Condominium Associations

Insurance company law firm Matthiessen, Wickert & Lehrer have updated a thorough discussion of the adjustment issue of matching in an article, ”Matching Regulations” And Laws Affecting Homeowners’ Property Claims In All 50 States. From their view, they noted the current state of affairs regarding matching:

It remains one of the most difficult issues to deal with in the world of property insurance. Homeowners’ insurance policies usually contain a provision obligating the carrier to repair or replace an insured’s damaged property with ‘material of like kind and quality’ or with ‘similar material.’ They cover property damage resulting from ‘sudden and accidental’ losses. When damage caused by fire, smoke, water, hail, or other causes results in a small portion of a home or building being damaged (e.g., shingles, siding, carpet, cabinets, etc.), whether and when a carrier must replace non-damaged portions of a building in order for there to be a perfect match remains a point of contention. It is a matter of great importance to insurance companies because ‘matching’ problems with a slightly damaged section of roof or flooring can lead to a domino effect of tear out and replacement costs of many items which are not damaged. The problem of partial replacement is especially troubling where the damaged siding or shingles have been discontinued, making it virtually impossible to properly match. To replace only the damaged portion would result in an obvious aesthetic deficit due to a clear difference in the appearance of the replaced portion of the building from the portion that remains undamaged.

Would the entire structure need to be re-sided or the entire roof re-shingled? Or is it sufficient to replace just one wall of siding or just a few shingles? Whether or not the insurance company must pay to replace entire sections of the structure in order to bring the property back to its previous uniformity and aesthetics can bring various state insurance laws and regulations into play. On the one hand, many pundits claim that the terms of the insurance policy require the carrier to pay the cost to ‘repair or replace with similar construction for the same use on the premises.’ They argue that ‘similar’ doesn’t mean matching exactly. Others argue that coverage for ‘matching’ and ‘uniformity’ under a homeowner’s policy doesn’t exist without a specific endorsement. The truth lies somewhere in between and can vary greatly from state to state.
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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.
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Once Hurricane Irma passes and recovery efforts begin, the many volunteers who agreed to serve on boards of community associations will have daunting challenges. Buildings will need to be secured from further water intrusion, and units that are water-soaked will need to be dried out. The storm debris ranging from damaged landscaping to destroyed roofing and other building materials will need to be removed. Many of these items will be critical path tasks to return properties to safe, habitable condition. Failure to effectively and quickly cope with dangerous conditions on the property may mean the difference to residents of whether the local building officials or fire marshal condemn the property and prohibit occupancy pending extensive repairs.
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Homeowners living in planned communities usually have governing documents that mandate the individual home or condominium unit owners carry their own insurance in the event of a property loss. While unitholders in these communities pay monthly or yearly dues so the main association (HOA) can take care of the common areas, part of those mandated payments usually go to the HOA for the purchase of a master insurance policy which ideally should insure everything maintained by the HOA. Rarely do individual unitholders in an association ask to see the master policy of their HOA. Nor do the individual unitholders ask their governing board to audit the master insurance policy to make sure it covers enough of the HOA’s potential responsibilities and liabilities. If the policy does not contain the proper coverage for the HOA, the HOA subjects its unitholders to a special assessment if a disaster occurs and major rebuilds that are costly. Planned communities risk inadequate insurance coverage if it purchases a master policy without understanding the needs to the community and discloses these needs to its broker or agent when purchasing its policy.


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On October 14, 2011, Corey Harris explained Florida’s standard of director’s liability in his blog post, Am I Personally Liable Simply For Being A Director? As he noted, “[t]he longstanding precedent discussed in Munder v. Circle One Condominium, Inc., 596 So.2d 144 (Fla. 4th DCA 1992), provides that directors are immune from individual liability unless a crime or fraud has been committed or there has been self-dealing or unjust enrichment. As a result, negligent actions are not individually actionable, even if such actions are clearly wrong.”

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Our firm has been receiving calls from a large number of Florida condominium associations over the past few days regarding the increasing problems associated with the oil spill that is plaguing the gulf coast. I have a personal connection to this growing crisis. I spent a large portion of my life in Destin, Florida, and part of my family still lives and works in the area. Late last night, I flew to the panhandle to see what our firm could do to help.


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