Condo Association Provides Inadequate Insurance

J.F. from Fairfield County writes:

Dear Mister Condo,

If a condo association is maintaining flood insurance, but not the proper amounts as required by lenders to provide financing, how can condo owners force the board to purchase the proper amounts of insurance. A vote would be the simple answer, but a number of units are not interested in selling or refinancing. Is there a duty for the board to insure to the amounts that meet today’s lending requirements? Please note I looked at CT laws concerning duty to insure and the flood insurance provisions are somewhat gray to me.

Mister Condo replies:

J.F., Connecticut’s laws on the association’s duty to provide adequate coverage for units can be a bit confusing. At the very least, you have highlighted a specific area of concern that the law may not address clearly. As long as the association is providing adequate coverage to follow the law, there is no additional requirement that they follow what mortgage companies feel is adequate coverage. In other words, if a mortgage company determines the value of your unit to be higher than what the association has deemed appropriate, the mortgage company may claim a delinquency in insurance and either provide the additional insurance (at a premium to you) or mandate that you provide the additional insurance. This is particularly tricky for units that are in flood zones as the flood insurance is a separate policy from the association’s Master Policy. I have found that there is an additional layer to add to this confusion. If the insurance underwriter changes the amount of the Master Policy coverage, it may create a discrepancy with the flood insurance purchased by the association. In other words, the coverages may be for differing amounts which again cause the mortgage companies to claim a discrepancy and require matching amounts of property and flood insurance. The bottom line is that Boards need to keep a close eye on these policies by working with an insurance professional to make sure they are both adequately insuring the association and complying with state law. I do know of homeowners who have sued their association, claiming the association failed to provide adequate insurance. Will you need to do the same? Maybe. I would bring the insurance delinquency to the Board’s attention and see what they do. If you aren’t happy with the results, seek the advice of a local attorney who will let you know if you have a case. All the best!

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