By Joe Savage, Real Estate Broker
Now that the 2013 Hurricane Season is winding to a close, I think I can talk about insurance without it appearing in poor taste or a scare tactic. While I am not an insurance professional, I have had many dealings with them in my current role as a real estate broker, and also when I managed the homeowner associations (HOA's) at The Beach Club from 2001-2005. Enough dealings that I learned to ask many questions that the uninitiated may have failed to consider. It is my intent in this and a subsequent article to share those questions so that you may ask them yourselves, in order to better manage your risk.
In 1991, the state of Alabama rewrote its condominium statutes. This rewrite is known as the 1991 Uniform Condominium Code of Alabama. It is commonly referred to in documents as the "Act" or the "1991 Act." It stipulated that all condominiums of a "stacked" nature, incorporating after 1991, must carry an "all-in" endorsement in their insurance. "Stacked" means just what it sounds like: one unit on top of another. All four condo HOAs at Plantation are of a stacked configuration. An "all-in" endorsement essentially adds to the coverage of the exterior, common elements (stairs, corridors, exterior walls, roof, etc.) by covering the interior, private elements, "...as they were on the day the developer first conveyed them." "As they were built," if you will. That would include walls, ceiling, flooring, cabinets, wiring, plumbing, appliances, electrical...everything that would be considered a "fixture" and would necessarily run with the property in the event of a sale. That would be just about everything except furniture and furnishings. The ACT, and thus this requirement, only applies to Plantation Palms, as it is the only condo HOA incorporating after the ACT was implemented in 1991.
The Declaration (governing document) of each of the other three condominiums dictates that the HOA "...obtain insurance upon the Property insuring it (including both Common Elements and all Units) against all risks." It is so written in the Declaration of all three other condos (see Article X.) To a layman like me, that sure sounds like the HOA has to take out a policy which effectively has an "all-in" endorsement as it is defined in Alabama; others may refer to this as an as-built endorsement.
Some confusion has developed about whether or not the three condominiums incorporated before 1991 have this coverage. In several recent sales, the lenders involved expressed concern that they were unable to confirm the presence of this coverage from the "Evidence of Insurance" documents provided by the respective associations insurance agents. Once contacted, the agents were unable or unwilling to categorically state that the interiors of the units would be covered in the event of a covered claim. In an email communication, they did "...confirm that the Association's master property policy follows the condominium docs when a claim is processed." This seemed to be acceptable to the lenders. However, the question you need to ask yourself (and perhaps your board of directors) is "Must I take out additional interior coverage to protect myself from the risk that my interior may not be covered by the HOA's current master policy?"
Next Article: The" HO-6"...What It Is and What It Isn't and Its Question
