Who's Responsible - The HOA or the Unit owner?

Dj,

First, if the pipe (that was in the wall) was to be maintained by the Association, then the Association was responsible for the damage caused by the broken pipe. That's the way these things work. Just as if the owner had left his faucet running, it backed up and damaged the downstairs unit, that owner would have been responsible.

Question, when you say walls in/out which wall are you referring to? Typically, from my understanding of condominiums, the owner is responsible from the drywall in and the Association from the drywall out (owners responsible for the drywall itself). The pipe was behind the drywall - this would have been the Associations responsibility.

In my opinion, you should ignore the membership advice and get a competent legal opinion. If your bylaws are in conflict with existing State or local laws (and it appears that they are per you posting), then the State laws are what must be complied with.

The order of precedence is:

Federal Law
Federal Regulations
State Law
State Regulations
County Codes
County Regulations
City Ordinances
Deed Restrictions (your CC&Rs - Covenants, Conditions and Restrictions)
Articles of Incorporation (if any)
Bylaws
Resolutions (formalized decisions made by the Board).

If any lower precedent document is in conflict with a higher precedent document, the higher document is the one that must be followed as it "controls" the issue. However, there are situations where the higher document will defer control to the lower document. Therefore, be sure to fully read the documents and laws.

Yes, I have been through a number of these claims.

It is easy enough to look up the law. The PA UCA (3312) says your association must have insurance on "the common elements and units exclusive of improvements and betterments installed in units". So you need to have insurance coverage of the units, just as you found out (regardless what the realtor told you). State law takes precedence over your bylaws (in case your bylaws do not require it).

The UCA also says that your insurance must be "primary". This means that your insurance pays even if the unit owner has insurance covering the same thing. This seems to fit the claim you described.

Did you make an insurance claim on your insurance? Insurance policies should follow the law, so you may already be covered and not know it.

I would contact your insurance company for a careful read of your policy. If you don't have coverage for the units and the other requirements of the law, then you need to get it. You have already seen the need for it, and it is required by the law, and you would not be doing your fiduciary responsibility to not have it.

Being brand new to HOATalk - this was one of my first posts - so I do appreciate all of the feedback and recommendations that I received. Apparently I did not fully explain the source of the insurance claim to begin with. The flexible water feed line that burst and flooded the Unit was NOT inside the wall of the Unit - it was fully within the inside of the bathroom, inside of the inside bathroom wall. That is why our HOA objected to the claim being filed against the HOA. Because the flood was caused by an interior defect ONLY, inside of the finished interior wall. The adjuster claimed it was inside the wall between the drywall and the exterior of the Unit so that the HOA was liable - and it simply was not a defect within the wall - and he knew that. Everybody on both sides knew that. (Even the HOA's insurance agent as well as the district claims supervisor both told the HOA that the claim had been filed against the HOA in error, that it NEVER should have been filed against the HOA, and that they would withdraw the claim against the HOA, and place it fully against the Unit owner's coverage -- but they never did.) In the end our HOA conceded the issue and accepted the claim. A claim was filed against the HOA for the basic clean up, dry out, and rebuild. About $50,000 worth. The Unit owner filed a claim against his personal coverage for the cost of replacing his improvements, betterments, and his furnishings - about $35,000 worth. As a side note, recently we received a letter from the insurance company (the same one for the HOA coverage and the individual Unit owner's coverage - purely a coincidence) stating that they were going to sue the manufacturer of the burst feed line for full recovery of the $85,000 - but they cautioned us that recovery would be tenuous at best, and could take many years before a successful recovery could occur at any rate.

DjB2 (Pennsylvania)

1- You did not mention any property management professional. I assume your 32 unit condo corporation is self-managed or almost so.

2 - Boards may spend years blissfully defying or, very respectfully, unaware of how their legislature has decided they should respond, including as to the corporation's insurance coverage & deductible treatment.

You indicated that : "The HOA has always run our development on a "walls in - walls out" basis of responsibility. That is, if there was any damage to the inside of the unit, it was the responsibility of the Unit owner and/or their personal insurance coverage to take care of it themselves. If there was any damage to the outside of a Unit, it was the responsibility of the HOA and their insurance to take care of it. It has worked that way just fine for 33 years, without ever a complaint."

