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Condominium Insurance Basics

Maybe it is the weather, but we have been receiving a number of questions about condominium insurance coverage as between the common elements and units.  Here is a summary:  A condominium master policy must, at a minimum, cover property damage to all of the condominium structure, including both the common elements and units as originally constructed and finished by the developer, with the unit owners providing individual insurance for their improvements and personal contents.  Section 11-114 of the Maryland Condominium Act states that the council of unit owners is required to maintain insurance “[f]or property and casualty losses to the common elements and the units, exclusive of improvements and betterments installed in the units by the unit owners other than the developer.”

During the 2009 legislative session, the Maryland General Assembly took action on the issue in direct response to two Court of Appeals decision concerning the allocation of responsibilities for property damage between a condominium council and the individual unit owners.  The revised law established that the condominium master insurance policy must cover all of the building elements, including the units, except for improvements installed in the unit by the owners after construction.  However, where the damage originates in a unit, that unit owner is responsible for any insurance deductible under the council’s policy, up to a maximum of $5,000.  The new law amended Section 108.1 to make it specifically subject to the provisions of Section 11-114.  It then amended Section 11-114 to make clear that the council of unit owners is required to maintain insurance “[f]or property and casualty losses to the common elements and the units, exclusive of improvements and betterments installed in the units by the unit owners other than the developer.”  The amended law also imposes the deductible requirement on any individual owner in whose unit the damage originates, regardless of whether the bylaws so provide, up to a maximum of $5,000. Otherwise, the deductible remains a common expense.  The result is that condominium master policies must cover property damage to all of the condominium structure, including both the common elements and units as originally constructed and finished by the developer, with the unit owners providing individual insurance for their improvements and personal contents.  If damage originates in the unit, the owner is responsible for the insurance deductible up to a maximum of $5,000.