By:  Jay Steven Levine, Esquire (published in Broward Coalition Newsletter – 2011)

The focus of this article is the community association’s filing of an insurance claim for property damage in a casualty event.  It is important to realize that property damage insurance will cover property damage only where the cause is a casualty event versus deficient maintenance or damage caused over a long period of time.  The most pervasive casualty event is a hurricane or tornado.  However, there are more common every day events which are caused by a casualty.  These include fires, bursting pipes, air conditioning condensate line leaks, water heaters bursting, overflowing toilets and leaking shower pans.  Essentially, if an event is identifiable, sudden, unexpected and unusual in nature, the event is most likely to be considered a casualty event.

When an association is faced with a property damage claim caused by a casualty event, the association should immediately contact its insurance agent to discuss the effect of filing a claim on the loss run history of the association.  Loss run history will affect the ability of the association to renew its insurance policies and may affect the level of premiums in the future.  Most times the agent will agree and recommend that the association file an insurance claim.  The agent will then forward the claim to all of the association’s insurance carriers requesting coverage for the loss, and request that the appropriate insurance company assign an adjuster to commence the adjustment process.

There are times when the insurance company demands a proof of loss from the association.  The association must provide one as part of the duty of cooperation imposed by a typical insurance policy.  This is a critical document which should be prepared with the aid of legal counsel, as the proof of loss could affect the ability of the association later on to recover more than what the insurance company is willing to pay.

Also as part of the duty of cooperation, the association must permit the insurance company, upon its request, to review the records of the association and to take witness statements.  As with the proof of loss, the association’s legal counsel should be involved in this process, as it could impact the ability of the association to recover money in the future.

A very significant change in the law in 2011 involved an amendment to F.S. 627.7011, which is part of the insurance code applicable to all properties within the state of Florida.  Except in the case of a total loss, the statute allows insurers to now pay only the actual cash value of an insured loss from a dwelling (less applicable deductibles).  Prior to this change, the insurer was obligated to pay upfront the full replacement cost less deductible, and not just the actual cash value of the damaged property.  In order for the association to obtain the remaining amounts so to recover the full replacement value (less deductible), the association must enter into a contract for the performance of building and structural repairs, with the insurer paying the remaining amounts once the repairs are made.  The net effect of this new law could financially impact associations.  An association should consult with its legal counsel in order to best approach such effect.