common area insurance

We are a PUD. We recently got out from under a terrible MC and issued all owners a copy of the CC&Rs, Bylaws and rules. We now wish we were still in blissful ignorance. While dealing with all the other issues we have from this MC, A member of our HOA brought this insurance issue to our attention. Who's insurance pays if a fire starts in a common area or termites infect a unit with the units having common walls? Our CC&Rs read thus:

ARTICLE V
INSURANCE
(a) The owner of each lot shall carry fire, public liability and property damage insurance as he may deem necessary or desirable, or as may be required by his individual lender.
(b) Adequate fire insurance and adequate public liability and property damage insurance for all commonly owned areas shall be obtained by the Board of Governors as promptly as possible following their election, and shall be maintained in force at all times at the expense of the owners as a whole, the premiums thereon to be paid out of the maintenance funds. Each owner shall be named insured in such insurance policy, and the amounts of such coverage shall be as may be established and determined from time to time by the Board of Governors to be adequate. Nothing herein contained shall preclude any individual owner from carrying such public liability and/or property damage insurance as he may deem desirable to cover his individual liability for damage to person or property occurring on said premises, whether within his lot or elsewhere. The Board of Governors may also purchase and maintain, at the expense of the owners, workmen’s compensation, casualty and extended coverage, vandalism and such other insurance coverage as it may deem necessary or desirable for the protection of the owners.

ARTICLE VI
DESTRUCTION OF IMPROVEMENTS
...
(c) Neither the destruction of any owner’s unit or garage or carport, nor his failure to rebuild, shall relieve him of his duty to pay assessments for maintenance charges as provided in Article IV hereof, but, any owner who has totally or partially destroyed improvements upon his lot shall receive the insurance proceeds pursuant to Article V of this Declaration.
The old MC reportedly told some of the owners all they needed for insurance was a HO-6, meaning inside coverage only - not fire. The problem is the last 11 years the policy was the same and only covered liability - we had to double it this year as we were under-insured on that and add another policy per California also. We have already doubled the water assessment and increased the dues 20% this month which is why we wish we were still in blissful ignorance, OR given correct records when we bought this unit last year.

Question is do we add this policy to the dues if the owners will vote it in, which they probably will not, (it has to be a vote per CC&Rs)or
Can we notify all owners they have to carry a specific amount of fire and liability insurance on their own and change the CC&Rs, or
are we reading this the wrong way.
Anyone been through this before?

Thanks Tim,

We are still trying to collect info. Some of the owners only carry COA insurance. I was under the impression we insured our own property. I know we pay for the painting on the out side walls and roof.

Tammy,

You wrote “I know we pay for the painting on the out side walls and roof”. Who is the “we”? Are you saying that the Association pays for outside building maintenance?

How do your Documents describe the Common Areas or Common Elements, and how are the Units, Homes, or “what is owned” by the individual Owner described?

Under Insurance, in the Paragraph (b) that you posted, the word “shall” is used twice and it states “the premiums thereon to be paid out of the maintenance funds”.

Are you a member of the Board of Governors?

And for better understanding, since your Association has apparently gone from being “managed” to being “self managed”, approximately how many living Units or Homes in the Association?

And as Tim asked, what “type” of an Association?