The statutes vary by state, with some states being very specific and others not. For example, Kentucky statute states that land, foundations, basements, floors, main walls, ceilings, roofs, halls, lobbies, stairs, entrances/exits, elevators and all devices/installations existing for common use; central power/light/gas/water are common elements. Arizona simply states that all portions of a condominium other than the units is a common element. Both states then discuss how chutes, flues, ducts, wires, walls partly within/outside the boundaries of the unit are also part of the common elements.

Limited Common Elements

Limited common elements are generally elements shared between one or more units but that the rest of the community does not access; a shared balcony or patio. For example, Kentucky statute states that limited common elements include stairs, corridors, and balconies common to the units of a particular floor or building. Arizona states that limited common elements are the portion of a common element for use by one or more but fewer than all units, any chute, flue, duct partially within/outside unit-portion serving only that unit is a limited common element for that unit, and that limited common elements can be reallocated between units if the owners agree. The statutes are very detailed, and while there are similarities among states there are also significant differences. The declarations of the association should align with the respective state statutes.

Unit

What constitutes the unit is also defined by statute and again, this varies by state. In general, the unit is considered to be the portion of the condominium designated for separate ownership or occupancy, but the statute may go so far as to identify walls, floors, ceilings, paneling, paint, tile, windows and other portions as part of the unit or not part of the unit. Again, the declarations will indicate this, as will the statutes. These explanations help identify ownership and who is responsible for maintaining and insuring the property.

Condominiums are not the only properties with homeowner associations. There may be communities with townhouses that need a homeowners policy mixed in with condominiums that need a unit owners policy. The same may apply to commercial buildings. This makes the declarations or association agreement very, very important. While the statutes can give the definition of common elements, limited common elements and units in general, it does not define these elements for any particular given property. Once you have a solid understanding of what consists of the unit and common elements for the property in question, you then turn to coverage.

Commercial Coverage

Association Coverage

The association, whether it's for a residential or commercial policy, will need a commercial property and commercial liability policy. Let's start with commercial property, the Condominium Association Coverage Form CP 00 17.

The CP 00 17 is designed to provide coverage for buildings owned by the condominium association. The buildings are rated separately and fixtures outside of individual units, including outdoor fixtures, improvements and alterations that are part of the building, and appliances, are also considered to be part of the building coverage under CP 00 17. Likewise, permanently installed equipment and machinery are covered, as is personal property owned by the association and used to maintain the common property, including appliances that are not contained in individual units. For example, there may be a clubhouse with a kitchen available for community events or that residents can use for large parties.

Certain types of property are covered if it is required by the association agreement, such as fixtures, improvements and alterations that are part of a building or structure, appliances for refrigerating, dishwashing, cooking, laundering, ventilating, security or housekeeping.

Business personal property of the association is covered as well, and this is property in or on the building or structure listed in the declarations or within a specified number of feet of the premises. Business personal property is considered to be personal property owned jointly by all unit owners, as well as the association's interests in the labor, materials or services furnished or arranged by the insured on personal property of others, and leased property that the association has a contractual responsibility to insure unless coverage is provided for under Personal Property of Others coverage. However, personal property of unit owners is not covered.

Personal Property of Others is specifically outlined in the policy as property in the insured's care, custody or control and that is located in or on the building described in the declarations or is within a specified number of feet of the described premises either in the open or in a vehicle. The current ISO form has 100 feet, but policies vary.

So the policy providing coverage for the association in short covers the common elements, building personal property used to maintain the common elements, and personal property of others as long as it is not property of the unit owners. Certain property within the units such as fixtures, improvements and alterations that are part of the building will be covered if the association agreement requires it. If the agreement does not require it, then it would become the responsibility of the unit owner.

The policy also states that a unit owner may have other insurance covering the same property covered in the association policy. The policy states that this insurance, meaning the association policy, is primary and does not contribute with such other insurance, other insurance being that of the unit owner. Here the policy is making it clear that for the property covered by the association policy that the association policy is primary.

Commercial Unit Owner

For the commercial unit owner, property coverage is provided in the CP 00 18 Condominium Commercial Unit-owners Coverage Form. Coverage is provided for property at the premises described in the declarations from a covered cause of loss. Covered property includes business personal property and personal property of others. Included in property not covered are fixtures, improvements and alterations if part of the building, and appliances for refrigeration, ventilation, cooking, dishwashing, laundering, security or housekeeping if the association agreement requires the association to provide such coverage. This mirrors the language in the Condominium Association Coverage Form CP 00 17 that provides coverage for the association. As such, if there is a loss to some fixtures in a unit or the refrigeration equipment is damaged in a kitchen fire, the adjuster handling the claim will need to refer to the association agreement or declarations in order to determine which policy should provide coverage.

The unit owner policy also states that the association may have other insurance covering the same property. In this case, the unit owner policy is excess to that policy and does not contribute with that other coverage.

Commercial Liability

Liability issues are more about damage or injury to others, and less about the property itself. Therefore, for liability coverage, the Commercial General Liability Coverage Form CG 00 01 ould be used. Coverage is provided for sums the insured is legally obligated to pay caused by "bodily injury" or "property damage" to which the coverage applies. The injury or damage must be caused by "occurrence" as defined, and the "occurrence" must happen during the policy period and in the "coverage territory".

