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Fall Law Seminar
September 26,2009
CATS presents its second Law Seminar for the Community
Association Industry. Topics are focused on the legislative action
being presented that will impact the CID industry, a review of
critical existing laws, and relevant court cases that impact Boards
and Managers. Tips on enforcement of the governing documents, court
cases that provide us direction and how to avoid expensive legal
costs by using sound practical solutions that will work to achieve
compliance, and much, much more...... Click Here for
Registration |
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CATS is pleased to provide our new monthly
newsletter with real questions posed at our last Law Seminar. We
hope that you find this information useful and will share it with
others.
This month's questions are answered by Joe Mirocha, CIC, CIRMS of
RJF Agencies, Inc., an insurance expert and part of the CATS
faculty.
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 A: When
repairs are under the deductible, and damage is to the inside of a
unit, the Owners HO-6 policy should handle the cost. If the
damage is to Common Area of the association, the Association's
documents may dictate the procedure for handling the
deductible. If they are silent, it would be in the best
interest of the Association to design a formal deductible policy
and make it part of the rules and Regulationsinterest.
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Q: Who is required to pay the deductible in a claim on the Association’s policy?
 A: The Association's Governing Documents should dictate who pays the deductible in the event of a claim. If the Documents are silent in this area, it is recommended that a formal deductible policy be drafted and made part of the Rules and Regulations of the Association. A general rule of thumb is that unit owners are responsible for the deductible if the damage is to the inside of the unit, and the association is responsible for the deductible to common areas.
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Q: In an insurance
claim, the practice used in our claim was to contract with a
restoration firm to work with the adjuster to identify damage and
make the necessary repairs. No bids were required. Is this a
standard practice and is it a "good" practice?
 A: In
most situations, different "bids" for repairs are
not necessary as the contractor will need to do the work for the
money provided by the insurance company. It is more important
to feel confident that the contractor selected is knowledgeable and
experienced in this type of repair work and has worked with
insurance claims in the past. Having a contractor selected before
the claim occurs is always a good way to speed up the processing of
the claim.
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Q: Is there coverage for owners that perform repairs and lawn work themselves that have not been requested or approved by the Board?
A: In most cases, unit owners who are performing building repairs or lawn work are not covered under the Association's General Liability policy. Unless the Association is negligent in some way, and this was the cause of the injury, the General Liability policy would not apply. Medical Payments coverage does not cover unit owners, unless they are on official Association business in a volunteer capacity. Insurance coverages vary by company so make sure to read your policy. |
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Q: What is the Association’s liability for persons entering on the common area without permission hurting themselves on the property?
A: The Association has a responsibility to provide a safe environment for unit owners, guests and anyone else using common areas, regardless if they are invited or not. A "No Trespassing" sign will make the intentions of the Association clear to uninvited guests. However, this will not absolve the Association from any liability if the Association is found responsible for injuries to anyone on common area. |
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Q: In our HOA the owner owns the sidewalks and stoops, but the association provides snow removal. Who would be responsible in a slip and fall?
A: If the Association maintains the sidewalks and steps during the Winter months, the Association's policy should respond to a claim. The unit owner's HO-6 insurance company should also be notified. The two adjusters will determine % of fault or if one company will pay all damages. |
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Q: Does a workers compensation policy cover volunteers doing work on the property? If they are paid?
A: A Workers Compensation policy does not cover volunteers. If this person is paid, then they are no longer a volunteer. They need to have their own WC insurance or the Association should consider them an employee and purchase the required insurance.
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Q: A none resident ran into our mailboxes causing damage. How do we get them to pay for the damage? Will the Association policy provide coverage?
A: If a non resident caused damage to Association property while operating a automobile, the auto insurance policy should cover the damage. If the operator has no auto insurance, you can try small claims court. Or, the Association's insurance policy should cover the damage, subject to the deductible. Unfortunately, damage to mailboxes may fall under the deductible of the Association's policy, so you are left with options 1 and 2 above.
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Q: What is the difference between original specification and Bare Walls coverage?
A: Original Specifications and Bare Walls refer to what is covered by the Association's insurance on the inside of a unit. Original Specifications means all permanent fixtures, cabinets, wall coverings, floor coverings, built in appliances, etc. that were part of the unit when turned over to the first unit owner from the developer. The unit owner would need to insure any improvements or betterments to the unit, plus cover the deductible gap of the Association's Master Policy. Bare Walls means only the sheetrock and one coat of paint is covered on the inside of the unit. All cabinets, floor coverings, electrical and plumbing fixtures, millwork, built in appliances, or any other additions inside the confines of the ceilings, walls and floors are unit owner responsibility to insure, plus the deductible gap.
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Q: Does the Association have to use insurance proceeds for the damage and the scope of work provided by the adjuster? Does all of the scope of work be done and what is the time frame for completing the work?
A: The Association has a fiduciary responsibility to perform all required repairs due to damage to Association property. The insurance company will only pay the Actual Cash Value of the damaged property at first, and then will pay the full Replacement Cost (or holdback) once the work is completed. There is usually a time requirement of 180 - 200 days where you need to notify the insurance company of your intent to recover on a Replacement Cost basis. The work does not need to be completed in this timeframe, just notice to the insurance company. If the work is not completed in a "reasonable" amount of time, the Association could be responsible for any increase in material or labor costs over and above what was in the original settlement.
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The comments and answers above are general in nature. Coverage and policy interpretations should be confirmed with the existing insurance agent, insurance company or legal counsel.
For more information please visit our website at www.catsmn.com
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