Florida condominium associations have unique property, liability, windstorm, flood, and financial exposures. The right insurance program can help protect the association, common property, and the people who depend on it.
How Does Condo Association Insurance Work in Florida?
Florida law establishes specific property-insurance responsibilities for residential condominium associations and unit owners. A condominium association must maintain adequate property insurance for the association property, common elements, and other condominium property that the association is responsible for insuring.
The amount of adequate property insurance is generally tied to the value of the property being insured. Florida law requires replacement cost to be determined at least once every three years and provides for that determination through an independent insurance appraisal or an update of a previous appraisal.
Because condominium documents, property characteristics, and insurance responsibilities can vary, associations should review their governing documents and insurance program carefully when determining appropriate coverage.
What Property Does a Florida Condo Association Insure?
Under Florida law, the association’s property insurance generally provides primary coverage for portions of the condominium property as originally installed or replaced with like kind and quality, along with certain qualifying alterations or additions to condominium or association property.
The association policy generally excludes certain property located inside individual units that serves only that unit, including:
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Personal property
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Floor, wall, and ceiling coverings
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Electrical fixtures
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Appliances
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Water heaters and water filters
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Built-in cabinets and countertops
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Window treatments and related hardware
Insurance for those excluded items is generally the responsibility of the individual unit owner.
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Property Insurance
Risk Factor
Condo and co-op associations may face severe financial consequences from property loss due to fire, wind, or other causes.
Solution
Commercial property insurance should provide coverage for damage to the building, personal property owned by the association, and income lost due to a covered cause of loss.
General Liability
Risk Factor
Condo and co-op associations are susceptible to many risks, such as claims due to bodily injury, property damage, personal injury, and more. The association could also face lawsuits from claims associated with common areas such as hallways, stairwells, swimming pools, and parking areas.
Solution
General liability insurance is an absolute necessity for any association. It provides coverage for legal fees and judgments when the association is named in a covered lawsuit.
Crime and Fidelity Bond Insurance
Risk Factor
Crime and fidelity bond insurance is designed to provide coverage to cooperative and condominium associations to protect them from theft of funds or association-owned personal property by an employee, board member and in some cases, the property management firm.
Solution
Crime and fidelity coverage is designed to provide coverage for employee dishonesty, forgery and alteration, computer fraud, counterfeiting, and more.
Systems Breakdown Insurance
Risk Factor
With technology performing many tasks in today's world, a breakdown can cause a significant financial burden, including the cost to repair the equipment and any resulting lost income or extra expenses.
Solution
Comprehensive coverage provides protection against equipment mechanical breakdown for machinery such as heating and cooling equipment and elevator motors.
Directors and Officers Liability Insurance
Risk Factor
Directors and officers (such as board members) can be held accountable for decisions they make in the performance of their duties. Any resulting lawsuits are typically expensive to defend and can result in potentially large settlements.
Solution
Directors and officers liability insurance provides coverage for the legal costs to defend a covered lawsuit and may also provide the money necessary for any resulting judgments.
Commercial Umbrella Insurance
Risk Factor
What happens when your condo or co-op building faces a large liability loss that exceeds the basic limit of your standard policy?
Solution
A commercial umbrella policy will provide extra coverage over and above general liability, directors and officers liability, auto liability, and employers liability policies. Limits start at $1,000,000 and go as high as $200,000,000.
Cyber Liability Insurance
Risk Factor
Technology has spun a whole new web of liability exposures including the need for protection of privacy, data, and financial information for your association residents. Breach of their data can result in costly fees and lawsuits for the association if held liable.
Solution
Cyber liability coverage covers fees and lawsuits resulting from the breach of personal data, assuming that the association is liable.
Environmental Insurance
Risk Factor
Pollutant clean-up is generally excluded from the basic policies. Leaking of a fuel tank can be very costly to remediate.
