Rain, Rain, Go Away -- All this damage ... who will pay?
With record rainfalls this season, Colorado community associations and managers have stayed busy responding to reports of water intrusion and hail damage. After the immediate excitement subsides, our phones start ringing. Managers and board members typically ask us some variation of the following questions about insurance:
Is the association or the owner responsible for insurance coverage? This question often arises in the context of condominium and townhome communities, and the answer depends on what the governing documents and controlling statutory provisions say. Often, the documents do not give clear guidance on which party bears the burden for insuring specific components, hence the call to the attorneys. The answers sometimes come as a surprise to uneducated owners and even association boards.
We recommend that associations evaluate insurance obligations with legal counsel and their insurance professionals to ensure proper coverage and to enable clear communication with owners about what coverage applies. Through the preparation of insurance and maintenance charts that summarize association and owner obligations, and the adoption of insurance guidelines that state insurance coverage responsibilities and provide step-by-step procedures for reporting and handling claims, associations can proactively educate owners and reduce confusion when losses occur.
Who pays the deductible? Under certain circumstances, associations can allocate insurance deductibles to owners. We recommend that associations include insurance deductible provisions in comprehensive insurance guidelines. Associations should adopt insurance guidelines before a loss occurs to assist owners in understanding their obligations and to minimize disputes over the deductible. Associations that do not have such policies in place will need to rely on the recorded covenants and bylaws, and applicable sections of the Colorado Common Interest Ownership Act (CCIOA), to assist in determining the responsible party.
Can an owner file a claim on the association’s insurance policy? Colorado statutes clearly state that the subject matter of a potential claim must fall within the association’s insurance responsibilities before an owner may make a claim on the association’s policy. However, subject to statutory procedures, owners can submit claims to an association’s carrier if the subject matter of the claim falls within the association’s insurance responsibilities. In general, if the association’s insurance responsibilities cover the potential claim, an owner may make a claim on an association insurance policy as long as the owner first notifies the board in writing of the potential claim, follows any applicable policies of the association for adjustment of claims, and gives the association at least fifteen days to respond in writing and inspect the damage, if requested. The potential for owners to file claims on association insurance policies underscores the importance of associations adopting insurance guidelines that state procedures for adjusting claims.
Our office offers fixed fee pricing for insurance and maintenance charts and insurance guidelines that assist your association in addressing insurance questions. Please contact one of our attorneys with any questions or for applicable pricing.