Insurance of HOAs Condos

[Marisa Alvarez]

I own condos which are part of different HOAs.

I see a lot of money goes into Insurance ( flood wind sink holes etc )

Some Small Associations around where I live (Tampa Bay - Florida ) have opted to go just with Liability Insurance and not the rest. Our Insurer says it is illegal and that we can be sued if we do so.

Is this right ?? 😳😳😳

[Greg Scott]

It is important to ask yourself, who would sue them, why and when?

Almost every mortgage requires property insurance. In a condo, the HOA insurance would cover the structure. The HOAs that forego insurance are likely gambling that they will not have a claim. But, let's say a hurricane washes the entire condo into the ocean. Every condo owner is wiped out, as is the bank. The bank and the owners could sue the HOA but what does the HOA own? Maybe a small bank account? Both the owners and the bank will lose almost all the equity they have in the property.

Just another good reason to know that Condo Associations add a lot of risk to any investment.

[Jamie Mason]

Yikes! I would fight that if I were an owner in these associations. Greg is correct; without casualty insurance held by the condo association, there is no protection for the building whatsoever in the event of fire, wind damage, or the myriad other things that can damage a building. Individual owners' condo policies only cover contents, a small amount for interior fixtures (usually around $15K, depending on the policy), liability, and sometimes medical payments. Owners could be completely wiped out financially in the event of a loss to the building. 

[Marisa Alvarez]

@Greg Scott I understand. So what happens if there is no mortgage ? If every owner owns their place. Is it still a risk to only carry liability insurance?

[Greg Scott]

That would be the equivalent of owning a single family home with no mortgage.  You could elect to forego insurance, but it would not be advisable.

[Jason Bott]

@Marisa Alvarez 

The HOA by-laws will state the board is required to procure insurance for the HOA. If the board does not execute, then the unit owners can sue the board members for failure to perform their duties.

[John Mocker]

Jason is correct about the requirement.  Also, many bylaws specify what coverage must be purchased and often include a general guideance for the amount (ie. the full replacement cost of the structures, etc.).  

Assuming the bylaws do not require it (unlikely) and no owner objects, there is still going to be an issue when someone tries to sell their unit.  We insure a lot of Condo associations and when a unit is being sold, the new Mortgage company requires the Association's proof of Insurance. My guess is that either the mortgage will be rejected or the Association may be forced to get coverage at that time.

[Marisa Alvarez]

@John Mocker thank you for the info. If all the owners sign that they only want to carry let’s say, liability and fire insurance ( none of us have mortgages and no one wants to sell) , would there be a liability then for the members of the Board ?

[Marisa Alvarez]

@Jason Bott Jason, being a small community and none of us with a mortgage. Can each member sign that we only want to carry liability and fire insurance? ( not all the rest - hurricane, wind - flood - sinkhole ) And if so, is the Board still liable to get sued ?

[John Mocker]

Marisa,

That would be a question for an attorney in FL.  They will be able to advise on the state statues and what is required in the bylaws of the Association.  Sorry I cant give you a better answer for that.

[Jason Bott]

Originally posted by @Marisa Alvarez:

@Jason Bott Jason, being a small community and none of us with a mortgage. Can each member sign that we only want to carry liability and fire insurance? ( not all the rest - hurricane, wind - flood - sinkhole ) And if so, is the Board still liable to get sued ?

Marisa, as John mentions, you should connect with a lawyer who specializes in working with HOAs to answer your question.  Best of luck with it.

[Michael Haynes]

Marisa Alvarez. You sound like you don't know how dangerous it is to live near the beach on the West Coast of Florida. Do you know your elevation level for the building from Mean High Water level of the Ocean in Clearwater? It could be 3 feet like most of the properties on the Peninsula, South of Kennedy Blvd. in Tampa. That's why there is no way to make the Storm Sewers work in a hurricane comming up the Tampa Bay. It's like playing Russian Roulette with that one storm that could hit your area and wipe it all out. Do you know the situation with private Home Owner Insurance companies in Florida? There are 25,000 Claims that have not been settled or even looked at up there in the Panhandle after Hurricane Michael wiped it out for the second time. The Insurance companies are waiting for people to move away and die and just not pay because they don't have the money. We lucked out with the hurricane that just past us last month. Here is an article about the subject https://www.forbes.com/advisor...

[Stephan K.]

You are pretty far away from the water, close to us.

I never go without insurance on properties, have had too many damages. Storm, Fire, Water, etc.

[Marisa Alvarez]

@Stephan K. Stephen that reminds me I would love to talk with you and your guys and learn from what you guys are doing ! Please let me know when you can ! 😃