Condominium claims can be challenging, even for experienced adjusters. Condo losses regularly involve building exteriors, decorated common areas, multiple units, and other insurers. Depending on the areas of the condo damaged, an incident could implicate multiple insurance policies at the same time. When considering condo claims, unit owners and associations will typically review multiple property policies, declarations, related bylaws, and differing opinions regarding cause, origin, and the amount of a loss.
Simply stated, unit owner policies insure everything “inside” the unit. Condominium Bylaws and Declarations sometimes define what is considered part of the unit in different ways. Some condominiums consider everything from the surface of the walls inward to be part of the unit. However, other governing documents consider items within a wall, such as insulation, plumbing, and/or components, to also be part of the unit.
One challenging aspect related to condo coverage disputes is the interpretation and application of Other Insurance provisions. While intended to guide insurers and policyholders in determining coverage when two or more policies insure the same interest, Other Insurance provisions must be interpreted closely and based on the facts at issue in a particular claim. If a reasonable interpretation of the governing documents – and any potentially involved property insurance policy – exists, then insurers, owners, and associations will spar over responsibility and loss payment(s).
Other Insurance provisions are included in policies to ensure that policyholders are not profiting from covered losses. Generally, there are three (3) types of Other Insurance provisions: excess, proportional, and escape. First, an excess provision provides additional coverage for a loss, above and beyond what is already provided in a primary policy. Proportional provisions allocate liability between two concurrent policies. Lastly, escape provisions can release an insurer from a coverage obligation if other coverage is available under another policy.
For additional guidance on coverage disputes involving condominium losses, please contact any member of HKR’s team.