It's important to note just who is an insured under the CGL policy. In order to be an insured, the person must be listed in the Declarations as follows:

SECTION II – WHO IS AN INSURED 1. If you are designated in the Declarations as:

a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner. b. A partnership or joint venture, you are an insured. Your members, your partners, and their spouses are also insureds, but only with respect to the conduct of your business. c. A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers. d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your "executive officers" and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders. e. A trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as trustees.

This definition includes only those in charge of the organization and not other parties. The association is a group of elected volunteers willing to oversee the maintenance and upkeep of the community; they authorize repair and maintenance to the property, hire and pay vendors, and deal with the day-to-day issues of the condominium community. Unit owners may be required to vote on certain repairs or changes to policies and procedures. However, it is possible that all unit owners could be pulled into a suit against the community as the unit owners all share in the responsibility for maintenance of the community at large. Therefore the endorsement Additional Insured – Condominium Unit Owners CG 20 04 should be used. This amends the definition of insured in the CGL policy to include each individual unit owner as an insured with respect to liability that arises out of the ownership, maintenance or repair of the community beyond the individual's unit. For example, a guest of a unit owner falls while walking along uneven pavement and sues the unit owner, the association and the community for her injuries from the fall.

Coverage under the CGL is open perils with certain exclusions. The Personal and Advertising Injury Liability section may be particularly important to the members of the association, since it provides coverage for "personal and advertising injury" which includes such acts as false arrest, detention or imprisonment; oral or written publication which slanders or libels a person or organization; oral or written publications that violates a person's rights or other actions. Note that if such actions are committed with intent they are excluded; such actions are covered only if they are truly accidental and unintended.

Personal Coverage

Personal Unit Owner

The personal unit owners form HO 00 06 provides coverage for the dwelling and personal property of the unit owner. The dwelling coverage is what is important here and that differentiates between what the unit owners responsibility is under the association agreement and what the association is responsible for.

The policy states that coverage is provided for alterations, appliances, fixtures and improvements which are part of the building within the "residence premises", real property that pertains exclusively to the "residence premises", structures owned solely by the insured at the "residence premises", and property that is the unit owners responsibility under the association agreement."Residence premises" is defined as the unit where you reside as shown in the Declarations of the unit owners policy.

Once again we see how important the association agreement is. If the unit owner is required to insure certain parts of the property outside of the unit, then the unit owners policy will provide coverage. This responsibility must be outlined in the association agreement, and that is all that is required for the unit owners policy to provide coverage for that property. The community may have a gazebo for each building unit, with the unit owners within those buildings responsible for insuring the gazebos.

Another coverage is loss assessment. Unit owners may be assessed by the association for funds because of damage to the property that is either not covered by the association insurance or that has exceeded the limits of the association's insurance. As long as the assessment is because of direct loss to property owned by all members collectively, and if that damage would be covered under the unit owner's policy had the damage happened to the unit, then $2,000 is available for assessments for any one loss. The number of assessments is immaterial; the limit is $2,000 per loss. Assessments that could be charged against the unit owner or community by a governmental agency are not covered.

Under the other insurance provision, the policy states that if there is an association policy that the unit owner's policy is excess over the amount due under that policy whether or not that amount of insurance has been collected or not. The unit owner policy is primary to any amount covered by the policy that is not covered by the association policy. For example, there is a fire in a building and there is damage to the building as a whole and to some individual units. The HO 00 06 will provide coverage for the individual unit-ower for damage to the unit by the fire, but the damage to the building itself will be covered by the association's policy.

Liability coverage is provided for loss assessments charged against the insured because of "bodily injury" or "property damage" that is not excluded, or is for an act of a director, officer or trustee, in his capacity, as a member of the elected association of property owners, as long as that person serves without receiving income for those duties of the association. Coverage is limited to $2,000 per accident or covered act, regardless of the number of assessments. Accident includes repeated or continuous exposure to the same harmful conditions, and acts involving more than one director, officer or trustee are considered to be a single act.

Summary

There are many moving parts when it comes to providing proper insurance coverage to a condominium owner or association. The association agreement or declaration is a key document, in that it defines what the association is to insure as a whole and what the individual unit owners must insure separately. However, the association agreement or declaration needs to comply with state statutes, as each state has statutes dictating insurance coverage and who is responsible for insuring what portions of the condominium. The statutes are very specific in their definitions of three key elements of condominium ownership – common elements, limited common elements and units. Without this detailed information, it would be easy for there to be misunderstandings between unit owners and associations. However, the statutes make it clear exactly who is responsible for insuring what.

The association policy aligns with the statutes and the association declarations, and the unit owners policy aligns with the association policy. The policies are designed to work together in event of a loss so that the damage to the community property and the insured's unit is properly covered. When questions arise, and they inevitably will, the association declaration, the association policy, and the unit owners policy will guide you to where coverage can be found. In some instances you may need to look at the statute for clarification, but then you can turn to the declarations and policies for determining coverage.