The world of insurance, although not necessarily simple, is usually cut and dry, not the stuff of excitement. While condos and co-ops have insurance for the common areas like roofs, stairways, lobbies and often the apartments as well, the practice of individual unit owners buying homeowners' insurance is more and more common.
Developments and units can be insured, among other things, for fire, theft, natural disaster and water damage. Most boards' dealings with insurance companies, including its agents, brokers, claim examiners and underwriters, are routine and predictable.
"Water damage, kitchen fires, pipes breaking, those are the ones we see regularly," said David Spiro of Spiro Risk Management in Valley Stream. However, every once in awhile, a co-op board or condo association must be prepared to deal with out-of-the-ordinary claims that involve more than just the predictable insurance issues.
Bruce Cholst, an attorney with the law firm of Rosen & Livingston in Manhattan, for example, tells of a case involving a condo and the "right of first refusal," or the right to determine who can live in the development. One person who had been turned down by a condo that he represented charged racial discrimination in a complaint before the New York City Human Rights Commission.
"We filed a claim with the insurance company, asking them to provide us with a defense and coverage," he says. "There are two aspects to a directors' and officers' liability claim. Will the insurance company provide a defense free of charge and provide counsel free of claim, and if a case is tried and it turns out badly, will they cover any judgment, defense [legal costs] and indemnity [for the individual board members]?