Condominium insurance law leaves confusion in its wake

Flustered by Florida condominium insurance law? Some of the latest requirements are as confusing as they are contentious.

And lawmakers are likely to make more changes when they convene in March — including possibly reversing a statute requiring individual owners to obtain hazard and liability insurance as of Jan. 1.

But don't rip up that policy just yet. If you don't have insurance by the new year, the current law has a financially painful consequence: It gives associations the power to purchase a policy on a unit owner's behalf and bill later. And associations are not required to find the best deal.

Associations have always been required to carry insurance for association-owned property. In 2004, it was established that the association had to insure everything up to the wall board in the unit. The unit owner was responsible for the interior, including wallpaper, paint, popcorn ceiling, furniture and appliances.

In the last session, lawmakers required that as of Jan. 1, 2009, unit owners prove to their associations they had insurance and that the policies name the association as an additional insured.

But the way the statute is written is ambiguous, leaving associations and owners grappling for specifics."In general, these changes have been problematic from the start and have generated a large amount of questions and complaints to our office," said Bill Raphan, a South Florida supervisor with the state Office of the Condominium Ombudsman, a resource for unit owners, board members and property managers. "The legislature is seriously considering eliminating these [new] statutory requirements at the next regular session."

So what should you do? Buy a policy or flout the law and hope it will be altered?

Your safest bet is to "get the policy. It's the best way to protect yourself and your property," says Ed Domansky, a spokesman for the Florida Office of Insurance.

Here are Domansky and Raphan's answers to some commonly asked questions.

Are associations required to obtain proof of insurance from each unit owner?

"The new condo law allows, but does not require, condo associations to ask for a copy of the unit owner's policy," Domansky said. That means they can also choose to do nothing.

Unit owners have been required to carry insurance for a few years now, Domansky said. However, the new language requires the unit owners insurance to name the association as an insured entity.

What must an association insurance policy cover?

The law states every hazard insurance policy issued or renewed on or after Jan. 1, 2009, should provide primary coverage for all portions of the condominium property as originally installed or replacement of like kind and quality. The coverage excludes personal property, as well as water heaters and filters, and built-in cabinets, countertops, etc.

What must a unit owners hazard policy cover?

There is no minium coverage requirement, but the policy must also include special assessment coverage of no less than $2,000 per occurrence.

Who is responsible to pay when an association purchases a policy on the behalf of an owner?

"If an association purchases a policy, they have to deal with the problem of how to collect reimbursement from the unit owner," Raphan said. "The statute says it can be collected in the same manner as other assessments."

In other words, an association may choose to place a lien on a unit if its owner doesn't pay up.

"Particularly in these times, associations need to weigh their options and consider the consequences of attempting to enforce these collections," cautioned Raphan. "More liens and foreclosures are the last thing condo communities need."

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