The complexity of condominium insurance law

The complexity of condominium insurance law

For a manager of a condominium owner’s association, understanding the necessity of compliance with federal and state law, as well as protecting against potential liability claims, is a challenging but vital part of protecting the association.

Disasters, such as the recent freak snowstorm that caused massive power outages and burst pipes in Houston and across Texas last month, can significantly affect the ability of the HOA to meet its obligations to maintaining common areas when insurance claims go unpaid or are challenged.

When dealing with property damage claims to multiple units, condos, or to the common areas, it is important for Houston condominium managers not only to have proper documentation when filing a claim, but also to make the filing in a timely manner. When the claim is denied or delayed for no specific reason, it is essential to explore effective legal options in order to obtain timely financial recovery.

Community association laws

Condominium associations are governed mainly by state law, but they are also impacted by federal law. With regard to HOA insurance laws, the Texas Condominium Act (Chapter 81) and the Uniform Condominium Act (Chapter 82) set forth the statutory requirement of condominium formation, management, operation and powers, as well as common elements, insurance and records retention in the state. Chapter 81 refers to declarations recorded prior to 1994, while Chapter 82 governs declarations recorded from 1994 to the present.

Under these laws, associations must maintain:

  • property insurance on insurable common elements, including fire and extended coverage with 80% replacement cost of actual cash value
  • commercial general liability insurance, including medical payments insurance against death, bodily injury or property damage from use, ownership or maintenance of common elements
  • if this insurance is not readily available, the association must give notice to all unit owners and lienholders

In addition, any portion of the condominium required to be insured that is damaged or destroyed must be repaired or replaced in a timely fashion unless the condominium is terminated, a state or local ordinance prohibits this action, or if 80 percent of the unit owners vote to not rebuild.

In addition, if damage to a unit or common elements has been caused by an act or omission of a unit owner, guest or invitee of a unit owner, the association is entitled to assess a deductible portion of the damages in excess of insurance proceeds against the owner.