There’s an old adage that ‘insurance is for pessimists’ – but that’s very much not the case. In the world of home ownership, and especially in shared communities, proper insurance is a critical factor in protecting not only your most important asset – your home – but also your pocketbook and your neighbors’ pocketbooks. It’s important to know what your building or association’s insurance policies cover, as well as what individual unit owners and shareholders are responsible for when a claim is made.
Which Covers What?
According to Mildred Ayala, the manager of the HUB International insurance office in Woodbury, New York: “There are several basic components to a typical condo or co-op homeowner’s policy. They include additions and alterations coverage, coverage for personal property and contents, loss of use, and liability and medical payments.” There are of course other riders that may be placed on the policy at the request of the insured and approval of the insurer, including higher limits of coverage.
While insurance is regulated state by state, the basic architecture of the terms of a homeowner’s policy are remarkably standard. According to Martin Cabalar, an attorney with Becker & Poliakoff in Morristown, New Jersey: “Typically, state-to- state you will see similar, if not exactly the same template for a basic insurance policy.” And Ayala adds: “It’s very straightforward.”
The Basis of Claims
The basis of claims in homeowners policies has to do with responsibility. Unlike in a detached private home, the lines of demarcation in a condo or co-op property – particularly a vertical one – can involve the unit that sustained some type of damage, the unit from which that damage may have emanated, and the co-op corporation or condominium association. The determination of responsibility may rest with who is responsible for what, and if there was any negligence.
Michael C. Kim, an attorney at Michael C. Kim & Associates in Chicago, says: “When we look at responsibility for a situation, the first perspective is [to ask], what was the cause of the loss? Was it a failure of a plumbing fixture, such as a commode for example, where the internal components of the commode failed? That’s a situation where the equipment is self-contained and belongs to the owner of the unit. Then you have other situations where a flood was caused by a failure of the flow of water into the bathroom. That takes on a different characteristic, which is essentially that you have a plumbing supply line coming into the unit, and if the valve failed, who is responsible for that?”