Florida Law Requires Loss Assessment Coverage for Condominium Unit Owner Policies

Most condo HOAs have a master insurance policy that covers shared areas on the property in case of damage or liability. Like any policy, though, the master policy has limits and deductibles, and if damage to a common area exceeds the limit or falls below the deductible, the HOA’s policy might not cover everything. In that case, the HOA might levy a loss assessment (sometimes called a special assessment) on individual owners to cover costs.

What Is Loss Assessment Coverage?

Loss assessment coverage is an optional add-on you can purchase for your homeowners or condo insurance policy. It acts as a financial safety net in case of damage to common areas of your building complex. Loss assessment coverage on your own policy would cover the loss assessment applied by your HOA.

What Is An Example of Loss Assessment Coverage?

Let’s say you live in a condo with a beautiful beach view and a shared courtyard. One day a storm damages the courtyard, causing $575,000 worth of damage to the pavings and underlying drainage systems. Your HOA’s master policy has a $500,000 limit for damage to common areas; therefore, the HOA is responsible for $75,000 worth of repairs.

Typically, if common areas owned by condominium associations are damaged or destroyed, the associations may seek to have each of the individual unit owners pay for a portion of the damage. If the loss is one that the association is insured against, the association may still assess unit owners for any costs or liabilities other than what is recovered from the insurance claim.

So if there are, let’s say, 30 units in the complex, each owner could be held responsible for up to $2,500. In other words, a loss assessment allows the HOA to pass the cost of the courtyard repairs on to the individual condo owners in case of a covered event like a storm.

Are Loss Assessment and Special Assessment the Same Thing?

All loss assessments are special assessments, but not all special assessments are loss assessments. A special assessment is an umbrella term that signifies any fee levied by an HOA on individual property owners, while a loss assessment is a special assessment due to a covered loss. In our example above, the $2,500 is both a special assessment and a loss assessment because it is applied to repair a loss due to a covered event.

Is Loss Assessment Coverage Required for Condo Insurance?

For the most part, loss assessment coverage is not required for condo insurance. However, loss assessment coverage can protect you against paying out of pocket for a loss assessment done by your HOA for damage to common areas. Additionally, some states and associations have rules about minimums, as discussed below.

What Is Florida’s Law for Loss Assessment Coverage?

Florida Statute § 718.111(4) gives condominium associations the power to make and collect assessments to “lease, maintain, repair, and replace the common elements of association property,” while Florida Statute § 627.714 requires that residential condominium unit insurance policies issued or renewed after July 1, 2010, must include at least $2,000 in property loss assessment coverage. This coverage would pay up to the stated amount for any assessments made upon each insured unit owner.

The loss assessment coverage provision of § 627.714 sets forth a few requirements:

  • Policy must include at least $2,000 worth of coverage
  • The coverage amount is in excess of all other coverage
  • Deductible can be no more than $250
  • The deductible will not apply if another one was already applied to the unit owner for the same loss
  • Coverage applies to all assessments made related to a particular loss
  • The loss must be to property owned by the community as a whole
  • The loss must be of the type covered by the unit owner’s homeowner policy

As long as the loss assessment coverage meets these minimum statutory requirements, it may include other terms and conditions. For example, as discussed in Loss Assessment Coverage and the “Master Deductible” Clause, this coverage may not apply to assessments made by associations to cover their own deductible on the association’s policy.

When determining how much loss assessment coverage one should get, unit owners may want to consider what property the association is responsible for, how much insurance the association has, and how much previous assessments have been.

Does HO-6 Cover Loss Assessment?

HO-6 policies can cover loss assessment, but it depends on a few factors. Namely, while loss assessment coverage is typically an additional endorsement on an HO-6 policy, it is sometimes included. To understand which is the case for you, be sure to review your HO-6 policy for any limits or exclusions that might apply.

Further Resources on Insurance Coverage Law

Navigating the complexities of insurance claims can feel overwhelming. Whether you’re facing unpaid claims or simply filing for the first time, our eBooks equip you with the crucial information you need to advocate for yourself with confidence.

Why Merlin?

Are you fighting an insurance company that won’t pay up on claims? With nearly 40 years of practice and $2 billion in recovered claims, our team stands by your side to ensure you can face any insurance challenge with confidence. Contact us today for a consultation, or read more about how we’re your trusted advocate.

Can an HOA Require Homeowners Insurance?

The short answer to this question is yes, HOAs can require individual property owners to have homeowners insurance as long as the Declarations of the HOA address it. This blog answers some common questions about HOA insurance requirements and examines a particular case from Florida where an HOA took a member to court for failing to provide proof of insurance.

What Is HOA Insurance?

HOA insurance, also called an HOA master policy, is a type of commercial property insurance obtained by the HOA itself. HOA insurance is completely separate from any individual insurance held by the individual property owner. In other words, your homeowner’s insurance protects your condo, while HOA insurance protects the association’s shared property from both property damage and liability. 

