This post is one of a series about 10 Most Common Misperceptions About Condominium Laws And Operations, which I presented at the Maine Condo Forum and Expo in Portland, Maine, on September 25, 2010.
The biggest disaster that can happen to a condominium is a fire or other casualty which destroys or substantially damages a building. Proper insurance coverage lessens the pain. But insurance is a changing thing. Coverages change, property values go up or down, deductibles go up and new perils arise, requiring adjustment of the policy.
Unfortunately, associations do not always keep their insurance coverage up to date. What’s more, insurance coverage for condominium associations is not a topic that all insurance agents are adequately informed about.
It is not only property and casualty coverage either. The association must insure itself against liability claims such as slip and falls on the common elements. Then there is Directors and Officers coverage, which insures the Board against claims made against them when they exercise their duties as directors. If the association hires anyone who could be considered an employee, they may need Workers Compensation insurance.
The Maine Condominium Act has lengthy and complex insurance requirements for condominium associations. Your condominium documents usually contain additional requirements. If the Board does not follow these requirements, their Directors and Officers (D and O) insurance coverage may not cover them in case of a claim made by a unit owner that the Board neglected its statutory duties.
Recommendation: Make it an agenda item every year for the Board, or a committee of the Board, to sit down with an insurance agent, knowledgeable about insurance, to review your coverage and make changes as needed. Consider whether to change your documents to require unit owners to obtain insurance for their unit, and to make them pay the association’s insurance deductible in case of a claim for damage to a unit.