Condo loss assessment coverage

Prior to Hurricane Matthew’s destructive path, a major hurricane had not made landfall in the U.S. for a record-breaking 129 months. Of course, you know what that means. Stock up on canned food and batteries because it’s hurricane season. When making sure you are covered in the event of a hurricane, don’t overlook loss assessment coverage for condominium owners. Typically, condo association bylaws will state that when a building or a commonly shared area sustains heavy damage from an insured disaster but the losses are not fully covered by a condo association’s master policy, then the association may assess a proportionate share of the uncovered losses to all the unit owners.

The good news is that the chances this coverage already exists on your National Flood Insurance Program Standard Flood Insurance Policy or SFIP are good. SFIPs consist of three parts: 1.) the Dwelling Form, 2.) the General Property Form and 3.) the Residential Condominium Building Association Policy Form, or RCBAP. It is the Dwelling and RCBAP form that are relevant when discussing loss assessments.

The Dwelling Form provides limited coverage for loss assessments against unit owners for flood damage to common areas of any building owned by the condo association. The amount of coverage under the Dwelling Form you have will depend on whether or not there is RCBAP.
If there is no RCBAP, you would only be covered under the Dwelling Form for damages to common areas, up to the building coverage limit under the Dwelling Form.

If your policy includes an RCBAP which covers at least 80 percent of the Replacement Cost for the damage, then the Dwelling Form will pay that part of the loss that exceeds 80 percent of the association’s building replacement cost.

Finally, if there is an RCBAP present that covers less than 80 percent of the Building Replacement Cost, the Dwelling Form will provide coverage to you once the RCBAP limits are exhausted. However, the Dwelling Form will cover to any coinsurance penalty under the RCBAP no matter if the limits on that policy have been exhausted or not.

If you have any questions about this coverage, call our agency today. We’d be happy to sit down and walk you through it.