A resident is claiming their insurance company will not add our association as an additional insured party on their homeowners policy. How does this effect our requirement of owners to do so?

ANSWERS:

Before jumping to the conclusion that the Association’s requirement cannot be met, I’d suggest obtaining a copy of whatever document the owner received from his/her insurer declining to add the Association as an additional insured (and if the declination was verbal, having the owner get something in writing as to the reason). At that point the Association will know if the declination is based on something that can be cured by the owner (thus enabling the insurance to be met) or not (in which case either the Association’s requirement must be waived or the owner needs to seek insurance coverage elsewhere.

Sara A. Austin
Austin Law Firm LLC
226 E. Market St.
York, PA 17403
717.846.2246 phone
717.846.2248 fax
saustin@austinlawllc.com

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It is not clear from the question whether the requirement that an owner add the association as an additional insured is in the governing documents for the association or is adopted by board rule.  It is further not stated whether the requirement to add the association as an additional insured is in connection with the use of the resident of the clubhouse for an event, or is a general policy of the association for all owners to obtain a policy for their home and include the association as an additional insured.  In responding to this question I assume this is a condominium and that a board rule requires the owner to have the association named as an additional insured.  If this is a general policy required for all owners, it is important that the association’s counsel review the governing documents.  Typically the governing documents state that an owner may obtain a policy covering the owner’s own interests so long as the owner obtains a waiver of subrogation against the association, but does not mandate it.  While there are exceptions, we see this in about 98 percent of the documents we review.  If that is the case in this instance, it is our opinion that the board cannot mandate that owners obtain a policy covering their interests when the documents are merely permissive, let alone require the owner to have the association named as an additional insured. 
 
If on the other hand, the requirement to name the association as an additional insured is the result of a request by the owner use the association’s clubhouse or other facility, the board may impose reasonable conditions on the use of the common property or common elements.  The board has very broad authority over such facilities and in most states its rule-making authority would allow it to make such a rule.  Generally, there are several parts to a homeowners own policy.  In an HO-6 policy (for condominium unit owners), for instance, coverage A is for structural damage to the unit including additions and alterations and should be coordinated with the type of policy maintained by the association for the units (i.e. bare walls, single entity or all-in).  Coverage B covers personal property, such as furniture, clothing, etc.  Depending on the type of policy (single family home versus condo) there will be a part of the policy that covers personal liability.  Typically most insurance companies will add an additional insured under that part of the policy, particularly if there is a contractual indemnity obligation running from the insured to another party – in this case the association.  Such an indemnity obligation would be typically stated in a use agreement allowing the owner the ability to hold an event in the clubhouse or other common facility. Hence, if this is a requirement in connection with an event the owner wishes to hold on common property, we would suggest that the owner go back to the insurer and seek to add the association only under the liability section of the owner’s policy.  If the owner’s insurer is not willing to do that, we would advise the association that the owner needs then to seek a separate liability policy for the event under which the association can be added as an insured.

J. David Ramsey
Becker & Poliakoff
67 Park Place, Suite 702
Morristown, NJ 07960
Tel: 973.898.6502
Fax: 973.898.6506
DRamsey@bplegal.com

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I want to know how and where the requirement is stated and what remedies the governing documents provided for non-compliance. The answer to the resident may require that the resident obtain a policy from an insurer that will add the association as an additional insured. It may be the case that the resident and its insurer are confused about the request. Some direct inquiry to the insurer may prove helpful.

Ed Zelmanski
Zelmanski, Danner & Fioritto, PLLC
44670 Ann Arbor Road, Suite 170
Plymouth, Michigan 48170
(734) 459-0062
Fax: (734) 459-5313
ezelmanski@zdfattorneys.com

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The homeowner may have to use a different insurance company.  Insurance companies differ on their approaches to naming an association as an additional insured.
 
If numerous companies take the same approach, then unless the Board can find a company that offers to name the Association without a substantial premium increase, it may be necessary for the Board to reconsider its requirement. 
 
Remembering that all Board action must be “reasonable” it is difficult to require a member to obtain something that is not commercially offered or acceptable.

Robert C. Griffin, Esq.
Griffin Alexander, P.C.
415 Route 10, 2nd Floor
Randolph, NJ 07869-2100
(973) 366-1188
rgriffin@lawgapc.com

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I’m not quite sure how to answer or why this is required. Should the association be sued for something the owner did, then there is a common law claim for indemnification by the association against the owner. I also do not know why an insurance company would refuse to do add the association. That is quite common. My advice to unit owners is always to insure the unit with the same insurance company that the association has to avoid any issues as to which company is responsible for what claim.

Kenneth D. Roth, Esq.
Marchetti Law PC
900 N.Kings Highway, Suite 306
Cherry Hill, NJ 08034
Tel: 856-824-1001
kroth@marchettilawfirm.com