Insurance? HELP!

I have a unit in our townhome association that is unoccupied, and has been unoccupied for at least 18 months while the owner has it up for sale.

Last week (Friday), I got a call from the listing agent on that unit that there was water damage inside *probably* from the water heater leaking. The owner has initiated a claim with his insurance company, and he's requested that I get an adjuster to the unit to see if any damage would be covered by our policy.

So...fast forward to today... My *assumption* (yes, I know, always dangerous) was that our HOA insurance covers the structure, but not possessions or furnishings in the unit. My personal insurance policy covers both my possessions and the "mercantile" for my unit.

His insurance agent called me today to say that the owner thought that our policy included things like carpet/pad/paint/trim/etc. This is NOT what I thought it included.

Good thing I have both a copy of my policy AND a copy of our CCR (Declaration).

Description of Premises on our insurance policy: Condominium Building - Residential without mercantile.

From Insurance Policy - Section 1 - Property Coverage: We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss. Blah, blah, blah...INCLUDING Completed additions, fixtures, including outdoor fixtures.

Ok, so that's brief info from my policy, which I have sitting on my desk. I'm meeting with our insurance guy today, so I'll get the questions answered completely.

What I'm interested in is our documents. The owner thought we covered the paint/carpet/etc. In our CCR, we have a section on Insurance... and here it is...

Section 12. Insurance. Casualty Insurance on Insurable Common Area The Association shall keep all insurable improvements and fixtures of the Common Area insured against loss or damage by fire for the full insurance replacement cost thereof, and may obtain insurance against such other hazards and casualties as the Association may deem desirable. The Association may also insure any other property whether real or personal, owned by the Association, against loss or damage by fire and other hazards as the Association may deem desirable, with the Association as the owner and beneficiary of such insurance. The insurance coverage with respect to the Common Area shall be written in the name of, and the proceeds thereof shall be payable to, the Association. Insurance proceeds shall be used by the Association for the repair or replacement of the property for which the insurance was carried. Premiums for all insurance carried by the Association are common expenses included in the annual assessments made by the Association.

In addition to casualty insurance on the Common Area, the Association, through the Board of Directors, may elect to obtain and continue to effect, on behalf of all Owners, adequate blanket casualty and fire insurance in such form as the Board of Directors deems appropriate in an amount equal to the full replacement value, without deduction for depreciation or coinsurance, of all of the Units, including the structural portions and fixtures thereof, owned by such Owners. Insurance premiums from any such blanket insurance coverage, and any other insurance premiums paid by the Association shall be a common expense of the Association to be included in the regular annual assessments of the Owners, as levied by the Association. The insurance coverage with respect to the Units shall be written in the name of, and the proceeds thereof shall be payable to, the Association as Trustee for the Owners.

Section 13. Replacement or Repair of Property In the event of damage to or destruction of any part of the Common Area improvements, the Association shall repair or replace the same from the insurance proceeds available. If such insurance proceeds are insufficient to cover the costs of repair or replacement of the property damaged or destroyed, the Association may make a Reconstruction Assessment against all Owners to cover the additional cost of repair or replacement not covered by the insurance proceeds, in addition to any other annual or special assessments made against such Owner.

In the event that the Association is maintaining blanket casualty and fire insurance on the Units on the lots in the Properties, the Association shall repair or replace the same from the Insurance proceeds available.

So....what do you think? Did I misinterpret the HOA insurance obligation? I almost hope so, then I can drop a small part of my own personal unit insurance!

Any thoughts...greatly appreciated!

It's also not defined in our CCR where the HOA obligation begins or ends (studs in or paint in...).

I appreciate the comment. I thought I was pretty close to accurate here...

Thanks, Eva, that is just what I'm planning on doing. I was hoping no one would focus on the fact that it's water damage... Since no one has lived in the unit for so long, even the owner/agent don't know exactly what happened yet. They're still investigating and contracting with a flood/water restoration company.

I'm pretty sure our association is off the hook because our policy seems to exclude this type of damage...

Limitations..."We will not pay for loss of or damage to:
(2) Hot water boilers or other water heating equipment caused by or resulting from any condition or event inside such boilers or equipment, other than an explosion.

I'm pretty sure his hot water heater didn't explode...

Also, my hot water heater died a year and a half ago, and it caused a small amount of flooding. I just took care of it through my own insurance... Of course, mine wasn't leaking for days at a time...

Thanks, though! I had to call his insurance agent back, and I wanted to be able to have a reasonable conversation before I meet with our agent later today.

We had a case when a pipe did burst undeground as well.

DJ1 .. excellent point.. can you please elaborate? Is it your insurance or the Association insurance? We have so many absentee owners and I hate for the Association to be responsible for owners' negligence.
Most absentee owners do not have their units checked at all. On the other hand amending the covenants to impose more responsibilities on the owners may be impossible.. they will not approve it.

Tracie,

If you have what is called an "all-in" policy then it is likely that the association policy will payout for the "resultant damage" to the unit but not for any work to the hot water heater or to personal property. If there is the potential for building damage that could at some point in time if not taken care of correctly cause further damage that the association will ahve to correct, let your policy respond so that you have some control over the repairs. It is also probable that your policy will then go after the owners policy to reimburse them or "subrogate". It is also the best method to back bill your owner with the amount of the deductible on your policy with the argument that the hot water heater is not and could not ever be an association resposnbility. Do this notice to the owner immediately and if they dont' pay add it to the account so it gets paid when the property sells. Once you tell the owner that they will have to personally cover the dedutible, if they do not have a rider on their personal insurance "HO6" policy to cover that, then they will most likely not want to file the claim under the association insurance. The owner's insurance agent is looking for any way to not pay the claim on the policy period and is hoping that the association does not know enough to realize this. the owner's agent needs to be educated as well. You also need to be sure that your agent is aware that the association (read the board) reserves the right to accept or reject any claim and the state laws now support that action.