HOA Legi-Slate

We often hear the lament that homeowners did not know the insurance carried by their homeowner associations does not cover personal items like furniture, art work, rugs, upgraded light fixtures, etc. When disaster has struck, these homeowners have found themselves without adequate insurance. An additional problem arises when it is unclear which insurance covers the damage - the association's or the owner's? Owners have been left with flooded condominiums or townhomes after their homeowner insurance has declined to pay on the grounds that the damage is covered under the association policy, not the owner's, and the association refuses to submit a claim, arguing just the opposite. SB 06-089 contains proposed amendments to two sections that would further assist associations and homeowners in understanding and exercising their respective rights and responsibilities in relation to insurance coverage.

The first proposed amendment would add a disclosure to the list of already required disclosure items in section 38-33.3-209.4. This section would require associations to disclose a list of the association's insurance and maintenance responsibilities related to the common elements, limited common elements, units, owners' property, and owners' personal liability within units. In addition, to listing the association's insurance and maintenance responsibilities, the disclosure would require a statement that owners are responsible for determining what additional individual insurance coverage must be carried to cover other insurance responsibilities not covered by the association's policy. This statement should go a long way in alerting homeowner to the fact that, although the trash pick-up and the lawn and pool maintenance may be taken care of by the association and paid for by collected assessments, association insurance is not all inclusive.

The next proposed amendment is to section 10-4-100.8 (Homeowner's insurance - prohibited practices - definitions). The proposed changes would clarify the procedures of owner initiated claims against association policies. These changes would work to the advantage of owners and associations by imposing some conditions on how and when an owner may file a claim against association policies. The proposed amendment would give owners a right to file a claim against an association policy as an additional named insured if the following conditions are met:

1. The owner has given written notice to the board or manager of the subject of the claim, following any applicable association policies or procedures for owner-initiated insurance claims;

2. The owner has given the association at least fifteen days to respond in writing and if requested, has given the association's agent a reasonable opportunity to inspect the damage; and

3. The subject matter of the claim falls within the association's insurance responsibilities as defined by the declaration or listed in the association insurance and maintenance disclosure required by section 38-33.3-209.4(2)(j).

These procedures will allow owners with legitimate claims whose associations are unfairly refusing to submit a claim to do so, protecting the interests of owners. Owner interests, in addition to association interests, are further protected by these proposed conditions as frivolous claims that increase insurance premiums or even lead to cancellation of coverage will be barred from being submitted.

The last proposed amendment effecting SB 100's insurance provision is one that instructs insurance companies that insure associations not to take into account any request by an owner for a clarification of coverage when determining premiums to be charged to the association.