HOA Insurance Claim unfairly denied

Hello,

I am a homeowner who recently experienced water damage in my unit. The CC&Rs state that the HOA master policy is the primary insurance and the policy has a 5K deductible. At this time, I have received a quote from a contractor that states I have 17K worth of water damage. I submitted my documentation to property management and they submitted it to their carrier. About 3 weeks ago, I spoke with their adjuster and he decided to assess the damage to my home via video. He has not come to my home to see the damage. Not surprisingly, he estimates that the damage to my home is less than 5K so no coverage is available.

As I work for a property and casualty TPA, I know that it's unacceptable that he is trying to assess my damage without actually seeing it. And I demanded that he come to view the damage in person. Property Management told me that their agent had requested that he come to see the damage and that the adjuster agreed and would get in contact with me, but he hasn't.

Since the HOA's insurance claims it's less than 5K, my H0-6 carrier would then be responsible, so I contacted them and they sent an adjuster out to view my property last week. I am still waiting on the report but the initial assessment is that it's at least 5K. I have a valid claim under my HOA master policy and I am being given the runaround. The HOA carrier will not return my calls or contact me, presumably because I am not the insured. Property Management hasn't followed up with them or me.

What recourse if any do I have? How can I get the HOA to make an adjuster come out to view the damage to my property properly? At this point, the HOA insurance is acting in bad faith by failing to thoroughly investigate my claim. However, it seems to me the HOA needs to escalate this issue with their insurance. I pay my assessments and have the right to have my claim handled fairly and quickly.

Any help is greatly appreciated.

The CC&Rs are very vague and make no mention of where the HOA's coverage starts or ends. No language about "studs out" or "bare walls coverage. The H0-6 carrier has advised that I pay them my 1k deductible and then they cover the rest of the 5k deductible to the HOA carrier. Additionally, since the HOA insurance is primary it seems to me that there must be reserves somewhere if the HOA is responsible for the deductible. Also, the HOA carrier didn't deny my claim because there wasn't coverage. I have asked my H0-6 to subrogate but they appear to be unwilling. Possibly because there coverage is considered excess...

The insurance section of the CC&Rs states the following:

7.6 Insurance:
7.6.1(b) Named Insured: Unless otherwise provided in this section, the named insured shall be
the Association or its authorized representative, as a trustee for the Members. However, all
policies shall be for the benefit of Owners and their Mortgagees, as their interests may appear.
7.6.1(d) Authority to Negotiate: Exclusive 'authority to adjust losses under policies obtained by
the Association shall be vested in the Board; provided, however, that no Mortgagee having an
interest in such losses may be prohibited from participating in any settlement negotiations
related thereto.
7.6.1(f) General Provisions: To the extent possible, the Board shall make every reasonable
effort to secure insurance policies providing for the following:

(ii) That the policy will be primary, even if an Owner has other insurance which covers the same loss;
7.6.2 Types of Coverage: Unless the Association determines otherwise pursuant to section
7.6, the Board shall obtain at least the following insurance policies in the amounts specified:
(a) Property Insurance: A policy or policies of all risk property insurance for all
insurable Common Area Improvements and Residences, including fixtures and building
service equipment, against loss or damage by fire or other casualty, in an amount equal to
at least ninety percent (90%) of the current full replacement cost (without respect to
depreciation) of the Common Area and Residences, and exclusive of land, foundations,
excavation and other items normally excluded from coverage. A replacement cost endorsement
shall be part of the policy.

If for some reason the HOA insurance denies your claim, your own HO-6 policy will cover the costs. The HOA insurance may be primary, but you should still have coverage (indemnified) up to the amount specified in your policy. In that sense it is not your problem but your insurance company's problem. Your adjuster should be calling their adjuster to work out the details.

You can hire a public adjuster, who will take a percentage of the $17,000, but I would wait a while before giving away a percentage, at least until you get your adjuster's report.

Your CCRs will have a definition/description of your unit (or Residence or separate interest), but not in the insurance section. It will probably not have phrases such as "studs out" or "bare walls," but instead something more specific like "undecorated surfaces of the perimeter walls and the space so contained," which it is the description of what you own. Then the insurance section uses this definition by using the word Residences.

Get more estimates (broken down by Residence/common area).

