Is your association having trouble finding its master insurance policy at a reasonable premium?  If so, you are not alone.  Many associations are having their insurance canceled, not renewed or seeing their insurance premiums dramatically increase.  Fewer and fewer insurance companies are writing the master policies for condominium associations.  Many factors have led to that condition, including the large number of ice damming claims over the past few years, the increase in slip and fall cases against associations and the general increase in insurance claims.  Many insurance companies have decided not to write condominium insurance in Michigan.  And, those that still write those policies in Michigan are often dramatically increasing their premiums.  I have heard of associations facing a ten to twenty-fold increase in their insurance premiums.  You can imagine the reaction of the co-owners.  On the other hand, the individual co-owners’ insurance policies, typically called an HO6 policy remain readily available.

Many insurance claims are caused by the negligence of a co-owner.  For example, a co-owner is smoking in bed, falls asleep and starts a fire.  Or, a co-owner is cooking dinner, the telephone rings distracting the co-owner, and a kitchen fire erupts.  As a result, significant damage may result to the unit and the common elements.  The association’s carrier is called as is the co-owner’s HO6 carrier.  Both adjusters then look to the condominium documents to determine who has the responsibility to pay for the repairs.  The association argues that the damage is a result of the co-owner’s negligence and therefore the co-owner’s HO6 policy should pay the cost.  The HO6 adjuster points to the typical language in condominium bylaws and states that even if the co-owner’s negligence causes the damage, if the risk is covered by the association’s master policy, the co-owner is only responsible to pay the deductible.  In the end, the association’s master policy typically bears the expense.  And, since that is a claim made under the master policy, it is charged against the association.  After several claims the association may see its policy canceled, not renewed, or renewed at a substantial increase in premium.

That situation is even more frustrating when the claim is only slightly over the deductible.  Should a claim be submitted or should the association “self-insure” for the amount above the deductible to avoid the additional claim?  These questions should be carefully considered before a claim is filed.

Because of the limited number of insurance companies writing condominium master policies in Michigan, and because of substantial increase in premiums, many associations are looking for alternatives.  Certainly the association cannot go without insurance, but is there some method to shift part of that insurance responsibility to the HO6 carriers?  Personally, I think that is a good idea.  In those instances where the co-owner is clearly at fault, the co-owner’s insurance should bear the brunt of the costs.  But to do so requires the amending of your condominium documents.  Further, many documents should be amended to clarify the distinction between the association’s and co-owner’s responsibilities when the interior of a unit is damaged.  If a roof leaks and causes damage to the interior of a unit, including carpeting, wallpapering and personal property, who is responsible for what?  If your documents don’t clearly make the distinction, an amendment would be in order.

In short, all associations should carefully examine their insurance coverage and the language of their condominium documents to determine if something can be done to control escalating insurance premiums.  That effort would also help to eliminate disputes between the association and its co-owners when the interior of units or personal property is damaged.  No association wants to pay more for insurance than is necessary, but all associations must be certain that adequate insurance is in place to protect the interest of all of the co-owners.