Monday, May 17, 2010

What were they thinking? Going without insurance is not an option.

Many of you may have read about the 30-unit Lauderhill condominium that was recently destroyed by fire. Fortunately, there was no loss of life. Unfortunately, there was very significant property loss and all of the accompanying grief and inconvenience that brings to the people who were living there. Even sadder is the fact that the condominium board decided not to renew the property insurance as a “cost saving” measure last year.

Section 718.111(11)3(d) of the Condominium Act specifically provides that:

An association controlled by unit owners operating as a residential condominium shall use its best efforts to obtain and maintain adequate insurance to protect the association, the association property, the common elements, and the condominium property that is required to be insured by the association pursuant to this subsection.

We can debate all day long where struggling associations are going to find the money to pay for insurance premiums, but going without coverage is simply not an option. Cutting out every other service if need be, passing a special assessment and/or terminating the condominium entirely would be better options.

Debating about whether or not the directors’ actions constituted a breach of fiduciary duty or wanton recklessness might be psychologically fulfilling but won’t do much to make these owners financially whole after this tragedy.

I have previously been told by clients struggling with incredibly high delinquencies that they are considering going without insurance coverage as a result. In the past, that discussion was confined solely to windstorm coverage. I advised those associations not to do that even IF they received 100% approval of each and every owner living in the community. Board members have to make tough and intelligent decisions even when their members don’t support them. In the sad case of this Lauderhill condominium, the owners weren’t even kept in the loop as to the decision being made that put them in peril.

This condominium is a cautionary tale for any other boards or directors out there that think cost savings should start by cutting out your safety net.


  1. this a perfect example of why an internet community social network is beneficial to all homeowners or unit owners. Not too many boards are transparent, intelligent, and forthcoming.

  2. Can you say "breach of fiduciary responsibility?" One or more homeownwers might claim "negligence" - not good.
    Ted Salgado, Principal Reserve Advisors, Inc.

  3. Great post looking at this issue. For me, meeting with insurance brokers in Oakville was one of the first things I did when I got my condo there. It just doesn't make sense to invest so much of your money in something, and then completely ignore a way to protect it. I feel really bad for these people and hope that they find some way to get compensated.