New Insurance Coverage, New Problems for Condominium Associations
Byline: Jordan I. Shifrin
Every year, just like the color change of the leaves and the cycle of seasons, the Illinois Condominium Property Act is amended. This year, the hot topic was an overhaul of some very archaic insurance provisions. This reform was long overdue. However, there is a major shift in statutory coverage requirements.
On the one hand, responsibility for coverage will lie primarily with the association and eliminate a lot of disputes over covered risks. On the other hand, this expanded insurance program will be considerably more costly. The following is a summary of changes contained in the new bill; effective June 1, 2002. All condominium insurance in the State of Illinois must include the following:
- Coverage for units, common elements and limited common elements. This includes anything controlled or built by the developer.
a. Additions and improvements installed by the unit owner are still excluded.
b. Coverage is provided for portions of systems bounded by the walls, ceilings and floors.
c. There is no coverage for wall, ceiling or floor coverings.
Comment: Although limited common elements are to be covered by casualty loss, that does not affect association policies regarding financial responsibility for maintenance.
- Fidelity bond coverage shall be for the board, officers and the management company for the full amount of operating and reserve funds on deposit.
- Deductibles - there is no longer a question that a deductible may be charged back to the unit owner(s) causing the loss, as long as it is subject to notice and hearing.
- Primary coverage - The association's insurance will always be presumed to be the primary carrier.
Comment: One of the biggest sources of disputes between the association and an owner was which insurance covered a loss; the owner's or the association's. From this point forward, these types of claims are to be submitted to the association's carrier as the "primary."
- Associations can now require unit owners to maintain owners HO-6 insurance coverage and if they fail to do so, the association can purchase it and charge the cost back to the owner. …