New Condo Insurance Law Goes Into Effect July 1, 2011. Read the Following Notice and Get Your Insurance Up-To-Date.

Dear American Towers Owners:

This letter is to provide you with legal notice of some recent changes the Utah Legislature made to the Utah Condominium Act regarding the Association’s property insurance obligations and your own condo property insurance for your Unit.

The most important change is that Owners of Units sustaining damage to their Unit in the future will be responsible to pay the deductible of the Association's property insurance policy for each insurable incident whether or not there is any assignable negligence or fault. However, your own condo property insurance policy is now required to pay this amount. If you choose not to carry insurance, you will be required to pay this amount.

The current deductible of the Association is $10,000. The insurance policy of the Association will pay for all property damages in excess of the deductible (excluding your personal property such as furnishings and clothing).

If you choose to not carry property insurance for the first $10,000 of damage, the Association will conduct repairs and as authorized by this statute may assess and lien your Unit to collect the amount of the repairs within the deductible if not paid within 30 days after billing.

Because of these changes, it is very important that you obtain condo property insurance for your Unit prior to July 1, 2011 when the new legislation takes effect.

This is what you should do:

  • Obtain Condo insurance with a property limit of at least $10,000. Most owners already carry coverage in excess of this amount and may receive some premium savings by reducing their limits to this low amount.
  • Obtain additional appropriate insurance for your personal property (furnishings, clothing etc.) and for your personal liability.
  • Request your agent to send a certificate of insurance to the American Towers Owners Association.
  • If you have deluxe or expensive remodeling, document the extent and cost of remodeling in case you ever need to recover the additional costs in the event of future damage or a claim.

You are also invited to a special Owners Meeting to review and discuss this new legislation with the Board, our attorney and an insurance representative. The meeting will be held on Tuesday, June 14, at 7:30 pm in the Community Room immediately following our regular Board Meeting which will begin at 5:00 p.m.

The new legislation, S.B. 167, requires that after July 1, 2011, each Owner (or his insurance policy) will be responsible for damages to their Unit for each incident up to the deductible of the insurance policy of the Owners Association which at present is of $10,000. Once the deductible has been met by an Owner or his insurance policy, the insurance policy of the Association will then pay for all damages that exceed the deductible amount (excluding only personal property such as clothing and furnishings).

Once the $10,000 deductible has been met, the property insurance policy of the Association will provide coverage for all damage to a Unit including fixtures, improvements, betterments, cabinets, light fixtures, electrical fixtures, heating or plumbing fixtures (your fan coil units), paint, wall coverings, floor coverings, windows, any other item permanently part of, or affixed to a Unit, all Common Areas and all Limited Common Areas including those located within your Unit.

Previously, the Association had to pay the deductible on its own policy and was able to pursue those who may have been at fault for such damage. Now individual owners of damaged Units (or their property insurance policy) must pay the deductible. This helps insurers of the Association and individual Unit Owners coordinate insurance coverage and benefits. But it also highlights your need to insure your own portion of the risk of damage to your Unit, the $10,000 deductible.

If more than one Unit is damaged in any one incident, the Owners of the damaged Units (or their insurer) must pay the deductible in the same proportion as the damages to their own Unit bears to the total damages to all Units resulting from the incident. Each Unit Owners share of the deductible is to be calculated as a percentage of the damages to their Unit divided by the Total damages to all Units and Common Areas.

Owners who do not carry property insurance to cover their share of the deductible must still pay for all damages up to the deductible and the Association is authorized to collect this by assessment. The amounts will be added to your monthly statement and interest and late fees will be charged for amounts that are not timely paid.

All Owners who have a property insurance policy for their Unit are also required to have a certificate of insurance sent from their insurer to the management office of the Owners Association.

Your Board of Trustees strongly encourages all owners to obtain property insurance for your Unit in the amount of at least $10,000 and additional insurance for your personal property and liability in an amount that you and your agent deem appropriate. Please also be sure that your policy specifically and explicitly will cover damages from a backed up sewer, drainage water or other escaped liquids.

