Unit owners of associations are clearly intended beneficiaries of the property insurance policy that the associations purchase. Indeed, in many situations, the association policy pays for the individual owner’s unit damage as well as the common elements. So, when a unit owner is damaged by a delaying, denying or underpaying property insurer, can the unit owner sue for the owner’s personal loss?
One Massachusetts case1 unfortunately says “no.” However, I read the underlying briefs and was compelled to accept the logic made by the unit owner’s counsel:
In the underlying case, the Condominium Trustee, pursuant to the Condominium Trust, authorized the Brownstone Insurance agency to negotiate with Sun Management (the condominium associations assigned management company) to purchase a first party Master Condominium insurance policy. That Policy was intended to and did, by its plain and unambiguous language, provide first party property insurance coverage for the Condominium Trust’s common elements, and for individual condominium unit owners, including Plaintiff’s individual condominium unit(s). The Condominium Association and the Insurer clearly manifested an intent to confer the benefit of first party insurance coverage by securing the policy and holding dispersed insurance funds “for the benefit of” the individual condominium unit owners, such as the Plaintiff. Simply put, Plaintiff, an individual condominium unit owner, was an intended third-party beneficiary of the Condominium Trust’s Master Policy. The Proof of loss reflects this third-party benefit intent as it was signed by the condominiums association, as “Agent, 76 Condo Assoc.” …The condominium association would not have signed it as so, without the intent to confer a benefit to “76 Condo Association”….The Policy provided to secure insurance coverage for the interior of Plaintiff’s condominium units, as well as common areas. The monies paid under the Policy were paid as a proximate result of damages to Plaintiff’s condominium unit(s), held (still to this day) by the condominium association’s general account, for the benefit of the Plaintiff to complete repairs to its condominium unit(s), the Plaintiff was an intended third-party beneficiary of the Policy. Despite the fact Insurer recognized Plaintiff’s covered claim for damage to its condominium units’ interiors, Insurer breached the Master Policy by paying Condominium Trust an amount that pales in comparison to the actual damages Plaintiff sustained.
The association certainly does not want to become embroiled in a lawsuit for the damages suffered by the unit owner. The policy clearly intended to pay for the unit owner’s damaged property and the alleged delaying, denying and underpaying insurer is damaging the unit owner—not the association.
To me, it seems like the law is allowing a wrong to occur without a remedy. This is not uncommon, but it is also neither good law nor sound civil policy.
Thought For The Day
“When I so pressingly urge a strict observance of all the laws, let me not be understood as saying there are no bad laws, nor that grievances may not arise, for the redress of which, no legal provisions have been made. I mean to say no such thing. But I do mean to say, that, although bad laws, if they exist, should be repealed as soon as possible, still while they continue in force, for the sake of example, they should be religiously observed.”
1 Batterymarch, LLC v. Everest National Ins. Co., 94 Mass. App. Ct. 1113 (Mass. App. 2018).