Florida Condominium Insurance Coverage: What Insurance Coverage Must Be Obtained? Who is responsible If Condominium Insurance Is Not Purchased?

An insurance agent’s claim of “cheaper” premiums could come with the risk of less coverage. A prudent condominium association must know what is required to be insured by law.

First, under Florida Statute 718.111(11)(a), a condominium association is required to provide adequate property insurance for the “replacement cost of the insured property as determined by an independent insurance appraisal or update of a prior appraisal.” Replacement cost coverage means coverage for the full cost of repairing and/or replacing damaged property without deduction for depreciation. The statute further states that the replacement cost must be determined at least once every 36 months.

When determining adequate property insurance coverage, under Florida Statute 718.111(11)(c), the board may consider deductibles in order to reduce its premiums. The deductibles must be consistent with industry standards and prevailing practice for communities of similar size and age, and having similar construction and facilities in the area where the condominium property is situated. The deductibles may also be based on available funds, including reserve accounts, or predetermined assessment authority at the time the insurance is obtained.

Second, under condominium documents or bylaws, most associations are also required to obtain replacement cost coverage for damages that may occur.1 Therefore, an association should buy a replacement cost, not an actual cash value policy. An actual cash value policy is coverage for the cost of repairing and/or replacing damaged property with deduction for depreciation. Depending on the age and/or maintenance of the condominium, this could be a significant difference in coverage.

Third, to ensure appropriate coverage, it is important that the condominium association works closely with an insurance agent who understands the association’s insurance needs and regularly procures insurance for associations. The mistaken belief that any agent will know the needs of an association may result in less coverage or future litigation against the insurance broker for failure to procure adequate insurance. If an insurance agent does not ask for the governing documents such as declarations, bylaws, articles of incorporation, or other relevant documents, you may be dealing with an inexperienced agent.

Finally, Florida Statutes and case law hold condominium association directors and officers immune from liability in their individual capacity, absent fraud, bad faith, malicious or criminal activity, or self-dealing / unjust enrichment. While most boards purchase Directors and Officers liability coverage (malpractice insurance for directors and officers), these policies are not created equally. Some policies contain exclusions for failure to maintain or obtain adequate property insurance. As a result, the board may be subject to liability, including the cost to defend the legal action.

Therefore, an association should also work with an experienced agent to obtain thebest Directors and Officers liability coverage which will limit this exclusion. The agent should know what exclusions apply, what policies have fewer exclusions, and whether the policy defends the board if there is a claim or lawsuit for failure to obtain appropriate insurance.

Bottom line, condominium associations must be careful and diligent when hiring an insurance agent to procure the best insurance coverage for the association and as required by Florida law.


1 See Fannie Mae Selling Guide § B7-3-04, Condo Requirements and Amount of Coverage topics.

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