task of rebuilding
or repairing. If the documents permit, the
association should stay out of the actual
rebuilding/repairing of units.
Occasionally, the situation gets
messier. Associations often wonder
what to do if insurance proceeds do not
cover the full amount of the loss. Generally, if there are uninsured losses, the
association pays for any work necessary
on common area (and each owner can
look to their personal HO6 for loss assessment coverage) and each owner can
handle the uninsured work in their unit.
But if an owner thinks the adjuster did
not provide sufficient proceeds to cover
insured losses, the owner often wants
the association to fight on their behalf
with the adjuster. Again, the association
should try and keep it simple and streamline its thinking. If an owner is adamant
that they have suffered more damages
than have been paid by the carrier, the
association can try and assign its rights to
negotiate the loss to the owner and leave
them to fight for more proceeds directly

with the adjuster. Understandably, the
adjuster may insist on dealing with the
association, and hesitate to engage with
the owner, but typically if the association
has consented to the direct contact and
perhaps even formally assigned its rights,
the adjuster will adjust, and engage
directly with the owner. Again, the association wants to simplify this process
as much as possible. If it is not needed as
a middleman in these transactions, then
get out of the way.
At the end of the day, once the
water stops flowing from the pipe, the
association should block out the noise
and focus on two things: getting dry and
getting coverage. If it can accomplish
those two things, generally all of the
other problems can be dealt with when
tempers calm and the building is dry.
■ HALEY BYRON,
ESQ. AND JOHN
SHAFFER, ESQ. ARE
PARTNERS IN THE
LAW FIRM MARCUS,
ERRICO, EMMER &
BROOKS, P.C.

Lending and
Banking Solutions
Designed for Condo
Associations

Timothy Murphy

774.454.9918
Timothy.Murphy@RocklandTrust.com
Member FDIC
April 2021 CONDOMEDIA

33
Condo Media - April 2021

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