A copy of the portion of the new law covering condominium insurance is enclosed with this letter for your convenience.

Sincerely,

Your Board of Trustees

Please note: The contents of this letter and anything communicated at the upcoming Owners meeting is not a substitute for Owners contacting their own insurance agent and insurer concerning their own insurance coverage and insurance plans. Neither the Association, its Board members, its Management, its legal counsel nor its insurance agents are giving advice to individual Owners.

The Following is the text of the Insurance portion of the new legislation, S.B. 167:

57-8-43 Insurance.

(1) As used in this section, "reasonably available" means available using typical insurance carriers and markets, irrespective of the ability of the association of unit owners to pay.

(2) This section applies to an insurance policy or combination of insurance policies:
(a) issued or renewed on or after July 1, 2011; and
(b) issued to or renewed by:
(i) a unit owner; or
(ii) an association of unit owners, regardless of when the association of unit owners is formed.

(3) Beginning not later than the day on which the first unit is conveyed to a person other than a declarant, an association of unit owners shall maintain, to the extent reasonably available:
(a) subject to Subsection (9), property insurance on the physical structures in the condominium project, including common areas and facilities, limited common areas and facilities, and units, insuring against all risks of direct physical loss commonly insured against, including fire and extended coverage perils; and
(b) subject to Subsection (10), liability insurance, including medical payments insurance 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 areas and facilities.

(4) If an association of unit owners becomes aware that property insurance under Subsection (3)(a) or liability insurance under Subsection (3)(b) is not reasonably available, the association of unit owners shall, within seven calendar days after becoming aware, give all unit owners notice, as provided in Section 57-8-42, that the insurance is not reasonably available.

(5)
(a) The declaration or bylaws may require the association of unit owners to carry other types of insurance in addition to those described in Subsection (3).
(b) In addition to any type of insurance coverage or limit of coverage provided in the declaration or bylaws and subject to the requirements of this section, an association of unit owners may, as the management committee considers appropriate, obtain:
(i) an additional type of insurance than otherwise required; or
(ii) a policy with greater coverage than otherwise required.

(6) Unless a unit owner is acting within the scope of the unit owner's authority on behalf of an association of unit owners, a unit owner's act or omission may not:
(a) void a property insurance policy under Subsection (3)(a) or a liability insurance policy under Subsection (3)(b); or
(b) be a condition to recovery under a policy.

(7) An insurer under a property insurance policy or liability insurance policy obtained under this section waives the insurer's right to subrogation under the policy against any unit owner or member of the unit owner's household.

(8)
(a) An insurance policy issued to an association of unit owners may not be inconsistent with any provision of this section.
(b) A provision of a declaration, bylaw, rule, or other document governing the association of unit owners that is contrary to a provision of this section has no effect.
(c) A property insurance or liability insurance policy issued to an association of unit owners may not prevent a unit owner from obtaining insurance for the unit owner's own benefit.