1. Per HOA policy:
- coverage is "primary";
- scope is "Common Area and Residences"; and
- "Residence" is a clearly defined term - which is in your favor.

2. Your insurance company sent an adjuster. If the HOA insurance company didn't, then there is only one legitimate evaluation of the damage. If you're comfortable with your insurance adjuster's estimate, no need to pay for a public adjuster.

3. Let the battle of the insurance companies begin. Your insurance company is on much more solid ground than the HOA's insurance company. As others have said, you should be pressing your insurance company to get this resolved. Their fight with the HOA insurance company, not yours. Call you're insurance company as often as you need to to get them to take the appropriate steps.

4. If your insurance policy covers you for time delay in some way, and if that's not part of the HOA policy, then you have additional leverage against your insurance company. Use it.

Best of luck.

Minor technicality, but what was cause of the water damage?

You're right. You can't compel them to take action.
But you can get the appraisal. And you can get a letter clearly stating their assessment of no responsibility. And you can ask for their help in pursuing your claim against the HOA policy.

I have been speaking directly with the adjuster at my HO-6, I don't have an agent. My HO-6 has reviewed the CC&Rs and was the one the alerted me the HOA being primary. I also have spoken to an attorney who has agreed that the HOA is primary and recommended going throught the ADR process, to the tune of 10K. And since the CC&Rs are so vaugue the decision could really go anyway. In the worst possible case scenario I would rather use that 10K to repair my home as opposed to giving it to an attorney and potentially still be left without a living room.

It seems to me that the HOA insurance should be willing to come to my home to give a fair assesment of the damage. Using video seems like a cheap and lazy way to handle a property damage claim.

I should get it soon. I just followed up with my HO-6 adjuster to see if it's available. Yes, I plan to send this and a letter to the HOA Board requesting their assistance since I am basically at their mercy. I am hoping that they are as reasonable as you all have been.

From the first post, it appears the damage was under $5K. It sounds like the deductible for the HOA policy is $5K, therefore, the homeowner would need to cover the deductible, or in this case cover the repair. This is not uncommon. I managed an HOA that had so many claims agaisnt their policy the HOA raised the deductible to &25K.

I received the report from my HO-6 adjuster today. Per their report, the damage totals $14,293.76. And they have issued me $4K- minus my 1K deductible to pay the $5k HOA Insurance deductible. I have a letter that I've addressed to the HOA Board and Property Management and I will be attaching the report and my invoices. I will ask them to review my documentation and move forward with payment. Is that how it works? Seems to me their insurance should be paying and their insurance should have come out to view the damage. It's ridiculous that he looked at video and guessed that the damage is under 5k, and expected me to just go away.

If the HOA would raise the deductible, that would actually beneficial as my HO-6 would then pay for the damage as it's over my deductible but less than the HOA's.

I went ahead and submitted my letter (addressed to BOD and property manager), independent adjusters report, HO-6 denial letter and picture to Property Management and asked that forward to the BOD for their consideration.

The PM responded today informing me that she was going to submit the new information to the carrier for their review and that upon the carrier's final determination she would then notify the BOD. I am not satisfied with this. Since I am now 60 days without a living room, I feel it's prudent to bring the BOD into the loop. I feel all parties need to be informed about the situation.

Am I missing something here? Should I ask PM to still send my letter to the BOD? Is she just trying to cover for herself?

Why isn't this being brought to the boards attention first? Confused. The BOD should have been the first in the loop IMO. The PM works for the board. The board should been able to make a decision on how to proceed. So why aren't they being given this information?

Are you waiting on the claim to be issued before getting anything fixed? Mmmm...

It seems to be the HOA boards call not the PM. The PM is to do what board authorizes to do. So why board not involved?

Plus if you claim on your insurance your insurance sues for the expenses.

Is it me or something fishy in this water?

Richard, I have filed a claim with my HO-6 and it's being denied because the HOA is primary even if the homeowner has insurance that covers the same thing. The previous denial letter that the PM wrote says that "Resulting damage to the affected portions of wall and floor are covered under the policy" but that their adjuster opined that the damage was less than the 5K deductible.

