I Need a Crystal Ball

Our board is wrestling with an interesting issue.

One of our buildings needs a repair that will involve common elements as well as potions of one unit. Typical condo stuff, right? One complicating factor is that this particular issue has been going on over a number of years. It was never properly diagnosed before - the board at the time didn't want to spend money and the management company at the time was less than great (because a great one would have cost more money). The unit owner has been unusually patient - many owners would not have been.

The issue has finally been diagnosed correctly. The bids are in. We're ready to roll.

The board is debating picking up a portion of what would be unit owner responsibility - ie. items not covered by our all-included master policy - in an effort to avoid getting insurance (owner's and ours) involved at all. The reason for this is that area condo communities are being hit with 30-40% premium increases, including communities that have had no unusual claims. This info comes from our current community manager who works for the largest management company in my area and who is in a position to know.

So the board is assuming that we're looking at a similar increase if we don't make a claim and a larger one if we do. ** It's entirely possible that we and the unit owner would save money over all if we kept the insurers out of it. **

In other words, we have a money problem disguised as a building repair. The challenge is trying to compare real, documented repair costs with estimates of potential insurance increases that are pretty nebulous - and then trying to decide which will result in the lowest cost overall.

How on earth do we do this?

I think we have to at least talk to the condo's insurance agent to firm up some of the estimates. Otherwise we're just guessing.

On the other hand, if there's no right answer, then there's no wrong answer either. Or all the answers are wrong. We just let the insurers battled it out, we go with what they say, and we take the financial hit on our insurance premiums. Of all the wrong answers, this last one seems like the "wrongest" to me. (Ironically this would have been the correct answer ten years ago.)

I'm sure we're not the only condo community dealing with things like this...

Cathy,

Being deliberate on this decision is the correct course, so kudos! You've inherited an unfortunate situation.

Your main challenge is that the HOA board (and likely the contractors) already acknowledge that your condo repair issue is several years old and that previous HOA boards elected to postpone repairs. That one fact, alone, makes even an attempt to file an insurance claim very risky.

1. The insurance adjustor/inspector will see the same thing.
2. That adjustor may interpreter this delayed repair and symptomatic that your Condo board is not fulfilling good-faith maintenance strategies (whether right or wrong).
3. The adjustor may spot more "troublesome" issues as they are on the insurer's team.
4. You are not guaranteed to even be renewed for your insurance policy, making premium increases a moot point.
5. When the insurer sniffs out a years-old problem, it's appropriate for the adjustor to hold the HOA at fault for not treating the project as an "emergency" or acute problem.
6. The insurer will certainly know that the HOA board, today, is trying to push off cash costs as the first consideration.....repairing the condo has always been secondary to the HOA.

Here's my two-cent opinion.....

Don't even invite the insurance company to inspect the damage unless you're all the way "in" on filing a claim. By doing the inspection, your record w/ the company will acknowledge the pending project. The HOA board should explore self-funding the repair of the deferred maintenance. Also, if the HOA board's decision, back then, resulted in the damages to the condo that are customarily the owner's personal responsibility, the HOA could cover those costs as well. I say this because the owner is subject to the directives of the condo association as a legal matter and thus are a "victim" if the HOA board makes decisions that cause further decay or damage.

What is the repair of?

Our Board had a very similar decision to make on 7/30 at an open Board meeting, but at a far smaller expense.

In our condo high rise, We owners are responsible to repair things like valves in our Unit even if the repair was needed because of some issue in the common area, so. long as the HOA hasn't been negligent. So when all the water needs to be turned off for some reason, when it's turned back on there might be a few valves in Units that need to replaced due to some debris in them.

In the case the other night, the oner has had to make many replacements of a certain valve over time. It's finally been determined that the common area path to this valve in this Unit is defective. The board and owners were shown a LOT of tiny pebbles and dirt in the Owners line that came from this defect. So the Board voted to reimburse the owners for the valve replacement, which was maybe $400.

So I agree with there who advise to leave the insurance company completely out of it and do not bill the owner in this particular case. If other w ownrs complain, advise them that is THIS case a common are defect caused the problem.

*Our "bare walls" insurance is the same.

My experience says this is sewage pipe problem and they can get "legally" nasty.