From Becker and Poliakoff
Outright Owner Not Required To Carry Insurance, But Should
Question: I own my condominium outright and do not have a mortgage. Does the law require that I carry insurance on my condominium unit? If so, what legal action can be taken against me if I choose to not have insurance on my condominium unit? J.P. (via e-mail)
Answer: The current version of the Florida Condominium Act, Section 718, Florida Statutes, does not contain an express requirement that unit owners carry insurance. However, at least in my opinion, it is a good idea to do so.
Generally speaking, the condominium association has the legal obligation to maintain insurance on all of the condominium improvements, both inside and outside the unit, with some exceptions. The statute expressly excludes from the association’s insurance responsibility “all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any insurance thereupon is the responsibility of the unit owner.”
While the components listed in the statute are the owner’s insurance responsibilities, there is no express obligation in the Statute that an owner carry insurance. There used to be a requirement in the Florida Condominium Act which required unit owners to carry insurance, which in the industry is usually referred to as “HO-6” coverage. However, that provision was amended out of the statute in 2010.
It is possible that your condominium documents require owners to carry insurance. It is not uncommon to see provisions in condominium association documents that state the owners must carry insurance on their unit. Further, some documents go on to state that in the event an owner fails to carry insurance, the association has the ability to force place the insurance and seek to collect the cost from the owner. In my opinion, such a provision is enforceable.
Accordingly, while there may not be a statutory obligation to carry insurance on your condominium unit, it is the responsible thing to do. The cost of most HO-6 policies is reasonable compared to the risks. In my experience, if everyone carries adequate insurance, many disputes would be avoided when there is an expensive loss due to relatively common damage events, such as bursting pipes, overflowed toilets and the like.
There’s another concern with the lack of insurance. In the event someone other than the owner suffers an injury while in the unit, the liability or defense of a claim would not be covered.
WaterCrest Condo Association.
Very good point – liability coverage is likewise important.
Joe: Great discussion. In SC and I suspect in most states, governing documents usually provide the requirement that owners obtain insurance coverage (HO6) and often the documents will state that the owner must submit a Certificate of Insurance to the HOA is so requested. Unfortunately, many HOAs don’t require owners to submit Certificates. I believe it is very important that HOA’s enforce the insurance provisions in their documents, which really means the management company needs to follow up.
A potential outcome of not enforcing could result in a lawsuit against the Board for breach of fiduciary duties in cases where a casualty occurs in a unit and the owner has no insurance because the Board did not enforce the provisions of the governing documents.