Putting a Premium on Your Insurance Coverage A Guide to Understanding Condominium Property Claims

Even with proper risk management best practices, it’s impossible to completely avoid all types of insurance claims from happening. At heart, a claim is like any other business dealing—a negotiation. Your ability to convincingly argue your position and support it with solid, factual-based evidence can often sway the outcome in your favor. With that said, it is no secret that condominium association property claims can be complex and confusing.

Condominium Governing Documents

Most claim coverage determinations are based on the intent of the “Condominium Governing Documents,” such as the bylaws and the master deed. In most cases, these documents define and determine what is covered by the association’s master property policy vs. the unit owner’s individual property policy (usually an HO-6 policy) in an individual unit. 

An HO-6 policy covers the unit owners’ personal contents, additional living expenses, and any additions or alterations to the unit. The association’s master property policy is intended to cover the association property as defined in the governing documents and common areas of the building. 

Governing documents range across different associations and the interpretation of these documents can be complex and challenging. Some definitions in the documents are clear, and state that the association is responsible for original specs, such as interior walls, original floors and cabinets. This means that the damaged property must be original when purchase with no upgrades by the unit owner to trigger coverage by the master policy. It’s important for the property manager to view any damaged units to determine if the damages were to original specs per the sales agreement. 

Every property manager should be knowledgeable of the intent of the documents in order to “set the tone” of a claim, and guide the adjustor on the same. If a property manager is uncertain of the insurance coverage intent for damages in the documents, it is prudent to consult with either the attorney who drafted the documents or the association board attorney to clarify the intent of same. The interpretation of the coverage afforded could defeat a large claim under the association’s master property policy and be able to tender it to the unit owner. 

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