Condo Media - February 2022 - 39

Keeping Covered
Beyond Battling Winter Temperatures
[By Gary M. Daddario, Esq., CCAL]
As you know, I write from the
perspective of legal counsel to community
associations. Once again, we find
ourselves in the " insurance " edition of
Condo Media. I begin with a quick recap
of some of my prior recommendations:
l Make sure the governing documents
require owners to maintain an individual
owner (H06) policy (reasonably
priced owner coverage makes a
significant difference in the event of
a loss but many owners " pass " absent
an actual requirement).
l Make sure the governing documents
assign responsibility for the Master
Policy deductible where the Master
Policy provides coverage for a loss
(the Master Policy deductible in
modern policies can be $25,000 or
significantly more-if responsibility
is clear then unit owners can prepare-if
not clarified in the governing
documents, owners will deem it a
fight worth fighting).
l Require owners to sign releases in
exchange for insurance proceeds
(at least one court decision approves
of this exchange because protection
of the association's interests is a
duty of the board and obtaining a
release in exchange for proceeds is
a reasonable action in protection
of the association).
l Utilize your agent to answer occasional
questions and to ensure that
your coverage is in sufficient amounts
and types to satisfy the requirements
of your governing documents (your
agent would rather respond to questions
and confirm coverage than to
see you struggle with insufficient
coverage in the event of a loss).
Other recommendations for
managing community association
insurance:
l Schedule an " insurance night "
and invite your agent to speak
to the community. Gaining an
understanding of what the Master
Policy covers (and doesn't cover)
is essential for a unit owner who
wishes to have their H06 fill any
coverage gaps. Agents are typically
willing to do this because it is good
customer service and because it is
also an opportunity to speak with
potential customers. The association's
agent best knows the Master
Policy and, as a result, best knows
how to " dovetail " an H06 policy
with it. As a result, owners will often
see a benefit to obtaining their H06
through the agent who is familiar
with the Master Policy.
l Both the association and the unit
owners should acquire what is
commonly referred to as " ordinance
or law " coverage. Often
available as an add-on, this type of
coverage provides funds needed
where the cost of replacing a building
or unit to the then current, applicable
codes exceeds the standard
coverage amount under the policy.
In other words, if funds run short
because the rebuild is more expensive
due to code changes, this coverage
will serve to provide additional
funds to fill the gap.
l Associations should investigate
the options for buying out of exclusions.
" Exclusions, " as the name
implies clearly enough, are conditions
explicitly not covered by the
Master Policy. Typical exclusions
include items such as " wind damage "
and " groundwater. " Even exclusions
for " mold " can now be negotiated to
less than full exclusions and, when
disaster strikes, some coverage is
always better than none.
l Address in advance questions surrounding
improvements to units
in the wake of casualty losses.
Unit owners often assume that
Master Policy coverage that existed
for items like flooring and kitchen
cabinetry is still in place following
their home improvement projects.
It is fairly routine, however, to see
language in governing documents
that requires unit owners to report
any improvements over a certain
value (often $1,000) to the association
and which provides that failing
such reporting, the Master Policy
will not provide coverage. This is
an internal communication issue
that can be resolved by the board
reminding unit owners (if, in fact,
your association documents contain
this language) of the reporting
requirement. It is far easier for the
reminder to issue and unit owners
to comply at a time when a casualty
loss is not " on the table. "
Finally, review your insurance
coverage at least annually. When
disaster strikes, having sufficient
coverage will prove to be the proverbial
" ounce of prevention " that puts
you in the position to receive your
" pound of cure. "
n GARY M. DADDARIO, ESQ., CCAL
IS A PARTNER WITH THE LAW FIRM
MARCUS, ERRICO, EMMER & BROOKS,
P.C. AND CHAIR OF THE NHLAC.
February 2022 CONDOMEDIA 39
Condo Media - February 2022

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