Many state statutes and condominium bylaws require the purchase of reasonably available property insurance which covers all direct physical risks of loss on an extended and replacement cost basis. One issue I have heard associations and their insurance agents ask: “Is flood insurance reasonably available” so that it has to be insured.

This question was recently answered in Porter v. Beaverdam Run Condominium Association.1 The holding is significant:

[W]e conclude that the Association is obligated by the Declaration and the Condominium Act to maintain insurance against all risks of direct physical loss which are commonly insured against, to the extent that such insurance is reasonably available. We further conclude that flood is a risk of direct physical loss which is commonly insured against for residential buildings located in a FEMA-designated flood zone. Accordingly, we conclude that the Association has an obligation to provide flood insurance for the Community’s buildings located within the FEMA flood zone each year when such insurance is reasonably available.

Condominium associations should be very wary that some insurance agents could leave the Board and Association liable for uninsured or underinsured losses by selling cheap insurance. These agents compete on premium price and propose packages of insurance that do not include commonly available coverages, especially sufficient law and ordinance coverage, flood, and earthquake coverage.

Thought For The Day

“The quality, not the longevity, of one’s life is what is important.”
—Martin Luther King, Jr.
1 Porter v. Beaverdam Run Condominium Association, No. COA17-793, 2018 WL 2011355 (N.C. App. May 1, 2018).

  • Bruce Holmes

    FL Commercial polices are apparently not “all risk” like a residential HO3. Involved with case with bad cast iron piping that is considered underground pipes and not covered. COAs should be advised to consider an endorsement for this risk by their ins. agent depending on age and condition of property.

  • shirley heflin

    Dear Chip:
    It shouldn’t be difficult to figure out if a Condominium Association is in a flood zone – especially if it’s surrounded by water (i.e., such as the downtown Tampa area).

    Your statement regarding Insurance Agents submitting competing “packages of insurance” is important. Insurance Agents are in business to make money and some try to make it to the detriment of their customer. Hopefully, someone will read your blog today and take note of this fact.

    Tampa, FL

  • Donald Tarver

    my Florida condo associations is stating since the 100% is not in the bylaws. they have defaulted in paying 80% of the covering of flood insurance………….80% default is not in the bylaws either…
    How is my association getting away from paying adequate insurance at the 80% level?

  • DA B

    Our by laws state supposed to have all risk iperils nsurance on common areas, I got a copy of policy and it says ” special perils or named association risk only.
    The board members never replied to email asking if all risk and special- named risk was the same.
    The ex pres who resigned replied and said its consistent with other HOA’s. Change in material notices have not been disclosed by board as required.
    The by laws say board to have officer and board liability insurance, it seems like they have that and other policies to protect them but shorting owners on property insurance?
    The board has employee dishonest, businessowners coverage, employment related practices. Failure to disclose records, directors and officers liability, business protector plus endorsement.
    We were told the insurance premium increased due to lowering hail deductible from 10 to $5k but policy still says $10k hail per building, 8- 4 plexus and special event coverage by deductible amounts?
    Any insight would be appreciated