Condominium Insurance Law : Condo Insurance Lawyers & Attorneys : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables & West Palm Beach

Condominium association directors generally owe a fiduciary duty to the association they serve. As a fiduciary, a director owes grave duties of loyalty and good faith to the association. This relationship is one of trust that finds its roots in contract, statute, and the common law. While directors owe this high duty of care to the association, under the right circumstances, a director may seek to have the association cover any liability or expense incurred to defend the director against accusations of wrongdoing. This is the principle of indemnity.

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The Southern District Court of Florida will have to determine whether an insurance company appropriately obtained a policy release from a condominium association involving a Hurricane Wilma claim in a case that is pending before it. Continuum Condominium Assoc., Inc. v. Mt. Hawley Ins. Co., No. 10-23550, 2011 WL 2214810 (S.D. Fla. June 2, 2011). It can be a questionable practice for insurers to demand that their policyholders sign a release during the adjustment of a claim before obtaining insurance benefits, particularly when the policyholder is not represented by counsel. The court’s analysis may balance public policy in favor of releases, which encourage parties to resolve their disputes, with the potential over-reaching or inappropriate means with which this release was obtained.

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If an association is unhappy with its insurer’s offer to settle a claim, it has two main avenues to resolve the dispute. First, the association can retain an attorney and file suit against the carrier for breach of contract. Second, the association can invoke the appraisal process afforded by most insurance policies.

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When a new condominium is constructed, the developer initially owns the property. Typically the developer will start selling individual condominium units, but maintain ownership and control over the common elements and unsold individual units. At some point, usually after a majority of the individual units have been sold, the developer will turn over ownership and control of the common elements to an association of individual condominium unit owners. These are usually times of transition, and different parties at different times carry different interests in the property. When an insured loss occurs during these transitory times, complicated issues can arise regarding who is entitled to insurance benefits.

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It is no secret that association board members, for the most part, have no formal training in dealing with insurance issues. In fact, neither do most association managers. While an association or manager can deal with a small claim without help, claims involving widespread damage or confusing policy issues often require outside help.

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In a recent case, the Florida Fourth District Court of Appeal analyzed a condominium association’s declaration documents to determine whether the association owed a duty to maintain the pipes located within interior walls of the condominium. While the subject of the case is a negligence action by the unit owner against the association, the case involves analyses into governing documents and statutory construction similar to those often required in the first-party property insurance context in claims by unit owners in condominium associations.

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As most of us know, June 1 was the beginning of the Atlantic Hurricane Season. Experts are again predicting a “highly active” year, and some opine that more than ten major hurricanes are possible. Coincidently, June 1 also came with significant changes to the laws regarding property insurance in Florida. As Jeremy Tyler mentioned on Monday, even the statute of limitations for filing a property damage lawsuit has been changed to five years from the date of the storm.

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