Solution
Environmental insurance provides coverage for clean-up costs and third party lawsuits as a result of a leak from the tank or related pipes.
Sponsor / Investors Owned Units Insurance
Risk Factor
Typically the policies for the association exclude coverage for the sponsor or holder of unsold shares for the interior of the units they own.
Solution
A policy should be maintained to provide coverage for what you are responsible for within the unit, as well as any lost income and lawsuits resulting from acts within the unit.
Condo Association Insurance vs. Unit Owner Insurance
The association’s commercial or master policy is not a substitute for an individual condominium unit owner policy, commonly called an HO-6 policy. Unit owners may need coverage for personal belongings, improvements or property that is not insured by the association, personal liability, loss assessments, and other individual exposures.
Where the association’s responsibility ends and the unit owner’s begins can depend on Florida law, the condominium documents, and the insurance policies involved.
General Liability Insurance for Condo Associations
Condominium associations can face liability claims involving common areas such as walkways, pools, clubhouses, elevators, parking areas, recreational facilities, and other shared property. General liability insurance may help protect the association against certain covered claims involving bodily injury or property damage to others.
Coverage limits should reflect the size of the condominium, amenities, visitor traffic, contractual requirements, and the potential severity of a liability claim.
Protecting the Board and Association Funds
Condo association boards make decisions involving budgets, contracts, maintenance, assessments, insurance, and other matters that can create management liability exposures. Directors and officers (D&O) liability insurance may help protect eligible board members and the association from certain covered claims arising from management decisions.
Florida law also requires condominium associations to maintain insurance or fidelity bonding for people who control or disburse association funds. The required protection must cover the maximum funds that will be in the custody of the association or its management agent at any one time.
What Other Insurance May a Florida Condo Association Need?
A condo association insurance program may involve several policies or coverage extensions rather than a single policy that addresses every risk. Depending on the property and association, coverage to consider may include:
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Workers’ Compensation Insurance, when applicable
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Ordinance or Law Coverage
The appropriate combination depends on the buildings, common areas, amenities, employees, contractors, location, financial structure, and governing documents of the association.
Florida Condo Associations Face Significant Wind and Flood Exposures
Florida condominium properties can face hurricanes, tropical storms, wind-driven rain, storm surge, and flooding. Property policies should be reviewed carefully for hurricane or windstorm deductibles, exclusions, limits, roof and building requirements, and any need for separate wind or flood coverage.
Flood insurance deserves separate attention because flood damage is typically not covered by standard property insurance.Condominium associations should evaluate available flood coverage based on the property’s location, flood exposure, common elements, association property, and other property for which the association has an insurable interest.
Replacement Cost and Deductibles Matter
Adequate property limits are especially important for condominium associations because reconstruction costs can change significantly over time. Florida law requires the replacement cost of the property to be determined at least once every three years through an independent insurance appraisal or an update of a previous appraisal.
Deductibles also deserve careful review. Florida law requires association property insurance deductibles to be consistent with industry standards and prevailing practices for communities of similar size and age with similar construction and facilities in the local area. When establishing the deductible, the board may consider available funds, including reserves, and predetermined assessment authority. The amount of the deductible must be established by the board at a properly noticed board meeting.
A large hurricane or windstorm deductible can create a significant financial obligation for an association after a major loss, making deductible planning an important part of the association’s insurance review.
Florida Condo Association Insurance for Northeast Florida Communities
Condominium associations vary considerably in construction, age, location, number of units, amenities, property values, reserves, and catastrophe exposure. The appropriate insurance program should reflect the specific condominium property and the responsibilities of the association.
First Florida Agency helps condominium associations in Jacksonville, St. Augustine, Ponte Vedra, Nocatee, St. Johns County, and throughout Northeast Florida evaluate property, liability, flood, windstorm, and other association insurance options.
Need insurance for your Florida condo association? Request a quote or contact First Florida Agency at 904-822-8800 to review your coverage options.
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