Many Colorado communities are facing the need to impose special assessments as a result of recent wind and hail events in the state. Special assessments may be imposed in circumstances where the association lacks cash on hand to pay for a large or unexpected expense. Such assessments have become increasingly common due to changes in the insurance industry.
Historically, condominium communities and other associations that are obligated to insure roofs and exteriors against damage have paid a flat deductible for various claims. Due to the expense and frequency of hail claims, insurance companies are no longer offering flat deductible amounts, and are instead requiring associations to pay a percentage based on the value of the insured property. Now, instead of a community paying a predictable $5,000 or $25,000 for a hail claim deductible, communities are facing unexpected six-figure deductibles.
Because this change is recent, and the deductibles are high, many communities do not have sufficient cash reserves to pay the deductible. Other communities choose not to reallocate reserve funds that may be earmarked for other projects, like asphalt replacement. As a result, communities turn to their members to bear the deductible by way of a special assessment. Many homeowners have loss assessment or additional coverage on their personal insurance policies, which can help pay some or all of that special assessment.
If your community is facing an unexpected deductible and you aren’t sure how to pay for it, contact legal counsel to determine the process for undertaking a special assessment. In the meantime, as the weather starts warming, hope for rain – and no more hail!