Not surprising are the calls we get from property owners living in condos, who are looking for help following property damage to their building that affected their unit. This often takes the form of damage to the unit owner’s property which often includes their personal property, i.e., contents, as well as items such as carpet, other types of floor covering, trim items such as door frames, baseboards, cabinets, and the list goes on depending on the type and severity of the damage and the wording in their condominium documents. When a covered casualty event occurs, whether it’s water, fire, the dreaded “mold” word or some other peril, the finger pointing starts and the unit owner is caught in the middle.

Why all this controversy? After all, the Master Association will most likely have insurance to cover the value of the association’s property.  Then there are policies unit owners can purchase called HO6 forms that are tailored to the unit owner’s interest.  With two insurance policies to look to for coverage, why do claims involving unit owner’s property and the Master Association property seemingly always create controversy?

After 20 years in the claim business, I think I have a fairly accurate picture of the issues. Remember, each entity owns parts of items that normally would be unquestionably owned and covered in a single homeowner or commercial policy form. In a condo, both classes of property are commingled in a building structure, precipitating the need to have some type of separation. Over the years, this has led the legislature to rewrite the law defining who owns what and thus who must insure their property or self-insure.

When you walk into a condominium unit, you will likely be looking at property that in part belongs to the unit owner and in part belongs to the Master Association. And don’t forget some of the structural part of the unit such as the windows, A/C, plumbing, etc., even with all the legal changes ownership may still be up for debate following a loss.  And remember there is the issue of who has the right and obligation to make repairs due to the wording in condo documents that can often create an ambiguity due to confusion about repair and replacement maintenance issues for everyday wear and tear versus a causality loss.

So given the long and tortuous history of condo losses and the adjustment process that goes with it and the fact that we do have practices and procedures that have been codified to some extent, why do we still have angry unit owners getting the run around? It’s called responsibility.  No one in the communal setting of a condominium wants to accept responsibility.

First you have the Master Association.  While the Master Association is made up of unit owners, no one unit owner or group of owners owns the building(s) that make up the condo association. In theory, all unit owners own a part of the association based on some formula that may be spelled out in the condo documents.  So given this arrangement, a policy is typically purchased that insures the building’s common elements. The Master Association is governed by a board of directors who often are supported by an outside property management company and may have a temporary or permanent on-site manager to handle the affairs of the association. The Master Association will also have its own insurance agent or broker who will procure insurance for the Master Association’s property.

In my view, despite what others may say, this group has its first allegiance to the function and good order of the Master Association. And yes, this good governance practice should benefit all the unit owners’ interests.  For the most part this works (not withstanding barking dogs, loud music, and any number of fights and sundry issues people living on top of or next to each other may have) except when a property loss occurs.

It’s at this time that little pesky details typically arise which in part are driven by the unilateral interpretation of the condo statutes as well as language in the condominium documents. None of which are likely to be uniform given the time they were written and the property they apply to. Then you have the problem of legal advice from condo and plaintiff attorneys who can often give conflicting interpretation of the statutes and the condominium documents depending on the issues, who they represent and who pays them after a property loss.

Let’s focus on the pesky little details. The most frequent and common loss in a condominium community in Florida is a water damage event. This could occur from water intrusion from above, next door, from a pipe in the walls, an appliance, a water heater or perhaps a dishwasher that accidentally discharges water into the unit. This water often subsequently migrates to other units in the building. Thus, one water leak will likely affect property that belongs to the unit owner where it originated as well as the Master Association’s property and to multiple units throughout a building in the same occurrence.

So, who pays for what? That seems simple if there are two policies in place, right? Not so fast! What about deductibles--both policies have deductibles. The unit owner does not want to go out-of-pocket especially if the water came from above--it’s not their fault this happened. The board or the management company does not want to pay or for that matter even turn in a claim if the loss was caused by a unit owner next door or the unit above the damaged unit. From our experience, boards and/or their management company does not like to be bothered and expect the unit owner (where the loss originated from) to take care of the problem even though some or often most of the damaged property within a unit is owned and insured by the Master Association, i.e., drywall, wall insulation and depending on the condo documents may include door frames, base boards and other building items as originally conveyed by the developer/builder.  

Then there is the negligence issue. We see a lot of condo boards and their management companies advising the unit owner that the responsibility for the loss is with the owner where the loss originated. Sometimes this works and the offending unit owner will call their insurance company and report a liability claim. But here is where it gets interesting.  The liability adjuster very seldom will agree to accept liability but instead blame the water loss on a defective appliance or leaks from pipes in the walls or ceilings that in fact may belong to the Master Association or the unit owner depending on interpretations of the documents and statutes. Thus, a finding of no liability and no payment from the offending unit owner’s liability insurance carrier is most often the outcome.    

Then there is the issue of mold.  If the water cleanup and dry out was not immediately taken care of, it’s a good bet air quality testing will be needed (if you can get someone to pay for it) to see if mold is growing in the unit or within the walls. And what if mold is determined to be inside the walls? Clearly the wallboards or drywall belong to the Master Association, but any wall covering, paint, etc., is the unit owner’s responsibility. So, if mold is determined to be in the wall cavity, which insurance carrier will agree to mold remediation and all that may be involved in that process? And remember, wall coverings such as paint, wallpaper, or maybe high-end wall finishes are the unit owner’s property. You can start to see the nightmare unfold.

In most cases the Master Association through its management company will have the water cleaned up by an emergency service restoration company.  But when the bill shows up, and in our experience, this is often where the trouble starts.  As an example, how do you proportion out the emergency service bill with two property owners benefiting from the work. And who pays for unit owners and Master Association property that likely will be destroyed or damaged in mitigation efforts?

These are but a few of the issues we run across in condo loss adjusting. When you have controversy following a loss to multiple owners, who for the most part do not know or understand the rules, regulations, laws or the language in their own condominium documents, things can quickly get out of control.

What should a unit owner who is getting the run around from the HOA or management company do?  One technique we have seen used is to send a certified letter to the board of directors (all of them) and the management company demanding that they notify their errors and omissions or directors and officers insurance company of a claim that the unit owner will be making against the board for their negligence in failing to handle the loss in a proper manner. From our experience, just the threat of this action has worked wonders.

Alternatively, unit owners, management companies and condo boards should consider retaining an experienced and reputable public adjusting company who can manage the loss so the issues can be properly sorted out and all the resources available can be utilized to repair and restore the property to its pre-loss condition.

Let us know about your condominium insurance claim nightmare.

If you have questions regarding Hurricane Milton related property insurance damage claims visit our website or contact us to submit a question to one of our public adjuster insurance claim experts.