We field calls every week about property losses (i.e. broken pipe water damage claim) where the Board, Management or homeowner is unaware as to who is responsible for the loss versus the loss itself. The following key points should help this easier to understand:
- With respects to condominium and townhomes, the Master policy covering the property is for all the individual unit owners. It is designed to protect them individually and collectively against insured losses to the buildings/structures
- Unit owners do not own the structure they reside in; rather they own one piece of all the Association’s property as a “tenant in common.” Therefore, any loss to covered property is the concern of the entire Association.
- The incorporated Association is the named insured under the Master Policy. However, each unit owner, as a result of their tenant in common partial ownership is also a full named insured.
- Per #3 above, a unit owner may submit a claim to their Master policy, with or without the “permission” of the Board of Directors or Management Company.
- The Insurance Company does not care who was responsible for the loss (i.e. unit owner smoking in bed caused a fire; unit owners washing machine hose burst flooding several units; etc.) as responsibility does not magnify or mitigate the loss. Insurance Companies need to know if the cause of the loss is a covered event. For example, with a sudden and accidental burst water pipe (a covered event), was the damaged property covered under the policy (i.e. building structure and bare walls or walls in depending on the CC&Rs)? If these two requirements are met the insurance company will cover the claim minus the deductible on the association’s master regardless of who was responsible for the loss.
The question of who was responsible for maintaining the item that caused the loss (i.e. ice maker inside the airspace of a unit bursts/common area pipe under the slab bursts) determines whether the unit owner or the Association is responsible for the loss under the deductible. The party allegedly responsible for the cause of the loss does not affect whether the Master policy property must respond or not.