Many gravitate to the carefree
lifestyle of condominium living, and
some people go the extra mile by volunteering to serve on their condo association’s board of directors. But when the
worst happens a fire, hurricane or accident board members can find themselves in a less than carefree situation.
“The main cog in condominium association insurance is property,” says Richard A.
Foote, account executive, Gateway
Insurance Agency in Fort Lauderdale, Fla.
“But association officers and volunteers
also are exposed to lawsuits and should be
protected with specific insurances.”
Smart Business recently spoke with
Foote about how condominium associations can best determine their insurance
needs while implementing certain cost
How has the condo insurance market evolved
over the last several years?
With all of the hurricanes blowing
through here, a lot of the big companies
that write property all over the country
pulled out of Florida. That’s why the state
of Florida was basically forced to develop
its own insurance company called Citizens
Property Insurance Corp. Most condominium associations were at the mercy of the
state and pretty much had to go with
Citizens. But because we didn’t have any
hurricanes last year and at the time of
this article, we have had no hurricanes this
year there are some viable new companies creeping back into the market. We still
can’t insure a 30-year-old condo that’s right
on the beach with any company but
Citizens, but a condo located inland that is
less than five years old all of a sudden
we have some alternatives.
What types of condo insurance does the state
Section 718.111 (11) of the Florida
statutes says that for all insurance policies
issued or renewed after Jan. 1, 2004, the
condominium association is responsible to
insure all portions of the condominium
property located outside the units.
Additionally, it must insure condominium property located inside the units as such
was initially installed, or replacements
thereof of like kind and quality and in
accordance with original plans and specifications, if those are available. The association must insure all portions of the condominium property for which the declaration
of condominium requires coverage by the
How is the insured value determined?
An appraisal by a licensed professional
should be completed every 18 months to
ensure the property is insured to its value.
An appraisal demonstrates due diligence on
the part of the board members and gives the
board members peace of mind knowing
that the property is accurately insured.
Additionally, an appraisal prevents underinsuring, which puts the property at risk for
having funds to rebuild in the event of a catastrophic loss, and overinsuring, which
results in paying extra insurance premiums.
What are the common types of condo association policies?
First, the association wants to protect all
the common areas with property insurance
and general liability the pool, the cat walks, the elevators, etc. We call it the ‘four
walls out.’ Second, directors and officers
liability insurance protects the association
officers or volunteers if they get sued.
Third, crime coverage protects the association if its officers commit dishonest acts.
Finally, policies for flood coverage and
workers’ compensation should be in place.
An umbrella policy is designed to kick in
when the general liability and the directors
and officers liability limits are exhausted.
Most condo associations carry $10 million
or $15 million of additional liability coverage in an umbrella policy.
What are the individual unit owners responsible to insure?
Unit owners must insure all floor, wall
and ceiling coverings. Coverage must
include electrical fixtures and appliances;
air conditioning and heating equipment;
water heaters and water filters; built-in
cabinets and countertops; window treatments including curtains, drapes, blinds,
hardware and similar window treatments that are within the unit boundaries
and serve only that unit. Owners also must
carry coverage for air conditioner compressors servicing only a specific unit,
whether located within or outside the unit.
What cost controls can help mitigate premiums?
Condominium coverage is pretty cut and
dried, so we make sure the associations
take steps to mitigate their premium. The
main step is windstorm mitigation. This
basically is a way for the association to
reduce the property insurance on its building based on how the building was constructed. An inspector goes through the
property with a four-page document that
answers all of the insurance company’s
questions as to how the roof is attached and
how the building will hold up in a wind-storm. With a well constructed building the
wind mitigation credit will be larger than a
much older building with poor construction.
RICHARD A. FOOTE is an account executive with Gateway
Insurance Agency in Fort Lauderdale. Reach him at (954) 332-1849 or [email protected].