What Does Your Condo/Coop Agreement Say About Insurance?

Every six months several childhood friends of mine get-together in one central location to catch up on our lives and who we want to be when we grow up! Often it simply becomes a time to share stories about recent life changes.

At our most recent get-together Sharon shared about the new condo she had purchased in North Carolina and all the upgrades she had chosen. Darlene told of the coop she recently bought in NYC in a landmark building, and Mary complained about how inconvenienced she was during her recent apartment renovation when she replaced her kitchen, two bathrooms and all the doors in her apartment. As I sat listening to the conversation, I couldn’t help but think about a recent article I had read in the Insurance Advocate. The writer, a well known expert witness in cases which involve insurance company disputes over policy coverages, discussed how differently the same loss could be treated based upon responsibility written into the agreement governing replacement of real property. Basically, the article talked about who is responsible for replacing real property in a cooperative or condominium unit when there is damage resulting from a covered loss. The answer isn’t always simple, but it is important.

The first thing a unit owner must always do is review the insurance requirements governing the replacement of real property. Real property is that which is differentiated from personal property and comes under the heading of additions & alterations coverage.
There are three different approaches to the treatment of who is responsible for the replacement of such property and what type of insurance a unit owner must purchase to be adequately protected in case of loss:

is most common where the unit owner must insure everything from the walls in. This includes any cabinetry in the kitchen and bathroom, any appliances, plumbing fixtures, decorative improvements like crown moulding and oak doors-any betterments to the unit made by the unit owner after purchase.

is where the association must insure the additions that were part of the structure when it was originally sold. This doesn’t include any additions, alterations, improvements and/or betterments made by the unit owner subsequent to the purchase.

All In

is somewhat similar to Original Specifications except that it is even better in that includes any improvements and/or upgrades made by the unit owner in addition to that which was part of the Original Specifications.

Clearly, from this information, all three of my friends would have completely different responsibilities should their abodes catch fire and be destroyed. I wanted to run home immediately and find out what my own agreement said about my exposure should my apartment go up in flames, but home was two days and a plane ride away, so I had to live with the suspense of not knowing until I arrived home and confirmed that my cooperative apartment was still standing.

– Karen Skoler, CPCU