Insurance?

Started by MissyS • 10 replies • 2307 views

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MissyS (Florida)
Posts: 73

Posted:

I have a question for associations that have connecting townhouses that require their owners to carry homeowners insurance.

Our docs require the HOA to carry property insurance on all common property and owners to carry homeowners insurance. A previous board decided to carry property insurance on all the buildings because they were concerned that if a building was destroyed the roof would have to be done by one roofing company and it would become a nightmare replacing the building's roof because owners would have different insurance companies. Also many owners do not have homeowners insurance but have condominium insurance. One owner in the building not having the proper insurance could prevent the building from being replaced. I certainly understand why the board made the decision but carrying the additional insurance has put a hardship on the HOA financially.

Changing the docs with all the foreclosures and owners who have abandoned their homes is out of the question at this time. For owners without the necessary insurance there is a provision in the docs that the HOA has the authority to obtain insurance for those owners and bill them.

There doesn't seem to be an easy answer. Should the HOA continue to carry the insurance on all the buildings? If not, how does other similar association handle their insurance?

Thank you in advance for your help.

TracieS (Colorado)
Posts: 460

Posted:

Do you mean that the association carries Business Owners insurance and the association requires owners to carry an HO6 policy? Why the duplication in coverage?

I'm in connected townhomes, and we do NOT require HO6 policies. We all have them, but it's not required.

I think it's going to depend on your documents. When the previous changes to insurance coverage were made, were they based upon a reading of your association's responsibility for insurance?

Do you have a section in your CCRs titled Insurance/Property Insurance/Business Insurance, or something like that?

DonnaS (Tennessee)
Posts: 5,671

Posted:

Missy,

I have a similar unit in S. Florida. The unit owner is responsible to carry full replacement coverage for the entire building on their half, including roofs. No way should the HOA be responsible for destruction replacement for the roof and structure. It may seem easier to not deal with the insurance companies but to assess everyone is unimaginable.

Our CC&Rs require proof of insurance yearly on the anniversary date of each units policy.

What we are required to purchase. Liability Insurance,Hazard Insurance,Flood insurance if so determined by FEMA FLOOD MAP,(we do)Full replacement and casualty coverage. Each of these has additional coverages like normal Homeowners Insurance.

Here is the best part. " IF ANY OWNER SHALL FAIL TO OBTAIN SUCH INSURANCE AS IS REQUIRED HEREBY OR SHALL FAIL TO SUPPLY TO THE ASSOCIATION ANY CERTIFICATE OF INSURANCE AS HEREINBEFORE SET FORTH,THE ASSOCIATION SHALL HAVE THE RIGHT BUT NOT THE OBLIGATION TO OBTAIN SUCH INSURANCE AND LEVY A SPECIAL ASSESSMENT AGAINST THE OWNER IN QUESTION AND HIS DWELLING UNIT" And then it goes into the details.

RogerB (Colorado)
Posts: 5,067

Posted:

Missy, it may depend on the items for which the association is responsible and those for which the owner is responsible. I suggest you talk with the association's insurance agent to get clarification on coverage.

I think the association would want to carry insurance on all of the buildings to ensure that if a building is destroyed it would be replaced. I would encourage homeowners to carry an HO-6 policy but do not know if the association can legallly require the homeowners to carry insurance. Also, it would be a nightmare for the association to effectively monitor whether or not each individual homeowner's policy remains in place at all times.

MissyS (Florida)
Posts: 73

Posted:

Donna our docs read the same. Thou owners are required to provide proof of insurance I'm sorry to say that has not been done.

There are from 4 to 6 units per building and to make matters worse we have flat roofs so you can see the dilemma in replacing the roof with different insurance companies. I wonder who would have the final say so on which roofing company to hire.

Also what happens if an owners gets the proper insurance and submits proof of insurance but because of the added cost cancels it. We would have no way of knowing the unit was not insured.

I'm also wondering the legalities of the HOA carrying property insurance on all the building since our docs states carrying property insurance on the common areas.

The HOA has carried insurance on all the buildings for years. To bring this up would be like opening pandora's box.

The reason I'm questioning the additional insurance is because the cost keeps going up and is now approx. a quarter of our budget.

I wish there was a similar HOA that can tell me how they handle their insurance.

MissyS (Florida)
Posts: 73

Posted:

Tracie not sure what you mean by Business Owners insurance.

Our docs state each owner carry homeowner's insurance and the association carry property insurance on only the common areas.

Since this happened years ago I can't say if it was based upon reading of the association's responsibility for insurance. My quess since no admendments were recorded the board took it upon themself to carry the duplicate insurance.

EllenS1 (Florida)
Posts: 1,148

Posted:

Missy,

One thing to keep in mind is that probably most owners carry a mortgage where insurance costs are escrowed. If they do not require an escrow because of a low mortgage amount I would think they would require proof of insurance. Our HOA only requires proof that there is termite service on all units. This doesn't answer your question but it's just my two cents worth.

TracieS (Colorado)
Posts: 460

Posted:

Ok, so your association pays for full insurance on the structures? AND, owners/members are required to carry FULL homeowners insurance (not an HO6 policy)??? If I were in your association, I would be holding back a large portion of my assessments until the issue is resolved. Well, I don't know if I would hold it back, because then there'd be liens, and whatnot...I'd pay under protest, though.

My association (joined townhomes), like I said before, does NOT require insurance by the owner/member. The Business Owners policy covers our common areas (although, I mean, it's just grass...) AND is full replacement coverage on our units and garages (essentially covering from the drywall OUT).

Let's say one of our buildings (we're four buildings with 4-6 units in each) were completely demolished. It has 4 units. Three unit owners carry HO6 insurance. Those three unit owners would be made completely whole following damages through the association policy (covering the structures) and the HO6 policy covering (usually) the contents inside the house. HO6 = kind of like renter's insurance, but can cover carpet/dishwasher/etc. The 4th owner, without the HO6 policy...well, the unit would be put back the way it was (making the association WHOLE), but without any type of furnishings inside. Probably not finished drywall. Probably not carpet. Probably not the refrigerator/stove/etc.

What more could be needed? In this case, who cares if the owner doesn't carry an HO6 policy? The association's ASSET (the structures) will be fixed...

MicheleD (Kentucky)
Posts: 4,491

Posted:

Quote:

Posted By TracieS on 11/12/2009 2:26 PM
Ok, so your association pays for full insurance on the structures? AND, owners/members are required to carry FULL homeowners insurance (not an HO6 policy)??? If I were in your association, I would be holding back a large portion of my assessments until the issue is resolved. Well, I don't know if I would hold it back, because then there'd be liens, and whatnot...I'd pay under protest, though.

Whew! I'm glad you changed gears on that one.

We must be very careful to never recommend people withhold their assessments, or any portion of their assessments. The association holds all the cards in that case, and liens are not only possible, but potentially foreclosure, too.

TracieS (Colorado)
Posts: 460

Posted:

I know, I know... I was trying to show how completely out of line the association is (seriously, these owners are getting FLEECED by having to pay for duplicate insurance coverage!!!!!), but then I brought myself back into line...

GlenL (Ohio)
Posts: 5,491

Posted:

Missy it would be unwise in the extreme for the BOD to not carry insurance on the buildings if any part of them such as roofs or walls are common areas which unless your CC&R's state differently certainly are. Somewhere in the CC&R's exactly what the Association must provide coverage on should be spelled out.

As to notification when a policy is cancelled you can require that the HOA be named as an additional named insured and require ten days written notice before the policy can be cancelled or significantly modified.

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