One of the most complex insurance claims for property owners and insurance companies occurs when a loss occurs at a property where more than one owner is involved. In most condominium claims, there are competing interests between individual unit owners, but also among insurance companies, which may overlap in their duty to cover the loss. This occurs as a result of the legal relationship that exists between owners and most associations governing the property. While unit owners maintain a possessory interest in their individual units (i.e. they can live there), their ownership interest represents a portion of the overall complex, sharing equally with the other members.
Primary Area of Conflict
Florida law under Chapter 718 governs the relationship that exists between the parties and provides detailed standards and boundaries for the manner in which associations and their boards of directors must act. This is never more important than when catastrophic losses occur, either by fire, sinkhole or windstorm. With an overall duty to protect the property interests of the owners, most boards must move cautiously to assure their recovery under the respective insurance policies, while also juggling the immediate concerns of the unit owners. The primary area of conflict between unit owners usually arises from the fact that unit owners in larger complexes do not share the losses equally, as some areas of the complex may be more damaged than others. The issue then arrives regarding the distribution of assessments to resolve uninsured losses, thus causing one unit owner to potentially be assessed to cover damages in an area in which the owner does not reside.
Association Coverage and Individual Coverage Disputes
These issues, among many others, place considerable burdens on the maximization of insurance recovery. The second layer of disputes arises from the scope of the association’s coverage, when compared to that of individual unit members. A common question relates to whether the association’s policy in a sinkhole claim would provide coverage for repair to the subsurface. It does. Nonetheless, once the cosmetic damage repairs are commenced, disputes often arise between the carriers who have insured the association, and the carriers that insure the unit owners for the interior damage. These disputes must be managed properly, so as to assure compliance with the insurance policy and to avoid getting the insured caught in the middle.