In Tennessee, once the first unit of a condominium is conveyed, the condominium association must purchase an insurance policy. Associations should look to the Tennessee Code §66-27-413 to see what the insurance policy is required to cover.

Per the code, a condominium association must maintain the following insurance:

  1. Property insurance on the common elements insuring against risks of direct physical loss commonly insured against for similar properties. The total amount of insurance after application of any deductibles shall be no less than eighty percent (80%) of the total replacement cost of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations and other items normally excluded from property policies; and
  2. Liability insurance, including medical payments insurance, in an amount determined by the board of directors, but no less than any amount specified in the declaration, covering all occurrences commonly insured against for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements.

When a condominium is multi-story, or has horizontal boundaries, the insurance purchased by the association must also include the units, but need not include improvements or betterments installed by individual unit owners. In any style condominium, however, each unit owner must be an insured person under the policy.

The association’s policy does not prevent unit owners from purchasing their own insurance. If a unit owner has purchased his or her own insurance covering the same risk covered by the association’s policy at the time of loss, the association’s policy provides the primary insurance.

Under the association’s insurance policy, the association waives its right to subrogation against any unit owner, lessee, or member of the owner’s or lessee’s household, unless it can be shown that the owner, lessee, or member of household intended to, and did in fact cause, the loss.

Condominium associations should comply with the Tennessee code, and individual unit owners should consider obtaining their own property and liability insurance as well to fill in any gaps not covered by the primary policy.