What's the Damage? Condominium Association Insurance and Hurricanes

By Partner Brian S. Hess

Partner Brian S. Hess

In light of recent hurricane and tornado damages, condominium association Board members have been lighting up our “switchboards” with questions relating to the association’s (and individual unit owners’) responsibilities for property damaged by storm events.  The simple answer, in most cases, is found in reviewing Florida Statute 718.111(11), which provides condominium associations with guidance as to their insurance requirements.  However, there is a bit of a story as to why the answer is generally statutory, and not driven by directly by the condominium association’s governing documents.

After the hurricanes of 2004 and 2005, insurance companies, and in turn, the Florida Legislature, were faced with a dizzying number of disputes between associations and unit owners with regard to insurance coverage for storm damages based on repair and replacement responsibilities as set forth within each association’s governing documents.  In other words, insurance companies representing associations and unit owners had varying interpretations of the same sets of governing documents, and, as such, these interpretations led to disputes that took significant time and money to resolve. Seeing the need to resolve these disputes on a wide scale, the insurance industry convinced the legislature to amend the condominium insurance provisions found in Florida Statute 718.111(11) to “protect the safety, health and welfare of the people in the [state] and to ensure consistency in the provision of insurance coverage to [residential] insurance coverage to condominiums and their unit owners,” with the intent to “encourage lower or stable insurance premiums. . .”.  Moreover, the legislature made clear that the legislation “applies to every residential condominium in the state, regardless of the date of its declaration of condominium.”


So, what does the statute actually require?  In accordance with Florida Statute 718.111(11)(a), a condominium association is to provide adequate property insurance for the “replacement cost of the insured property as determined by an independent insurance appraisal or update of a prior appraisal”  The statute goes further to require that replacement cost to be determined at least once every 36 months. When determining the adequate amount of property insurance coverage, the association, through the board, is permitted to consider deductibles, in accordance with Florida Statute 718.111(11)(c) as a component of the insurance costs as long as they are consistent with industry standards and prevailing practice for communities of similar size and age, and has similar construction and facilities in the condominium’s locale. The deductibles may be based on available funds, including reserve accounts, or predetermined assessment authority at the time the insurance is obtained.  In other words, the association is permitted to choose a larger deductible to be funded by association dollars in order to reduce its premium.  

The statute goes further to require the association to provide “primary coverage” for “all portions of the condominium property as originally installed or replacement of like kind and quality in accordance with the original plans and specifications”, as well as “all alterations or additions made to the condominium or association property…”.   Florida Statute 718.111(11)(f) goes further to state that the association’s property insurance coverage “must exclude all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including drapes, blinds, hardware and similar window treatment components, or replacements to any of foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any related insurance is the responsibility of the unit owner.” 

So, if an insurable event causes damage in the condominium, how does the association proceed?  Pursuant to Florida Statute 718.111(11)(j), an association is required to repair, replace or reconstruct any property covered by its insurance, and all deductibles, uncovered losses, and other damages in excess of insurance are a common expense payable proportionately by all unit owners.  There are exceptions under the statute, including where another method is approved by a majority of the total voting interests in the condominium, and where the costs are not paid for by insurance as a result of intentional conduct, negligence or failure to comply with the terms of the declaration or association rules.  If the damages are NOT deemed to be due to an insurable event, then “the association or the unit owners shall be responsible for the reconstruction, repair, or replacement as determined by the maintenance provisions of the declaration or bylaws.” As such, it is critical for associations to determine insurance coverage for any damages within the condominium with its insurance provider first before proceeding. 

We recommend that condominium associations deal closely with their legal counsel, insurance providers and agents familiar with community associations with the goal to determine the association’s insurance needs and ensure proper coverage before the need to make a claim. After damages are incurred, the association should consider retaining reputable building industry professionals to assist in damage assessment and a public adjuster to act as the associations’ agent in the claims administration process. Of course, we stand by able to assist as necessary.