When damages occur in condominiums a frequent dispute is how to determine if damages will be covered under the unit owner’s insurance policy or under the Board’s insurance policy for damages in common areas of the condominium. For example, in National Insurance Company v. Seguros Triple S,1 the Puerto Rico Appellate Court discussed this issue when water that escaped from a damaged bathroom of one of the unit apartments caused damage to the electric panel of the elevators of the condominium.
The contract or insurance policy in this case also included a clause “Waiver of Rights of Recovery” that stated the right to waive to recover payment through subrogation. Insurers have the legal right to place subrogation agreements in their policies so long as they do not contravene applicable statutes.2 The Plaintiff in this case alleged he was still entitled to payment through subrogation.
Puerto Rico’s Insurance Code states that insurance contracts or policies should be interpreted globally with all its terms and conditions, as expressed on the policy and with its extensions, modifications by addendum, endorsements or applications attached that may be part of the policy.3 In case any doubts arise on interpreting the policy, this shall be resolved in a manner that provides protection to the insured. If no ambiguity exists in the contract than it shall be interpreted in conformity to the will of the parties when they agreed to the contract.4 The Supreme Court of Puerto Rico has held that it is the responsibility of the courts to determine the meaning of the words used in the policy in controversy, and the meaning should be one understandable to a person of normal intelligence that purchases an insurance policy. If a policy has clauses that are ambiguous they shall be interpreted in favor of the insured.5
Unit owners are responsible for the maintenance and repairs reserved for their exclusive use and occupancy. If a unit owner does not comply, and as a consequence damages are extended to common areas of the condominium, the unit owner may be liable for the repair or replacement. In Seguros Triple S, the insured alleged he was not responsible for the damages of the electric panel because the clause read:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
WHO IS AN INSURED (Section ii) is amended to include as an insured each individual unit owner of the insured condominium, but only with respect to liability arising out of the ownership, maintenance or repair of that portion the premises which is not reserved for that unit owner’s use or occupancy.
The condominium’s insurance policy included each unit owner as an insured under this clause, therefore, subrogation could no longer apply. National (the insurer) paid the Board $25,077 for the damages caused to the elevator’s electric panel. Under the clause, the unit owner’s insurance company was protected against actions of subrogation, therefore National could not recover the $25,077 paid to the Board for the damages caused by the water that escaped from the unit owner’s apartment. If subrogation had not been waived, National would have been able to recover from the unit owner’s insurance the amount paid to the Board. It is important to read and understand insurance policies to be able to make global interpretations of its meaning, coverage, and remedies available.
1 National Ins. Co. v. Seguros Triple S, Inc., 2005 WL 3351236 (2005).
2 Id. at 6.
3 26 L.P.R.A. 1125
4 Quiñones v. Manzano, 141 D.P.R. 155 (1996).
5 Pagán Caraballo v. Silva Ortíz, 122 D.P.R. 105, 111 (1988).