It’s never fun when winter weather causes damage to the interior or exterior of your home or condo unit. Coming home to water leaking into your comfy space can send you into a panic. What do you do first? To discuss the best course of action, I spoke with Gregg Gerelli, president of Gerelli Insurance Agency, Inc. of Cold Spring, New York.
“Obviously, the first thing you need to do is to stop damage to the property,” said Gerelli. “You have your right in your insurance policy. You need to prevent further damage.”
Acting quickly is of course important. “If you’ve got water coming in, the first thing you would do is call the property manager or the board to get a contractor out to shovel the roof or put a tarp up. But you need to prevent further damage,” he said.
So an owner’s first contact should be “in house” before calling contractors, say, out of the phone book? “Yes,” said Gerelli. “If it’s a large association, they will have people on staff that can stop the damage from continuing.”
Gerelli continued to explain step two. This is assessing the damage monetarily and deciding if the insurance company needs to get involved. “You’re going to see if that damage is over the property deductible, where this is an insurance claim. Do you feel the estimate or fix-all is going to be large enough to be an insurance claim? Some associations have a $2,500 deductible. If you have a minor leak, you might not want to put in the claim. But if it’s more, you definitely want to put in a claim with your insurance agent,” he said.
What if the damage encompasses personal property such as furniture, electronics, clothing, works of art, etc.? “Anything that is the unit owner’s, that they pick up and take with them, is their responsibility,” said Gerelli.
What are the particular policies that cover “both sides” of the unit? “[The unit owners] would carry their own unit owner’s insurance for the interior of their unit. Whereas the master insurance for the association carries coverage for the building — the structure itself,” he said.
From a construction standpoint, how is it determined, as to what will be the association’s responsibility versus the unit owner’s responsibility to repair and pay for? Gerelli said that each association’s governing documents are different, and those documents determine responsibility.
Interestingly enough, the association’s policy is only responsible for making the unit whole to the specs of the particular unit at the time of its initial construction. Gerelli explained that owners are usually responsible for insuring their improvements to the unit. So the association only has to repair and replace what was originally there. So if a unit originally came with carpeting, but the owner installed marble floors after they moved in, the association is only responsible to replace carpeting. The owner is responsible for insuring those marble floors. “The same thing in a kitchen,” said Gerelli. “If you had the basic cabinets and laminate countertops and you went and put in cherry cabinets and granite countertops, that then becomes your responsibility. It gets picked up on the unit owner’s policy, called an H06.” The H06 policy picks up where the association’s master policy leaves off.
How does the HO6 policy differ from a policy on a single family home that is not part of an association? “A regular homeowner’s policy is called an HO3. It has building coverage, contents coverage and liability,” said Gerelli. “The H06 is designed like a homeowner’s policy, but instead of the dwelling, it has improvements and betterments as a limit. It also gives you loss of use and personal liability. It’s basically very similar to a renter’s policy, except it has the improvements and betterments part to it. It is also very similar in cost to a renter’s policy,” he said.
Who actually selects and hires any contractors needed for the repairs? “When it comes down to it, the contractors should be hired by the association to repair the building, because the association is ultimately responsible for the building. And the payment for the claim [for the building] is going to go to the association. It’s not going to go to that unit owner. Because it’s for the association’s master insurance.”
Does the unit owner have any say in who will be doing the repairs? “The association can hire whomever they want.” But Gerelli also said a common occurrence is that the same contractor who fixes the inside of the unit also fixes the outside. If that happens the unit owner would obviously have a say regarding the interior of their home.
Who coordinates the repairs with the insurance company — the unit owner, or the association manager? Gerelli succinctly stated that “it’s going to be the property manager or the board making all of the decisions.”
What if a unit owner doesn’t like how the association is handling the repairs? Is there any recourse? “No”, said Gerelli, “other than communication with the association. What you bought into is the association. The association is responsible for fixing the property. And they have every right to fix the property and hire who they deem fit. You have appointed and elected a board to represent you. You’re going to be able to communicate with them, but ultimately the board makes all decisions.”
Is there any complication of this process if the same damage has occurred repeatedly, and represents a possible construction defect? “An insurance company is going to pay for damage for a covered claim. So if you have ice damage to the building and the water comes in, then that’s a covered claim. If you have a windstorm, and a tree hits the roof and damages it, that’s a covered claim. If you have faulty workmanship, that’s not a covered insurance claim. You’re stuck going back after the builder. Which is usually an unwinnable battle and a tough spot for the associations,” said Gerelli.
Are there any other policies a unit owner can purchase for additional coverage? “You can’t have duplicate coverage on the structure,” he explained. “By buying into a condominium complex owners are buying into the bylaws and offering plan which basically says ‘the association is responsible for insuring the building.’ So you can’t also go out and buy an insurance policy for the building. If you did and had a claim that insurance company most likely wouldn’t pay, because you didn’t really even have an insurable interest to do it.”
Knowing what to do and where you stand, as well as maintaining good communication with the association, and proper coverage can make the event of property damage less stressful.