HOA Master Policy claims

Hey everyone,

I live in townhome community with 236 units. I am the president of the HOA.

From what I have read in the CCRs and what knowledge has been passed down to me by past board members, property manager and my own insurance agent who reviewed our CCRs, our obligation as homeowners is studs-in as far as repairs in the event of an insurance claim. Meaning, from my admittedly limited understanding, that if something happens to our house, the HOA repairs anything on the exterior and we are responsible for new floors, drywall, carpet, kitchen cupboards, etc.

All homeowners are required to have an HO-6 insurance policy with interior repair coverage. However, the HOA's master policy does cover interior damage as well to protect the entire community in case someone burns their house down and doesn't have insurance. That way the unit, which is adjacent to other homes, is repaired in a timely manner. All homeowners know they are responsible for entire coverage because this has been communicated to them repeatedly, probably not only by us but by their mortgage companies as well.

Last year, we had over one-fourth of our units with pipe damage from the freezing temperatures. Because there was so much damage and many adjacent units required repairs, the association turned the entire claim (over $600K) in on our master policy rather than coordinate with 60-some separate claims adjusters. However, that large claim put us at risk with our insurance agency (the only one who will still write us a policy because there were a lot of small claims before I was president) and we had to do all kinds of things to mitigate our risk for frozen pipes in the future to keep our policy. Also, the deductible was raised to $10K, which has to be split evenly among homeowners every time a claim is filed.

Now that I've given you the history, fast forward to last week. Freezing temps arrived, and we had about three or four homeowners with broken pipes and two adjacent units with damage. Obviously all the steps we took to incur another major loss helped, but now the few homeowners who have damage are balking at our request to submit a claim to their homeowners insurance before the HOA files a claim. One woman told the property manager that she thought that the pipes were the association's responsibility because it was actually outside her unit (in a utility closet which our attorney has already said is not a common element per the CCRs).

I am operating under the belief that we told them to winterize their units and we told them to insure the interiors of their dwellings and the HOA should not pay for their homes to be repaired. Especially because it's not fair for the 230-some of us who did winterize to have to get an assessment to cover it.

However, I know you are all fair people. My property manager is telling me to choose my battles and that they are wearing him out. My insurance agent is telling me to hold off on filing a claim unless someone's company threatens to subrogate. The board is telling me (and I pretty much think this too) that they are grown people and this is not an apartment complex.

You are all very smart people, and I know you will give me some real talk (assuming any of you trudged through this whole thing...) Anyone have experience with this? Or do you just feel like sharing your opinion? I could use someone to help me think this through.

Where is this utility closet, how is it accessed and what exactly is in it?

Homeowners typically have a low deductible, say $250 - $500. The HOA's deductible, which you said the homeowners have to split, is very high at $10,000. So the homeowners will likely pay less if they file their own claims on their own policy. If for some reason a homeowner has a high deductible, well, that was their choice.

Is the HOA's insurance primary? Ask your agent/adjuster if this makes a difference.

If you told the homeowners to winterize and they did not, then IMO the HOA is not obligated to file a claim for their damage. I believe they call this gross negligence, a voluntary disregard of the need to use reasonable care. My understanding is that the HOA has the choice to file a claim or not in this case.

Do you have a deductible policy? Is the deductible split among all homeowners, or just among the homeowners who have damage? It can be done either way.

I also live in a townhouse community and our master policy is similar to yours (except for the interior damage – that’s homeowner responsibility regardless how the damage occurred). We’ve also had problems in this area, which is why every year, we reminded people that pipes are their responsibility. Our policy is mailed out along with the upcoming year’s budget along with a few other reminders on stuff like snow removal and not walking on the retention pond when it’s iced over.

So I agree with Tim – have those homeowners contact their insurance companies and let the chips fall where they may. They may find they have to pick up the tab anyway if the coverage doesn’t include water damage (sometimes you have to get separate coverage for it and damage coming from sewer backups and such). Remind the homeowners (again) of their responsibilities, this time referring to the CCRs so they can read the citations. Sometimes, people need a whack in the wallet before they pay attention.

You might also remind them that even if the Association did have such coverage available, it would probably jack up the premium and therefore the assessments which help pay for it. If they’re willing to cough up another $100 or whatever for that, they can vote on it and the CCRs can be adjusted accordingly.

I still am not clear why a burst pipe in a utility closet is the HO's responsibility. We need to know more about this closet

All

My bad, but I think many understood what I was saying.

Subrogate....is the right or rights of the insurer to assume the rights of the insured. Legal rights or to step into the shoes of. Rights of subrogation can arise two different ways: automatically as a matter of law, or by agreement as part of a contract.

Subjucate....bring under domination or control, especially by conquest.

Laura

As you said:

There is also a vent from inside the house that, when opened, provides heat to the room in an effort to prevent busted pipes.

This alone makes me say the closet is part of ones unit, not common/association property.