Condominium association unit owners, boards of directors and property managers are often faced with questions of responsibility for losses due to water damage within association property and units. Water damage claims are likely one of the most common sources of damage in non-hurricane years in Florida. This problem is complicated by the maze of legal terms within the insurance requirements of Florida Statute §718.111(11).

Consider a common scenario:

A leak from an upper unit causes water to flow into lower units and damages the ceilings and drywall within those units. Repair expenses may be significant, but there may be a fairly large deductible on the association policy of insurance, making it difficult to obtain insurance proceeds to help cover the loss.

Under the Florida condominium statute, associations are generally responsible for the repair and replacement of the drywall within the condominium units. According to Florida Statute §718.111(11)(f), the association’s policy of hazard insurance covers “all portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications,” except “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.”

In the leak scenario, the association’s insurance covers all drywall damage caused by a covered peril and all other damage, with the exceptions of that specifically excluded by the statute — provided that the loss is above the association’s policy deductible.

According to Florida Statute §718.111(11)(j) “any portion of the condominium property required to be insured by the association against property loss pursuant to paragraph (f) which is damaged shall be reconstructed, repaired, or replaced as necessary by the association as a common expense.”

This means that the association pays for repairs to the items covered by the association’s insurance, even if those damages are below the association’s policy deductible, unless the members have voted to “opt-out.” Under §718.111(11)(j), the association also pays the deductible as a common expense of the association unless it has to “opted-out” of the provision of the statute. The “opt-out” provision of the condominium statute in Florida Statute §718.111(11)(k) states:

An association may, upon the approval of a majority of the total voting interests in the association, opt out of the provisions of paragraph (j) for the allocation of repair or reconstruction expenses and allocate repair or reconstruction expenses in the manner provided in the declaration as originally recorded or as amended. Such vote may be approved by the voting interests of the association without regard to any mortgagee consent requirements.

An Association can “opt-out” of part of the insurance law, but cannot “opt out” of its insurance obligations. It seems that the “opt-out” would change whether the repair expenses and deductible will be considered a common expense. If a majority of the association’s unit owners vote to “opt-out,” the requirement to pay for repairs as a common expense and the requirement to pay the deductible as a common expense can be changed and will be dealt with according to the condominium declarations. If damage was to only one unit, this “opt-out” may make it the unit owner’s responsibility to pay for the repairs and to pay the deductible.

Florida Statute §718.111(11)(m) states that if a community votes to “opt-out” of the repair and replacement and deductible requirements of the Statute, it must record a notice setting forth the date of the “opt-out” vote and the page of the official records book within the county records on which the declaration is recorded. The Statute allows an opt-out decision to be reversed by the same vote of a majority of the total voting interests of the association.

Associations considering whether to “opt-out” of the repair, replacement and deductible requirements of the Florida condominium statute should consult with their legal and insurance professionals who could likely help the board of directors weigh their options.