In Florida, condominium associations and condo boards are required by law to purchase property insurance policies to cover damages to condominium property. This is a legal requirement that exists independently from any requirement found in the provisions of the Condominium Documents (By Laws, etc.).
Specifically, the Florida Legislature has determined that it is in the best interests of the public’s “safety, health, and welfare” to make sure every residential condominium has consistent insurance coverage for both the condominium and its unit owners. Florida Statute 718.111(11).
Is There Insurance Coverage When a Hurricane Destroys Oceanfront Condominium Property?
Florida Statute 718.111 and Florida Condominium Insurance Requirements
There are two main requirements for residential condominium insurance policies under Florida Statute 718.111. They are: (1) mandating replacement cost coverage; and (2) setting standards for determining deductibles under the residential condo policy. The insurance can be provided through a commercial carrier or by a self-insurance fund as long as it meets the requirements of Florida Statutes 624.460 – 624.488.
1. Replacement Cost Coverage
Pursuant to Florida Statute 718.111(11)(a), the condominium property insurance policy must provide adequate property insurance, regardless of any requirement in the declaration of condominium for coverage by the association for full insurable value, replacement cost, or similar coverage.
This insurance coverage has to be based on the replacement cost of the property to be insured. That cost is to be determined by an independent insurance appraisal, if necessary; alternatively, an update of a prior appraisal can be used. Under the law, this replacement cost must be determined at least once every three years (36 months).
2. Deductibles
Under Florida Statute 718.111(11)(c), the Florida Legislature recognizes that insurance policy premiums can be expensive, and prudent condo boards may want to keep costs down by having higher deductibles on their property insurance coverage. Legally, this can be done as long as:
- The deductibles are consistent with (a) industry standards and (b) prevailing practice for communities of similar size and age, and (c) have similar construction and facilities in the locale where the condominium property is situated.
- The deductibles are based upon (a) available funds, including reserve accounts, or (b) predetermined assessment authority at the time the insurance is obtained.
- The board establishes the amount of deductibles based upon the level of available funds and predetermined assessment authority at a meeting of the board in the manner set forth in Florida Statute 718.112(2)(e).
What about Florida Condos controlled by Condo Unit Owners?
There are residential condominiums in Florida where the condo unit owners collectively control and operate their condo association. These unit owners’ associations must comply with Florida Statute 718.111(11)(d), which provides that residential condo associations controlled by unit owners must use “best efforts” to both (1) obtain and (2) maintain adequate property insurance coverage for protection of:
- the association,
- the association property,
- the common elements, and
- the condominium property that must be insured by the association pursuant to Florida Statute 718.111(11).
What is Condominium Property under the Condo Property Insurance Policy?
Of course, after a catastrophic event, one of the big issues for individual condo owners as well as the condo association will be what property is covered under the condominium’s coverage, and what property is excluded as being the responsibility of the unit owner.
All too often, controversies over what property is covered after damage has occurred will result in denials of claims and the institution of litigation. Consider the following cases which illustrate the distinction between “condominium property” under the condominium association’s coverage and the unit owner’s coverage obligations:
1. Condo Windows and Sliding Glass Patio Doors Destroyed in Florida Hurricane
Hurricane Wilma hit the coast of South Florida in October 2005 as a Category 3 Hurricane and moved across the state in five hours’ time according to the National Hurricane Center, leaving a path of destruction in its wake.
In North Miami Beach, the Royal Bahamian was a residential condominium made up of two eight-story buildings housing 164 individual condo units that suffered significant property damage during Wilma. This damage included harm to the windows and sliding glass doors of the individual condominium units.
The Royal Bahamian Condominium Association submitted a claim for this damage to be covered under its property insurance with QBE, shattered glass among other property damage issues totaling $8,475,190.75. The hurricane damage to the glass in the condo windows and patio/balcony doors made up most of the Royal Bahamian claim.
QBE denied coverage of the condo unit windows and sliding glass doors stating that the insurance policy was clear: it did not cover these items. The Royal Bahamian fought back, and the controversy ended up in federal court.