Seeing as that the HOA adjuster still has not come out to see the damage, I do feel like I need to escalate this issue directly to the Board as they have the exclusive rights to negotiate claims. As a member of the association am I not within my right to request that my letter and documentation be considered? As the point person for the insurance company shouldn't the PM have ensured that someone came to my home to provide a fair assessment? Not because I am owed this but becaue it's in the interest of the HOA as there policy does cover this damage.

I have no idea how your documents are written, but I will tell you how I would handle a situation like this.

Once a leak was reported, I would have the homeowner contact their insurance agent. They in turn, if needed, would contact us for the CCR's and name of HOA agent. Let's say it was the HOA's responsibility and the damage was $6K and the deductible was $5K, Generally, the homeowner's policy should cover the deductible and the HOA's policy would pay the $1K. The HOA does not, I repeat, does not have a slush fund to pay for homeowner deductibles.

What the HOA insurance covers is going to be based on how the policy was written, based on their interpretation on the CCRs of the association. What you posted for insurance has nothing to do with what the HOA's responsibility is. That is found in another section.

I will give you an example of how obscene some situations can be. Years ago my former boss took on an association close to his office of 172 homes saying how easy it was going to manage. What he never did was read their governing docs to see what might lay before him. It turned out that two owners who happened to be attorneys re-wrote the CCRs and got them passed and recorded. Within three years of passage, their monthly dues went from $120 to $450. The CCRs stated that the HOA was responsibility for everything and would pay for everything that went wrong in their units. Their annual insurance costs were $100K for earthquake and $250K for liability, with a $25K deductible (to keep the premium down). If your upstairs toilet overflowed because you put too much toilet paper in, GOOD NEWS, the HOA covered it. For $30K of damage, the homeowner had to cover the $25K deductible.

I have never in my life seen that many pissed off owners showing up for Board meetings. Needless to say, I resigned after 4 months which wasn't soon enough.

Hi Pat! Thanks for your help and interest in my story. The HOA's adjuster FINALLY came to my home to see the damage this past Monday. It was a little awkward since he did not responded to my calls or emails but I was civil. He thanked us for our patience while he went through "his process", which I suppose is trying to discourage people from bringing forth legit claims. He agreed that the whole floor had to be replaced and agreed to re-evaluate my water mitigation invoice. He advised I should reach out to PM on Friday which I did.

PM responded that their carrier was going to issue payment to them in an amount close to 10K and that I can begin repairs now, even though they have not received the check. I received her email late on Friday and I need to follow-up back up with her for clarification, but she is out on vacation all next week.

I assume that the 10K is total damage cost less the 5K deductible? So about 15K for the whole first level floor and it appears that we can use our own contractor which is great, seeing as we are going to change the material of the floor to something waterproof.

Also, I recieved notice this week that the complaint I filed with the State Insurance comission is being looked into. I am not sure what that really means, and probably doesn't mean much now that the carrier has accepted the claim. But, it felt good to feel like I was finally being heard.

Is there anything else I should know about the reimbursment process? Her email stated that we need to send a paid invoice, in the event that the repair cost less than 15K, would they only reimburse the difference between the final cost and deductible?

I still intend to appear at the next Board meeting, I really think the CC&R's could be reviewed and that the HOA should not be primary or at minimum that the deductible be increased to 20K or something greater than 5K. I also think that there should be some guidelines with regards to how claims are handled. If I would have known that the PM needed more documentation to "vet" my claim, I would have provided it right away. In retrospect it felt as though she kept pushing me to file a claim with my H0-6, but I already had done so when I contacted her and said this in my inital email to her.

I am just so happy that there appears to be the start of a resolution to this and I can have my house back.

I really appreciate everyones input and help.

Has the Association's adjuster submitted something to you (or the manager) explaining in detail why they are proceeding in this way? They should, and it should include explanation (as in a detailed explanation of their <$5k estimate).

I don't know California law on this, but in Maryland the association by default is involved in covering all expenses over $5k in the condo. So I would imagine you are legally entitled to a written explanation of the association's plans.

I also wanted to mention that the Manager saying she would submit your letter to the insurance adjuster, and then to the Board, is standard procedure. It doesn't mean the Board doesn't know about your claim. I can only imagine the Board is aware, and proceeding via the professional opinions of the manager and the insurance adjuster.