7 Apr 2016

With Great Power Comes Great Responsibility Part 3 of 4

Posted by Orlando HOA Services

We can talk about rflooded-house1esponsibilities all we want, but no one is perfect. According to a dear friend named Murphy, anything that can go wrong, will go wrong. (For information about Murphy’s law, click here to wikipedia) This post and the next will talk about what to do when things go wrong. Today we will discuss what happens if an individual in your close knit community did damage and insurance solutions.

 

 

Damage Caused by an Individual

The above principles are modified by the common law of negligence and, sometimes, by other CC&R provisions. Under the common law, everyone has a “duty” to act reasonably to avoid foreseeable risk of harm to other people. The failure to do this is negligence. If someone’s negligence causes property damage, wrongful death, bodily injury, etc., the negligent person is responsible for the consequences.

Thus, even though the separate interest is usually supposed to be maintained by an owner, the rule is usually different if the homeowners association was supposed to maintain the roof, a common area, but did so negligently; and, as a result, the roof leaked and damaged the separate interest. In that case, it’s up to the HOA to fix the damage to the owner’s separate interest and personal property.

This rule doesn’t always help, though. What if an owner’s dishwasher leaks and causes a flood? Can you prove the owner was negligent? Or did the dishwasher leak all of a sudden, with no warning, in which case maybe the owner wasn’t negligent, after all? Fortunately, such damage is often covered by insurance!

Insurance Considerations for HOAs

The CC&Rs usually require a community association to purchase insurance for the common areas. The community association will purchase “property insurance,” which covers the common areas if they are damaged by an insured peril, such as a fire or windstorm. The HOA will also purchase liability insurance, which will cover damage caused by the homeowners association’s negligence. Many times, damage to the common area will be covered by one or both of these policies. Most policies define common area in the same way it is defined in the CC&Rs. However, HOAs should have a written policy, or a CC&R provision, setting forth who pays the deductible in various circumstances. Usually, if the HOA was negligent, or if no one was negligent, the association pays the deductible. If the damage originated in an owner’s unit, then often, the owner is asked to pay the deductible, whether or not the owner was negligent.

Insurance does not cover all possible damage, however. What happens if an owner does not have liability insurance; he hires an uninsured contractor to do work in his unit; the contractor whacks a common area water pipe and causes a flood, and the flood damages the separate interests? The homeowners association’s property policy won’t cover the separate interests. The HOA’s liability policy won’t cover it either—the association did nothing negligent! The owner who hired the contractor is liable, but if the damage is hundreds of thousands of dollars—which can happen, neither he nor the uninsured contractor can afford to pay. Sometimes the individuals whose separate interests are damaged are underinsured. This can result in owners, who are innocent victims being displaced for months, having all their property destroyed, with no good source of obtaining payment! For this reason, although it’s hard to enforce, many homeowners associations amend their CC&Rs to require all owners to purchase liability insurance! Others at least strongly “urge” owners to do so.

 

Article originiated from: http://www.echo-ca.org/article/how-determine-maintenance-responsibility-hoas

Do you need an expert to keep your self-managed condominium association fiscally healthy? Orlando HOA Services can help you set up good financial practices that will keep your association financially strong well into the future. Contact us at JR@Orlando-HOA.com or check out our website at www.Orlando-HOA.com.

 


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