Tuesday, September 8, 2009

Lingering Confusion Over Individual Condominium Insurance Policies

In 2008, the Florida Legislature decided that condominium boards should be required to inquire once a year if their members had insurance coverage for their individual units. These individual homeowner policies (known in the industry as H0-6 policies) were also required by the 2008 Legislature to contain loss assessment coverage (although oddly they called it special assessment coverage) of at least $2,000 per occurrence and to name the association as an additional insured and loss payee on all casualty insurance policies issued to unit owners. Condominium boards were also given the ability to purchase any such missing policies and to specially assess any owners lacking such coverage for the costs of same.

Four and five years ago when a series of hurricanes battered our state, many boards were dismayed to find out that many owners did not have interior unit coverage and those damaged units remained as vacant shells for years after the storms because the owners had no money to restore them. At that time, boards were clamoring for some ability to ensure that owners were responsible enough to maintain H0-6 coverage.

Unfortunately, at the precise moment the Legislature finally provided boards with the tools to ensure interior unit coverage, most boards no longer wanted it! The subprime mortgage crisis was in full swing and boards were seeing their delinquencies rise at an alarming rate. The last thing most boards want right now is to be purchasing individual unit policies and pursuing special assessments for those policies that they might not be able to recoup.

However, much of the fear connected with this issue right now is borne out of confusion or misinformation. Here is a quick overview of the law as it stands.

1. The Condominium Act has required for several years that individual owners have unit coverage there was just never any statutory enforcement mechanism before 2008;

2. Boards must send out a notice inquiring if the owners have coverage and the owners must send back proof of such compliant policies within 30 days of the board's notice;

3. The Board can but is not obligated to purchase any missing policies. That means for many boards once they send out their notice of inquiry their obligation is over;

4. SB 714 which passed both houses of the Florida Legislature during the 2009 Session would have, among other things, removed the right to force place policies. Sadly this bill was vetoed by Governor Crist as a result of other provisions in the bill relating to sprinkler systems. There will undoubtedly be another attempt to address the 2008 changes next year.

It is important for boards to speak with their association attorney to determine the best way to meet their current statutory inquiry obligation without unnecessarily scaring their members. Rather than removing the ability to force place altogether perhaps a better option is to amend 718.111(11) to state that associations who want to force place can and remove the need for all associations to inquire as to coverage especially if many have no desire to become involved in the issue of interior unit coverage.

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