(9)
(a) This Subsection (9) applies to property insurance required under Subsection (3)(a).
(b) The property covered by property insurance shall include any property that, under the declaration, is required to become common areas and facilities.
(c) The total amount of coverage provided by blanket property insurance may not be less than 100% of the full replacement cost of the insured property at the time the insurance is purchased and at each renewal date, excluding items normally excluded from property insurance policies.
(d) Property insurance shall include coverage for any fixture, improvement, or betterment installed by a unit owner to a unit or to a limited common area, including a floor covering, cabinet, light fixture, electrical fixture, heating or plumbing fixture, paint, wall covering, window, and any other item permanently part of or affixed to a unit or to a limited common element.
(e) Notwithstanding anything in this section and unless otherwise provided in the declaration, an association of unit owners is not required to obtain property insurance for a loss to a unit that is not physically attached to:
(i) another unit; or
(ii) an above-ground structure that is part of a common area or facility.
(f) Each unit owner is an insured person under a property insurance policy.
(g) If a loss occurs that is covered by a property insurance policy in the name of an association of unit owners and another property insurance policy in the name of a unit owner:
(i) the association's policy provides primary insurance coverage; and
(ii) notwithstanding Subsection (9)(g)(i), the unit owner's policy applies to that portion of the loss attributable to the policy deductible of the association of unit owners.
(h) (i) As used in this Subsection (9)(h):
(A) "Covered loss" means a loss, resulting from a single event or occurrence, that is covered by a property insurance policy of an association of unit owners.
(B) "Unit damage" means damage to a unit or to a limited common area or facility applicable to that unit, or both.
(C) "Unit damage percentage" means the percentage of total damage resulting in a covered loss that is attributable to unit damage.
(ii) A unit owner who owns a unit that has suffered unit damage as part of a covered loss is responsible for an amount calculated by applying the unit damage percentage for that unit to the amount of the deductible under the property insurance policy of the association of unit owners.
(iii) If a unit owner does not pay the amount required under Subsection (9)(h)(ii) within 30 days after substantial completion of the repairs to the unit, an association of unit owners may levy an assessment against the unit owner for that amount.
(i) An association of unit owners shall set aside an amount equal to the amount of the association's property insurance policy deductible or $10,000, whichever is less.
(j)
(i) An association of unit owners shall provide notice in accordance with Section 57-8-42 to each unit owner of the unit owner's obligation under Subsection (9)(h) for the association's policy deductible and of any change in the amount of the deductible.
(ii) An association of unit owners that fails to provide notice as provided in Subsection (9)(j)(i) is responsible for the amount of the deductible increase that the association of unit owners could have assessed to a unit owner under Subsection (9)(h).
(iii) The failure of an association of unit owners to provide notice as provided in Subsection (9)(j)(i) may not be construed to invalidate any other provision of this section.
(k) If, in the exercise of the business judgment rule, the management committee determines that a claim is likely not to exceed the property insurance policy deductible of the association of unit owners:
(i) the unit owner's policy is considered the policy for primary coverage to the amount of the policy deductible of the association of unit owners;
(ii) a unit owner who does not have a policy to cover the property insurance policy deductible of the association of unit owners is responsible for the loss to the amount of the policy deductible of the association of unit owners, as provided in Subsection (9)(h); and
(iii) the association of unit owners need not tender the claim to the association's insurer.
(l)
(i) An insurer under a property insurance policy issued to an association of unit owners shall adjust with the association of unit owners a loss covered under the association's policy.
(ii) Notwithstanding Subsection (9)(l)(i), the insurance proceeds for a loss under a property insurance policy of an association of unit owners:
(A) are payable to an insurance trustee that the association of unit owners designates or, if no trustee is designated, to the association of unit owners; and
(B) may not be payable to a holder of a security interest.
(iii) An insurance trustee or an association of unit owners shall hold any insurance proceeds in trust for the association of unit owners, unit owners, and lien holders.
(iv)
(A) Insurance proceeds shall be disbursed first for the repair or restoration of the damaged property.
(B) After the disbursements described in Subsection (9)(l)(iv)(A) are made and the damaged property has been completely repaired or restored or the project terminated, any surplus proceeds are payable to the association of unit owners, unit owners, and lien holders.
(m) An insurer that issues a property insurance policy under this section, or the insurer's authorized agent, shall issue a certificate or memorandum of insurance to:
(i) the association of unit owners;
(ii) a unit owner, upon the unit owner's written request; and
(iii) a holder of a security interest, upon the holder's written request.
(n) A cancellation or nonrenewal of a property insurance policy under this section is subject to the procedures stated in Section 31A-21-303.
(o) A management committee that acquires from an insurer the property insurance required in this section is not liable to unit owners if the insurance proceeds are not sufficient to cover 100% of the full replacement cost of the insured property at the time of the loss.

(10)
(a) This Subsection (10) applies to a liability insurance policy required under Subsection (3)(b).
(b) A liability insurance policy shall be in an amount determined by the management committee but not less than an amount specified in the declaration or bylaws.
(c) Each unit owner is an insured person under a liability insurance policy that an association of unit owners obtains that insures against liability arising from the unit owner's interest in the common areas and facilities or from membership in the association of unit owners.