In the case of Royal Bahamian Ass’n Inc. v. QBE Ins. Corp., 750 F. Supp. 2d 1346 (S.D. Fla. 2010), the insurance carrier moved for a summary judgment, asserting the condo policy unambiguously did not cover this damage. Under the law, interpretation of an insurance policy is to be done by the judge (not a jury) and QBE asked the federal court to grant it judgment as a matter of law that its denial was correct under the terms of the policy.
QBE’s position was the damage to each unit’s windows and sliding doors was covered under the individual unit property insurance policies, not the coverage purchased for the condominium association.
The federal court held in favor of the Royal Bahamian Condo Association. Reading the language of the condominium association’s property insurance policy endorsement covering “any other condominium property,” the judge found that the condo unit windows and glass sliding doors constituted “condominium property,” within the meaning of this policy endorsement.
Moreover, the court held that Florida state law (Florida Statute 718.111(11)) legally required the Condo Association to buy this coverage to protect against hurricane damage to each unit’s windows and sliding doors. Since Florida law created this duty, and the court is required to interpret the insurance policy as being in accordance and agreement with existing state statutes, the declaration was held to cover the damage to the windows and sliding doors.
This was true even if the Condominium Documents (declarations) required each condo unit owner to perform all “repairs and replacements without limitation” to windows and sliding glass doors “at the unit owner’s sole cost and expense.”
Therefore, the condo unit owner is not responsible for hurricane damage to the glass windows and sliding glass doors on his patio or balcony; this is covered by the condo association’s property insurance policy. What about other things that might be found on the condo owner’s patio or balcony? Is that property covered in the same way?
2. Condo Trellises, Screens, and Hot Tubs Destroyed by Florida Hurricane
In the case of Costa Del Sol Ass’n, Inc. v. State, Dept. Of Business And Professional Regulation, 987 So. 2d 734 (Fla. Dist. Ct. App. 2008), a Florida residential condominium association filed a claim with its property insurance carrier to cover damage to various items found on the individual unit patios. The damages included harm to trellises, elaborate screens, and whirlpool tubs.
The claim that was submitted by the Costa Del Sol Condo Association was denied; the carrier’s position was that these things were not “condominium property” but instead property of the individual condo unit owners.
The carrier argued that these things were all outside the condo units. They were purchased, installed, removable, and usable only by the individual unit owners. Accordingly, they were not a part of the “condominium property” insured by condominium association’s policy.
The Condo Association filed suit in state court, asking that the judge force the insurance company to cover these damages. The Florida court, looking to Florida Statute 718.111(11), found that this was not to be construed as “condominium property” under the law and accordingly, it was not covered by the Condo Association’s policy.
As for distinguishing the unit owner’s property from that of the condo association’s property for purposes of insurance coverage, the court looked to the plain definition of “property” in Black’s Law Dictionary 1252-53 (8th ed. 2004), which defines “property” as: “The right to possess, use, and enjoy a determinate thing …; the right of ownership…. —Also termed bundle of rights.”
Additionally, the court considered whether or not the Condo Association could control or receive any benefit from the property in question and stated:
By way of gilding the lily, we may add that … making members of the association responsible for insuring property which they do not and cannot use, and from which they derive no benefit—indeed, in which they apparently have no insurable interest which would even permit their maintenance of valid insurance.
The Property Dividing Line between Condo Association and the Unit Owner
From this discussion of statute and case precedent, we can draw a dividing line between condominium property and Florida Condominium insurance coverage.
Florida Statute 718.111(11) legally requires the Florida Condo Association to buy property insurance coverage to protect against damage to condominium property. This policy must provide for replacement costs.
The property covered by the Condo Association’s Insurance will be property that is affixed, owned, or controlled by the condominium. Any individual unit owner property that the condominium as a whole cannot use and from which it derives no benefit is not covered by the Condo Association Insurance. This individual unit owner property must be insured by the unit owner himself.
How a Florida Real Estate Lawyer Can Help
If you are having difficulty in dealing with your Condo Board regarding insurance coverage, then it may be helpful for you to have an experienced Florida real estate lawyer to help you with the problem.
Most real estate attorneys, like Larry Tolchinsky, will offer a free initial consultation to answer your questions.
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