Condominium Gutting Excluded as an Act or Decision?

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

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.