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BILL: CS/CS/SB’s 2086 & 2498

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April 2008, their surplus lines companies have written one group insurance policy for approximately 80 condominium associations in the Tampa-St. Petersburg area. The coverage limits are approximately $100 million, which is about 10 percent of the total value of the association properties of approximately $1 billion, but the $100 million amount is equal to the PML for a 250-year windstorm event, according to these representatives. Willis uses the RMS (Risk Management Solutions) hurricane model, which has been approved by the Florida Commission on Hurricane Loss Projection Methodology.

Officials with the Office of Insurance Regulation (OIR) have expressed concern with condominium association windstorm insurance policies that do not provide coverage for the total value of the association property. The OIR has concerns that these policies do not provide sufficient, clear disclosures to the unit owners as to the terms and conditions of coverage, including any limits of coverage below the total value of the association property, or the risk assumed by the unit owners should their coverage be inadequate. If coverage is inadequate, unit owners would be charged with assessments after a hurricane occurs. Currently, policy forms are often distributed to unit owners only after an association board approves the insurance policy, according to these officials.

Condominium Unit Owner Responsibilities -- Plaza East Decision In January 2006, the division issued a Declaratory Statement in the petition filed by Plaza East Condominium Association (Plaza East).5 The Petition requested an opinion as to whether Plaza East may pass on to the unit owner the cost of repairing those items that would have otherwise been paid for by the association’s insurance policy, but for the application of the deductible or amounts in excess of the coverage limits, notwithstanding provisions in the declaration defining the condominium property as part of a unit with the cost of repairs to be paid for by the unit owner. Plaza East acknowledged it is required to insure the condominium property located outside the units, the property inside the units as initially installed, and all portions of the condominium property requiring coverage by the association under s. 718.111(11), F.S.

The division concluded that although the declaration of condominium required that the unit owner was responsible to pay for repairs if the damage was to the portions of the unit that the unit owner was required to maintain, in Plaza East, the division decided that the condominium association could not shift the cost of the deductible, a common expense, to only those unit owners whose property was damaged by the insurable event such as a hurricane. The division stated that the owners of the damaged units had paid their proportionate share of the insurance to replace the damaged property, and that it was unfair to shift the risk and liability to the individual unit owners for the damages. It is also noted that holding individual unit owners liable is inconsistent with the assignment of insurable risk in s. 718.111(11), F.S.

According to representatives with condominium associations, the Plaza East decision was contrary to how the law had been interpreted previously and has created confusion among condominium associations and unit owners. Historically, condominium declarations have unilaterally allocated the risk of uninsured losses to the unit owner in control of the damaged

5 In Re: Petition for Declaratory Statement Plaza East Association, Inc., Division of Florida Land Sales, Condominiums, and Mobile Homes Declaratory Statement 2005-055, Docket No. 2005 059934, Department Final Order No. DBPR-2006-00239, January 13, 2006 (“Plaza East”).

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