Question: We insure a Condo Trust under a business owner's policy (BOP). A condo unit owner was injured in a slip & fall in the condo parking lot. The BOP policy excludes medical expense coverage for "any insured." According to our Condo Association Coverage Charges endorsement, which expands the definition of Insured: "…Each individual unit owner of the insured condominium, but only for liability arising out of the ownership, maintenance, or repair of that portion of the premises, which is not reserved for that unit owner's exclusive use or occupancy." Does this make the injured condo unit owner an "insured" under the policy of the Condo Trust and hence excluded from the medical expense coverage under the Trust's policy?
— Massachusetts Subscriber
Answer: Yes, you have surmised correctly that the endorsement does indeed make the injured condo unit owner an "insured" under the policy of the Condo Trust and hence excluded from the medical expense coverage under the Trust's policy.
Liability coverage is third party coverage, and does not provide first party coverage to the insured. The liability section of the BOP form provides coverage for liability sums that an insured is legally obligated to pay as a result of "bodily injury" "property damage" or "personal and advertising injury" to which the insurance applies. There is an applicable exclusion: Medical expenses coverage excludes expenses for "bodily injury" … To any insured, except "volunteer workers."
The Condo association Coverage Changes endorsement adds that the condo unit-owner as an insured for liability covered by the policy, but the exclusion for medical expenses coverage to an insured would apply and no medical payments coverage would be available to the insured.
Question: When a condo owner makes improvements to the condo, for example new kitchen cabinets, and later sells the condo, are the cabinets still betterments and improvements for the new owner who purchases the condo?
— Texas Subscriber
Answer: The condo policy does not define "improvements and betterments." The policy provides coverage for betterments and alterations. While the new owner did not make the alterations, they are still alterations all the same. Also, the state statutes determine whether the unit owner or the condo association is responsible for appliances and cabinets. In our opinion the alterations still count as alterations under the new owner and should be insured as such.
Question: What is the correct coverage form to insure a condominium unit that is rented or held for rental, but is not the insured's/owners's residence premises?
— Texas Subscriber
Answer: The ISO HO 17 33 provides coverage for condominiums rented to others. Personal property of the insured is excluded as he is not present at the residence, and theft is excluded for money, securities, bullion, gold, goldware, personal records, tickets, jewelry, watches, furs, and gemstones. Business is also excluded except for the rental of the unit itself. The rest of the HO 00 06 applies as normal.
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There may be a gray area when property damage happens at a condo as a result of a renter's crime. (Photo: iStock)
Question: On Businessowners form BP 00 03 01 01 10, a condominium association filed claim when a unit, which was rented out and damaged when the tenant shot and killed his wife. The tenant's carrier denied the claim. The unit owner and condo association have presented a claim under the association's policy stating that it is primary under Conn. Stat. Sec 29, Section 47-225. Does this statute call for the association policy to be primary and cover all damages, including tenants improvements and betterments?
— Virginia Subscriber
Answer: The actual reference in the Connecticut statutes is 47-255.
In section (b) (1), the statute says that if the building contains units that are divided by horizontal boundaries described in the declarations or by vertical boundaries comprising or located within common walls between units, the insurance would "include the units and all improvements and betterments installed by unit owners, unless the declaration limits the association's authority to insure all improvements and betterments or the executive board decides, after giving notice and an opportunity for unit owners to comment, not to insure such improvements and betterments." So, while this is governed somewhat by statute, it depends on how the units are divided, what the policy says, and what the board and the unit owners have decided regarding insuring improvements and betterments.
In section (d), the statute says that "if, at the time of a loss under the policy, there is other insurance in the name of a unit owner covering the same risk covered by the policy, the association's policy provides primary insurance." If both the unit owner's and the association's policies do cover improvements and betterments, the association policy is primary.
Question: We have several insureds, insured on standard condominium unit-owners policies, who resided in a large condominium complex. The condo building was damaged by the recent hurricanes; however, not all units sustained physical damage. None of our insureds' units were damaged. Because some of the damaged units were found to contain mold, the condo association made the decision to gut all units to prevent any further spread. Now our insureds are looking to us to cover these costs… Are we responsible?
— Florida Subscriber
Answer: In answering this question, we are assuming that the units in question did not sustain direct physical damage from wind or water. We do not think the standard condominium policy provides coverage in the situation you describe. The policy excludes loss to property caused by acts or decisions of any organization. The condo association is the organization; the decision was to gut the property and the act was the actual gutting. Therefore, there is no coverage.
However, in the course of the gutting, if an ensuing loss occurred — collapse because of faulty methods in renovation, fire from an improperly disconnected gas line, etc. — that loss would be covered unless otherwise excluded.
We also think that in most situations the condo master policy provides primary coverage, if any. The ISO condo association form is written this way; however, having reviewed that form, the exclusion reads the same. There was no applicable case law on this situation.
Question: Our claims department continues to struggle with coverage provided by the CP 00 17 10 00 for (specifically) carpeting, and also wallpaper and paint inside a condominium unit. We are currently of the opinion that if the condo documents (master deed and bylaws) require the association to insure, for example, all units, common elements and limited common elements, the CP 00 17 would pick up coverage for carpet, wallpaper and paint.
We frequently encounter losses where the damage is confined to a single unit and it is necessary to replace vinyl or carpet and padding because of the buckling of the sub flooring. Confusion (not to mention frustration) occurs in trying to determine where the coverage comes from.
The HO-6 policy contains a statement making it excess over the association policy, and the CP 00 17 is specific that it is primary and not contributing. Is it the intent of the CP 00 17 to include carpet, etc., if the association is charged with insuring it? And, in the second paragraph of the HO-6 "other insurance" clause, the word "recoverable" could indicate that if the master policy has a deductible which prevents recovery from its policy, the HO-6 will drop down and become primary to that policy.
What are your thoughts about these two matters?
— South Carolina Subscriber
Answer: At one time condo unit owners were considered to have purchased "air space" and everything from bare walls out was considered the owner's responsibility to insure. Now the condo association master policy may cover individual unit owners' "fixtures, improvements, and alterations that are part of the building structure" so long as the association agreement requires it. Improvements and alterations that are part of the building include (but are not limited to) paint, wallpaper, lighting fixtures, counters, etc. There is also coverage for appliances such as dishwashers.
Coverage for carpeting follows the same logic. If wall-to-wall carpeting is included in the mortgage it is part of the realty and thus falls under the "improvements and alterations" that are part of the building structure. If not so designated, then generally where carpet is laid over an unfinished floor it is considered part of the building and would be covered as such. If the carpet is laid over a finished floor, and its removal would not materially damage the floor, courts have generally held it to be contents. Coverage would therefore be found under the HO-6.
You are correct in your interpretation of the deductible application. If the association has insurance covering the same property as the HO-6, the unit owner's insurance "will be excess over the amount recoverable under any other insurance." So, if nothing is recoverable because the association's deductible is greater than the amount of the loss, the unit owner's coverage becomes primary. The purpose is to prevent double payment for a loss, not to prevent payment for a claim.
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