Sometimes it is easy to determine who is covered under an insurance policy just by looking at the declarations page of the policy. Other times it is not so easy. A recent case from State of Washington illustrates just how complicated it can be to determine who is and is not covered under a policy of insurance. In the case of Elkins v. QBE Ins. Corp., No. 11-5150, 2011 WL 1562386 (W.D. Wash. Apr. 21, 2011), an insured office condominium suffered a fire loss and questions arose as to whether individual office unit owners were covered for business interruption losses under the property insurance policy.

Although this case involved a business interruption claim, the court’s analysis hinged more on who was covered under the policy than whether a business interruption claim was viable under the facts. For those interested in business interruption claims, Michelle Claverol writes an excellent series of business interruption articles for the Property Insurance Coverage Law Blog, and I encourage all to read her posts.

Back to the Elkins case, to determine whether the property insurance policy covered loss of rents for individual office units, the court looked to the following documents:

  • Insurance Policy
  • Condominium Conditions, Covenants and Restrictions (CC&Rs)
  • Washington Statutes
  • Case Law

The policy named the condominium association as the insured and provided that coverage existed for the “building containing twelve professional units.” The policy further stated that it would pay for loss of “community income.” The court looked to case law to determine how to read the policy, and looked to Washington statutes to determine that individual unit owners were covered under the association’s liability policy, but not necessarily the property policy. The court also noted that the condominium CC&Rs only required that the association property policy cover the building and limited common elements. Any additional insurance was to be procured at the expense of the unit owners.

Since the policy did not define “community income,” that definition was left to the court to decide. The court turned back to the condominium association documents, Washington statutes, and policy provisions to come to the conclusion that individual unit owners were not covered for business interruption losses under this association’s property insurance policy and that “community” meant the association as a separate and distinct entity from the individual unit owners. The court granted summary judgment for the insurer, QBE, and dismissed the individual unit owners’ business interruption claims.

Because condominium association insurance policies can be lengthy, technical, and require analysis of additional documents other than just the policy, we always recommend contacting competent legal counsel to assist with insurance coverage questions and needs.