RE: INSURANCE COVERAGE
The 2003 Florida Legislature amended section 718.111(11) of the condominium statute regarding insurance, effective January 1, 2004.
l The new statute clearly identifies what part of the condominium the association must insure and that which the unit owner must insure. Generally, the new statute increases the items to be insured by the unit owner and decreases the items to be insured by the association.
l Since association coverage may be decreased as early as January 1, 2004, unit owner policy limits may be inadequate upon the association policy change date. Consequently, it may be necessary to review unit owner limits prior to that policy’s renewal date.
l The legislature clearly expressed within the language of the statute the intent to (1) ensure consistency in coverage for associations and unit owners regardless of the date of the declarations, and; (2) encourage lower or stable insurance premiums for associations.
INSURANCE COVERAGE AFTER JANUARY 1, 2004
· Individual Unit Owner Shall Insure:
1. All floor, wall, and ceiling coverings;
2. Electrical fixtures, appliances;
3. Air conditioner or heating equipment;
4. Water heaters;
5. Water filters;
6. Built-in cabinets and countertops;
7. Window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of a unit and serve only one unit;
8. All air conditioning compressors that service only an individual unit, whether or not located within the unit boundaries.
· Important note: The unit owner policy must cover items outlined in 1 – 8 above even if those items were “initially installed and in accordance with the original plans and specifications.” These 8 items will be excluded under the association coverage as required by the new statute. The association is no longer able to insure them, unlike in the past when the association, by the wording in their declarations, could choose to insure them or require the unit owner to insure them. It is for this reason that adequacy of additions and alterations coverage must be reviewed.
· Unit owner policy covers upgrades – items not in accordance with the original plans and specifications.
· Primary Coverage for:
1. All portions of the condominium property located outside the units;
2. The condominium property located inside the units as such property was initially installed, or replacements thereof of like kind and quality and in accordance with the original plans and specifications or, if the original plans and specifications are not available, as they existed at the time the unit was initially conveyed, (note that this does not include the 8 items required to be insured by the unit owner listed above); and
3. All portions of the condominium property for which the declaration of condominium requires coverage by the association.
· Note the association only insures condominium property initially installed and in accordance with the original plans and specifications, not upgrades. This is not a change under the new statute as the responsibility to insure upgrades has always rested with the unit owner.
· Association policy excludes coverage for the 8 items listed under the unit owner policy.
· No statutory requirement that the condo unit owner be listed as an additional insured under association policy.
Example #1 - Assume that the association, based on the wording of their declarations, is responsible for insuring “all improvements upon the land”.
· Current law – In this instance, the association policy would be primary and responsible for all covered building damage except items that were not “initially installed and in accordance with the original plans and specifications” (upgrades have been and remain the responsibility of the unit owner to insure).
· 2004 statute – The association policy will not be responsible for insuring, not only any upgrades, but also the 8 items listed above. Those items will be the responsibility of the unit owner policy.
Example #2 - Assume that the association, based on the wording of their declarations, makes it the responsibility of the unit owner to insure floor/wall/ceiling coverings and certain “equipment” located within a unit.
· Current law – The unit owner policy would insure floor/wall/ceiling coverings and the specified “equipment” located within a unit.
· 2004 statute – Even though the unit owner was already responsible for insuring the “coverings” and specified “equipment”, under the new law additional items have been added to the “equipment” category (and are now excluded under the association policy).
The items added to the list of “equipment” are:
1. water filters;
3. window treatments (including accessories).