That, respectfully, attempts to confuse "insurable loss" with "obligations to repair after failure or deterioration".

Respectfully, because of what JeffT (Iowa) pointed out above, please let that idea burst into flames. It is irrelevant to an insurable loss scenario, how your Declaration & governance documents may address "owner vs corporation normal repair duties".

Jeff pointed out section 3312 Insurance of Penn Title 68 part 2 Real Property subpart B condominiums ( association shall insure UNITs among others less upgrades )
http://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=68

Note that unlike other sections section 3312 does NOT contain a provision allowing override by site specific governance documents.

Unless your condo corp has valid by-laws like below and such can withstand legal challenges, any insurable unit damage is a condo corp's Master Insurance Policy claim with the deductible a common expense to be sucked up by ALL owners ( unless Pennsylvania courts have ruled otherwise ) without possible subrogation nor slope-shouldering back upon the unit owner.

3 - How can by-laws validly alter that scenario ? Your lawyer needs to be consulted again about both an Insurance Deductible and possible a Unit Boundary Redefining by-law aka 'Standard Unit" By-law .

With master policy deductibles hitting $40 K or $50 K per event, many ( multi-storey ) condo corporations have used what ours and other jurisdictions MAY now specifically allow by condo act changes :

A- a Deductible By-law to totally download the Master Policy deductible onto the unit owner, including even for totally blameless damage and for damage spread to other units !

B a Standard Unit by-law to shrink the definition of the basic unit/ maximize the owner-insured upgrades.

I am not comfortable with that approach, it has not been tested by the courts here, and I doubt the original lawyers' claims that the sum of individual owners premiums becomes less than the Master Policy premium.

But I personally saw and heard those outcomes blissfully chosen by a half-dozen Boards after our jurisdiction's condo law was changed to make them possible.

4- In conclusion, next time there may be a large corporation deductible, or a unit owner beating hell out of the condo corporation if it persists with trying to flog the "walls in - walls out" formula as to insurable loss and contrary to your state's law.

I explained that similar issue a dozen times to a condo Director online at another site, even deconstructing how our common jurisdiction's Act would have to instead read in order to legalize their approach.

( They had for years been refusing to make Master Policy insurance claims without wrongfully extorted confessions of blameworthiness, thus triggering the unit owner to suck up the corporation's entire deductible under our condo law ). Recently I heard that the stubborn Board continued to ignore and have been cut to ribbons for it in two court judgments.

Good luck with getting your fellow Directors onside and/or the by-laws above.

3

Tim's point above is a good one and hopefully gets an answer.

The Director in my example above was ADAMANT for several years ( dozens of postings at the condo Forum ) that their corporation's longtime buckshee/voodoo interpretation was the legal one. ( eg "My spouse & I also got treated that way after our unit was damaged before I joined the Board, so our Board's way must be right ! Why can't lawyers & others understand that ? We have done it that way for over 30 years ! " ).

In that Director's case above, the flat out illegality was less dramatic until legislative changes in 1998, but it had been still illegal beforehand.

Condo laws probably reflect legislatures' fear that there will not be enough insurance coverage ( nor even any at all ) after residences are substantially damaged by insurable loss. That fear might be seen in making 'insurable loss master policy outcomes' prevail over the widespread condo scenario of 'owner pays for repairs after breakdowns or deterioration", plus legislated insurance trustee rqeuirements.

Pennsylvania's Title 68 section 3312 (c) even bars the Master Policy from containing a provision allowing the corporation's insurer from 'circularly' recovering payouts from individual unit owners ( Master Policy is legislated to waive subrogation. My own jurisdiction's condo law contains NO such provision, but the 'circularity' danger is real enough - that indirectly it could destroy unit owners without their own insurance - that the industry's policies are believed to always contain such. )

Old habits can be tough to change.

You're welcome.

It is unfortunate if - IF - your insurance jurisdiction does not have some sort of ombudsperson with enough condo competence & credibility to fill in what are sometimes gaps in legal understanding and/or even in the 'factuals'. Periodically even (non-elected )civil judges in my own jurisdiction are viciously mugged by our condominium legislation. So maybe condo insurance claims should get lots of respect & patience.

Or if such disputants could find a competent A.D.R. professional, maybe similar enlightening process too. ( I have a horse in that race, but way too far away to benefit from any of the commenters at this site). Good luck.