Utah Senate Bill 167 changed the way an HOA insures its property and buildings. It requires that HOA to carry 100% of the full replacement cost of the insured property. This includes “any fixtures, improvements, or betterment installed by a unit owner to a unit or to a limited common element”.
Regardless, each homeowner should have the correct insurance policy on their unit. The policy form you will need is:
- HO6 Condo Owners policy.
- Structure coverage equal to the deductible of $5000.
- HOA loss assessment coverage for the same amount.
- Whatever limit of coverage you need to cover your personal property, which is everything you would take with you if you moved.
What is Loss Assessment Coverage? The purpose of loss assessment insurance coverage is as follows: Within the HOA agreement, the HOA very likely has the right to levy a “loss assessment” against all HOA members as a result of a covered loss that is not fully covered by the HOA’s insurance and funds on hand. As an example, say an accident occurs at the HOA owned swimming pool and a judgment is entered against the HOA for $1,500,000. Assume the HOA’s liability coverage is $1,000,000 and there are no HOA operating funds available to pay the loss. Further assume there are ten members in the HOA. How will the remaining $500,000 be paid to satisfy the judgment? The HOA will assess each member $50,000 (they share the loss). Loss assessment coverage would pay the assessment up to the policy limit. Therefore, if your loss assessment coverage limit is $50,000, the coverage would pay the assessment and the HOA member would not owe any additional funds. When considering this coverage, be aware that it has limitations. Most loss assessment coverage is triggered only when the loss would have been covered by the HOA policy’s terms and conditions but there were insufficient policy limits. The loss assessment coverage will not provide any benefit if the loss is not covered or is excluded under the HOA’s policy, the HOA policy provided only defense costs but no indemnity coverage, or if the HOA’s policy has lapsed. The assessment must be a result of a covered insurance loss, not routine maintenance.
Because this insurance is required and is covered by the HOA, it does not excuse you from maintaining your unit. It is the responsibility of the unit owner to maintain their unit in good condition. Should a claim be submitted to the HOA for insurance and neglect is discovered, your claim will be rejected and the burden of the cost of repair will be the responsibility of the unit owner.
MAINTENANCE DEFINITION:
- Any part of the building used by the individual unit is maintained by the unit owner. (EX: Air Conditioner, Furnace, Doors, Garages, Plumbing, Windows, Patio, Deck, Etc.)
- Any part of the building used by more than one unit owner is maintained by the HOA. (EX: Roads, Roofs, Driveways, Landscape, Common Areas, Etc.)
- Any modifications, repairs, or maintenance to an unit in the HOA will need to be approved by the Modification Review Board. Any modifications not approved or within the standards of the HOA are subject to fines and the cost of restoring the unit to HOA standards will be the burden of the homeowner.
- The Modification Review Board will issue a warning letter to homeowners for not maintaining their unit in good condition. Should the warning be ignored, the HOA will have the unit repaired / maintained and bill the homeowner for the cost.
All claims for insurance NEEDS to be submitted by a board member of the HOA and not the unit owner. Should you have an issue, please fill out an Insurance Claim Form. Include as much detail and as many pictures as possible and the claim will be submitted to the insurance company where your issue will be assigned a claim number. Each claim will be assigned to an agent for investigation and that individual will determine what will be covered by insurance. The Unit Owner will be responsible for the full amount of the deductible, $5000, per incident.
All work and improvements done to units need be done by a current Utah Licensed Contractor that is pre-approved by the HOA Modification Review Board. This is to protect the HOA and to supplement the insurance coverage as needed to assure appropriate coverage. A current list of pre-approved Utah Licensed Contractors will be posted on the website and updated as requests are made.
Damage done to units by renters will be the responsibility of the unit owners and not covered by the HOA or under the HOA insurance policy.