Connecticut - Insurance Question

Not looking for a loophole , just the correct interpretation of 47-255 ; the proposal on the table is for unit owners to rely on their own insurance to cover the first $5,000 of any damage ; I'm just trying to provide a counter argument using the wording in 47-255 ; except for the wording in (b) regarding "betterments and improvements" the words in (a) , i.e. "the association shall maintain" does seem to put the responsibility on the association .

Just want to be sure , that's all .

The certificate of insurance says that "coverage is written on a special form guaranteed replacement cost basis subject to a $5,000 deductible and $5,000 per unit ice dam deductible. All in unit coverage includes improvements and betterments."

The first $5,000 could apply to non ice dam damage to all the units in total or the words "per unit" were inadvertently left out , not sure ; our biggest threat has been from ice dams and that expense alone could generate a large assessment to all unit owners .

Most Declarations state that the cost of a deductible expense is to be shared among all units in proportion to their share of the ownership of the common elements. In most cases this will be equal shares. If you want to assess the deductible expense only on those units that sustained a loss, then the Declaration would need to be amended following the prescribed process. Below is information that we received from our attorney several years again that relates to this subject. Hopefully it may be useful. I used OCR on a PDF file to get this into text, so I apologize for any errors.

AMENDMENT TO INSURANCE DEDUCTIBLE PROVISIONS

1. Under the documents of our community, the Association is required to provide property insurance coverage under its master insurance policy for portions of the units as well as for the common elements. The documents also require that if a portion of the community is damaged as the result of an occurrence covered by the policy, the Association is required to repair the damage to both the common elements and the affected units using the proceeds of the master insurance policy to cover the cost. If the insurance proceeds are not sufficient to cover the cost of repair, the balance is to be paid out of the common charges collected from all of the unit owners.

2. If the Association has purchased the insurance required by its documents, there should not be a problem with the adequacy of the coverage, except for the deductible. Deductibles are a common provisions in property insurance policies. They are a threshold below which the insurance carrier will not pay. For example, if the insurance policy has a $1,000 deductible, and the building suffers a $500 loss, the insurance carrier will not pay because the loss is less than the deductible. If the loss is $10,000, the insurance carrier will pay $9,000: the cost of the loss less the amount of the deductible.

3. Deductibles are included in insurance policies for a number of reasons. One is to discourage the filing of small insurance claims. Another is to encourage property owners to take steps to minimize damage after a covered loss in order to reduce the amount they will have to pay. In the case of condominiums, however, where the association, and not the owner of the damaged unit, must bear the cost of the deductible, there is little inducement for unit owners to take steps to minimize damages.

4. From time to time, it may be in the Association's interest to increase the amount of the deductible in order to save the unit owners money on the master insurance coverage.

5. Over the past decade, deductibles on association master insurance policies have risen significantly. Ten years ago, deductibles were frequently as small as $250. Today many associations cannot get insurance with deductibles smaller than $1000 and some have found it necessary to purchase insurance with deductibles of $5000 or more.

6. Over the years, some associations have charged the shortfall resulting from the deductible back against the individual unit owners. The unit owners, in turn, have claimed these amounts against their individual unit insurance policies and have often been successful in collecting. However, during the past several years, several of the larger and more sophisticated insurance companies writing unit owner coverage have begun to take the position that neither they nor the unit owners they insure are responsible for covering the deductible because of the provisions in the Common Interest Ownership Act which make any insurance shortfall a common expense.

7. There is a way in which the Association can assess the amount not covered by virtue of the deductible against individual units so as to make it possible to allocate a portion of the deductible under the Association's master insurance policy against the individual units that are damaged. This clause takes advantage of a provision in the Common Interest Ownership Act which states that common expenses benefitting less than all of the units can be assessed only against the units that are benefitted to the extent that this assessment is required under the provisions of the declaration. The amendments to the declaration that the board is submitting for your approval make these changes.

8. The new clause pro-rates the deductible for any casualty loss among the affected units and common elements in proportion to the damage to each of them. It then assesses the portion allocated to individual units specifically against each unit.

9. Under the terms of most unit owner policies being written today, this kind of assessment will be paid by the individual unit owner policy less whatever small deductible applies to that policy.

10. While it is possible that insurance companies may change the provisions of their unit owner policies in the future, this clause is. at present, the best method available minimizing the impact of deductibles under the master insurance policy on the community as a whole.

IMPORTANT NOTICE TO UNIT OWNERS CONCERNING INSURANCE COVERAGE

The Association has completed the process of amending its declaration to adopt new provisions concerning property insurance. A copy of the amended insurance provisions is attached to this notice. Under these amended provisions, if your unit is damaged by fire or other casualty and the Association is required to repair the unit under the terms of the declaration, it may charge a portion of the cost of the repair against your unit.

The maximum amount that can be charged back against your unit is the smaller of the cost of repairing the unit or $______________________________________, the amount of the deductible
under the Association's master insurance policy. If this charge is not paid, it will become a lien against your unit and can be foreclosed by the Association in the same manner as other common charges.

As an individual unit owner, you can obtain insurance which will cover a significant part of any amount assessed against you by the Association under the amended insurance provisions. This coverage, along with other important coverage every unit owner should have, is available as part of unit owner insurance policies offered by many companies and agents. In many policies, the coverage that will contribute to any assessment under the amended insurance provisions is called "buildings and/or alterations coverage."

You may need additional loss assessment coverage and building and/or alterations coverage over and above the amount necessary to pay any assessment under the attached amendment.

You will also need other coverage in appropriate amounts to protect you against other risks associated with the ownership of your unit.
In order to be sure that you have all of the coverage that you need, you should take your copy of your condominium documents, this letter, and the attached insurance amendment, to your insurance agent or advisor. Ask him or her to review this material to make sure that your unit owner's policy contains all of the coverage that you need.

If you do not have a unit owner's insurance policy, we urge you to get one at once.

Thanks everyone for your time and input .

Thanks again Bruce , an amendment to the Declaration is going to be put to a vote by the unit owners ; if it passes then our insurance agent said they , meaning our insurance company, will have to abide by the Association's Declaration and pay on the claim whatever is above our individual deductible.

This is not what I hear you saying Bruce - a few of us may have to hire a condo law attorney to sort this all out .

thanks EllieD - our Board wants put the following proposal to a vote among all the unit owners : the first $5,000 of property damage including betterments and improvements will be covered under each unit owner's personal HO insurance ; they want the Association's Master Policy to only cover damage to anything above %5,000 ; if it's approved then our governing documents , i.e. declaration, etc. will also be changed appropriately.

We , as unit owners , just want to know if this proposal is allowable under the CIOA in Connecticut ?

That's the best way I can explain our concern .

Unfortunately, this forum, as useful as it is, has not yet caught up with modern technology and edits or removal of posts by the originator are not possible. This feature is available with several other forums, so the technology is available.

Many of us have wished and asked for an edit capability.

Your best source of a definitive answer is the insurance company that has your master policy. They are obligated to write you a policy that fully complies with the requirements of your Declaration and all applicable state laws. If they agree that what you propose can be done (given legal amendments to your documents), then you should see if a sample of companies that write HO-6 policies in your area are willing (able) to pick up this added coverage.

Jim