| By :
Nick Messe
No area of residential property insurance is more complicated or litigated than condo owner's insurance policies. This fact has recently become more complicated for Maryland condominium owners. Insurance problems often arise when two or more insurers are involved in a claim. In this case it would be the condo association master insurance policy and the unit owner's personal policy (HO6). In response to the problem, The Maryland Condominium Act was amended effective June 2009 stipulating that condominium master property insurance policies must cover both common elements and individual units. Additionally, unit owners can be held liable for up to $5,000 of the master policy deductible if the cause of the damage originates in the unit. Will that owner have any coverage under their HO6 condo unit owner's policy to pay the $5,000 deductible for which they may now be responsible? That question will no doubt be tested extensively. The $5,000 will not be paid under the "Loss Assessments" coverage. It should come from the Coverage A "Dwelling" part of the unit owner's policy. Many condo unit owners, knowing that the master policy covers the building, choose a low limit or don't insure themselves at all for which is a big mistake. If you own a condo unit in Maryland, you should take the following steps to protect yourself. Check your policy for the Coverage A "Dwelling" limit. Ensure it is enough to cover the association deductible, your improvements, any other building or property that you are required to cover by the association agreement. Ensure that you have a "Special" or "All-Risks" coverage form. Most condominium losses are related to water damage from leaky or damaged pipes. The basic condo unit owner's policy will not cover such water damage. Ask your insurer or agent if there is an Extended Coverage Endorsement that can be added. These endorsements, when available, offer very broad coverage at an affordable rate. If you serve on the Board of Directors for your condominium association, ask about a non-profit Directors and Officers endorsement to cover you personally from errors and omissions complaints against the board. Submit a copy of the association agreement to your agent or insurer for review. Condominium agreements are often unclear about insurance requirements and deductible assessments. However, it is essential that all legal liabilities of the unit owners be spelled out in detail. Take the time to ensure that your association is taking the steps that they need to take to clarify all ambiguities. This new Maryland law clarifies that the master policy is responsible for losses and that the unit owners can be responsible for part of the deductible. No matter how much insurance is carried, the unit owner's insurer may not cover the $5,000 deductible unless the association contract clearly establishes a legal responsibility to do so. Don't leave yourself exposed to an uninsured expense after a large loss. Check your coverage and ask questions. If you do not have unit owners insurance, contact an agent to obtain a quote. It is better to be safe than sorry.
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