“Each
unit owner is responsible for purchasing and maintaining standard
condominium homeowners insurance coverage (for example, an HO6 policy).
Such
coverage shall be sufficient to adequately cover all contents and upgrades, as
well
as general liability.”
This regulation took effect on March 21, 2002.
In conjunction with this new regulation, your Board of Directors has recently voted to scale back the extent of insurance coverage provided to individual unit owners under the Association’s blanket insurance policy. As required by your association’s documents, the Association’s insurance policy covered nearly all claims for property damage, even those items of damage which occurred inside a member’s unit and which occurred through no fault of the Association. In addition, deductibles applicable to such claims were relatively low, and the Association has been paying many of those deductibles. As a result of this extended coverage, over the past several years a large number of claims were submitted to the Association’s insurer, State Farm, yet many of those claims were caused by incidents in which the Association played no role. As a result, the Association developed an extensive “claims made/paid” history. Recently, upon renewal of the Association’s policy with State Farm for the coming year, your Board was told that the cost of this existing coverage (by way of premiums due) would increase 20% over that paid last year. This increase is due, in large part, to the Association’s extensive claims history.
Your Board has now taken decisive action to keep down the skyrocketing costs of insurance coverage for your Association:
* First, it has voted to require each unit owner to pay the deductible amount applicable to any claim resulting from damage occurring inside his/her unit and for which the Association played no role. It has also voted to require each unit owner to pay the deductible amount applicable to any claim resulting from damage occurring on the common property caused by the actions of that unit owner or guest. This means that for each claim made to State Farm, the first $1000.00 in damages must be paid by the unit owner responsible for the damage. For example, if a grease fire on a unit owner’s stove causes damage to the unit’s kitchen, that unit owner will be required to pay the first $1000.00 in damages.
* Second, your Board has voted to increase the deductible on water-related damage claims from $1000.00 to $5000.00 per occurrence. Water-related damage claims (such as leaking pipes, leaking hot water heaters and overflowing sinks, tubs and toilets) constitute the largest number of claims made against the Association’s blanket insurance policy. For example, if a hot water heater in a second floor unit leaks and causes damage to the first floor unit, it will now be the responsibility of the owner of the leaking hot water heater (or that owner’s homeowners insurance carrier) to pay for the first $5000.00 in damages caused to the first floor unit by the leak.
* Finally, your Board has enacted the Rule referred to at the top of this letter requiring all homeowners to carry condominium homeowners insurance in an amount sufficient to adequately cover all contents and upgrades in the unit. As unit owners, you should contact your homeowners insurance agents to advise them that unit owners are responsible for the payment of these deductibles and to make sure that your own coverage coordinates properly with the Association’s coverage so that you are neither over-insured nor under-insured. If you have questions regarding these coverages, please contact State Farm at 856-429-5550.
One final note, leaking hot water heaters which caused damage to the inside of a unit and neighboring units were the most frequent and numerous claims made to the Association’s insurance carrier in recent years. Bear in mind that the typical working life span of these water heaters is ten to twelve years; thereafter they should be frequently inspected and, if found to be in poor condition, they should be replaced.
These actions taken by your Board of Directors will result in significant savings over time on the Association’s insurance costs, a savings that will ultimately benefit each member of your community.
Very truly yours,
SHIVERS, SPIELBERG, GOSNAY & GREATREX, LLC
George C. Greatrex Jr., Esq.
Lakes at Larchmont Condo Assoc.