As always, it’s important to be aware of what your individual insurance covers, and what the HOA insurance covers. Sometimes there are gaps in coverage that can lead to penalties for the condo owner.

What Insurance Is Required by HOAs in Florida?

There isn’t a single mandatory insurance policy required by HOAs for all homeowners in Florida. However, HOAs themselves are required to have both property insurance and liability insurance, and condominium HOAs in Florida are also required to insure buildings for the full replacement cost. Additionally, HOAs might be able to set minimum coverage amounts for homeowners. 

The associations’ property and liability insurance cover two different things: Property insurance covers damages to the commonly owned property of the association. This typically refers to things like pools, playgrounds, landscaping, sidewalks, and so on. Liability insurance protects the association from claims of liability on common property. For example, if a child falls at the playground, and their parents decide to sue the HOA.

These kinds of insurance interact with your homeowner’s policy in different ways, particularly in a condo. It’s important to review any Declarations for your HOA to understand your rights and responsibilities as a homeowner.

Can I Opt Out of an HOA in Florida?

Not really; it’s so difficult, that it’s nearly impossible. If you don’t want to be subject to the rules of an HOA, your best bet is to look for a community that doesn’t have one.

Can You Sue Your HOA in Florida?

Yes, you can sue your HOA in Florida, but your HOA can sue you as well; both associations and unit owners are bound by the terms of an association’s governing documents (usually called the “Declarations”), and failure to comply with them can have detrimental consequences for both.

For instance, let’s consider the case of Alorda v. Sutton Place Homeowners Association, Inc., decided by a Florida appellate court back in 2012. The case involved this issue, as well as the association’s claim for attorneys’ fees and costs associated with the lawsuit.

Some background: The Alordas purchased a townhouse located in the Sutton Place Homeowners Association on June 29, 2007. Section 9.04 of the Declarations for the Sutton Place HOA requires that the owner of a residence in the subdivision maintain insurance on the residential property and annually provide notice of coverage to the association. 

In June 2008, on the first anniversary of the Alordas’ purchase, the association didn’t receive notice that they had renewed their insurance coverage; they subsequently sent letters to the Alordas requesting proof of insurance. When the Alordas didn’t send proof, the association filed a complaint against them on April 9, 2009. The association asked the court to file a “permanent mandatory injunction” ordering the Alordas to purchase homeowner’s insurance as stated in section 9.04 of the Declarations.

In response to the service of the lawsuit, the Alordas’ attorney sent the association’s attorney an email on May 6, 2009, advising that the Alordas did have the required insurance coverage. Attached to the email was a copy of the Declarations page of the insurance policy, showing that it went into effect March 19, 2009. Counsel for the Alordas also asked the association to dismiss its action, since the couple did in fact have the required coverage.

But the case didn’t end there. The association refused to dismiss the action and ultimately obtained a judgment of attorneys’ fees and costs, and the Alordas in turn appealed that judgment, arguing that the original complaint didn’t state a reason for the injunction.

The Alordas were effectively appealing the fact that the HOA filed an injunction against them, since to get an injunction–to obtain injunctive relief–the requesting party must show that it doesn’t have an adequate remedy available at law. In other words, an injunction is a big step: It requires that there be no other way for the association to cover the costs of the required insurance or to obtain notice of the coverage from the Alordas.

In fact, the Declaration attached to the complaint provided the association with procedures to follow if an owner failed to provide the required notice of insurance coverage. The procedures specifically allow the association to obtain coverage and then assess the cost of obtaining that coverage against the owner. The procedures also provide that the assessment can be recorded as a lien against the owner’s real property if the assessment isn’t paid within thirty days and that an action at law could then be filed against the owner to collect the assessment.

The appellate court eventually agreed with the Alordas and reversed the judgment for fees and costs, finding that the association wasn’t the prevailing party. The court did comment, though, that they were “not unsympathetic” to the HOA, since the Alordas hadn’t notified the HOA as required by the Declarations. However, the appellate court effectively ruled that by jumping straight to an injunction instead of following the procedures laid out in the Declarations, the HOA had also violated the Declarations. The outcome may have been different if the association had obtained insurance coverage for the Alordas’ property and then filed an action against the owner to assess the costs of that insurance against the Alordas. 

Further Resources on Insurance Coverage Law

Navigating the complexities of insurance claims can feel overwhelming. Whether you’re facing unpaid claims or simply filing for the first time, our eBooks equip you with the crucial information you need to advocate for yourself with confidence.

Why Merlin?

Are you fighting an insurance company that won’t pay out on claims? With nearly 40 years of practice and $2 billion in recovered claims, our team stands by your side to ensure you can face any insurance challenge with confidence. Contact us today for a consultation, or read more about how we act as your trusted advocate.

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