B.B. from Collier County, Florida writes:
Dear Mister Condo,
My condo association received funds from an insurance claim filed regarding hurricane damage. Included in the claim were windows, a roof, and various other items. If the association wants to use some of the funds received in the settlement to purchase new windows for all owners but some owners had already purchased them in the last 10 years on their own, how does the association handle those owners that don’t want new windows but want some sort of reimbursement?
Mister Condo replies:
B.B., I am sorry that your association took so much damage. I am glad the damage was an insured loss and that the association now has the funds to make the repairs. I trust and hope that no one was injured during the storm(s). Once the funds are disbursed to the association, it is incumbent upon the Board to make sure the repairs needed are made. Any funds left over are somewhat to be used at the Board’s discretion. I am not sure I understand how claims were made for windows that weren’t damaged or are not being repaired but that is a discussion for another day. The insurance money is “found” money for the association. It was not budgeted, it didn’t go to replace the Reserve Fund as the Reserve Fund wasn’t used to make any repairs (if it was, that money should go back to the Reserve Fund). I would think that the Board, as the elected representatives of the association, would make the decision to use the money how it best serves the community, including saving it for the next “rainy day”. One word of caution – if the insurer gets wind that they paid more than was needed for repairs, they may come looking for their money back. If the claim was for 100 windows to be replaced and only 50 were replaced, the insurer may claim fraud on the part of the association for overreporting the damage. That might be all the more reason to put that excess insurance reimbursement aside, at least for a year or so, before moving it or using it for something else. All the best!
*** Please review the comment below from Bob Caspar who is a licensed public adjuster. He has a completely different take on the funds disbursed by the insurance company. He is an expert in this field and I highly suggest you read what he has to say.
IF the insurance company “overpaid” the HOA needs to spend that money on what was deemed damaged or return the $ to the carrier. If they have another loss and those items were not replaced, they would not be covered in the new loss. Moreover, the HOA could be committing insurance fraud, and telling them to just put it aside in case the carrier gets wind of It is about it is the worst advice I have heard in 40+ years in the claims arena.
Bob, thanks for the info. I have updated my response to include your comments. I truly appreciate the feedback.
Your welcome Bob.
Carriers can be really difficult when money is paid and not used to make the noted repairs.
If the costs per window were less then paid, THATS a different story, but not making the repairs claimed can cause a real problem.
Regards
Hi Bob My association right now is in negotiations with a law firm to file a claim for Hurricane Irma(deadline soon.) This firm and our lawyer stated that after we get the money from the insurance company, no one cares what we do with the money. I find this hard to believe. They have led our association to believe that for example we claim $10m, and after the contingency, our deductible, and other fees we end up with $5.1M. At that time we have no responsibility to complete the $10m worth of repairs. I think this is fraud. Can you give me any insight on how insurance claim funds can legally be used by a condo board?
J., I don’t know if it rises to the level of fraud but it does raise some ethical questions. Before offering advice to you here, I (Mister Condo) did reach out to a Public Adjuster friend (Bob Caspar) of mine to see if he had any insights to offer. Obviously, the Board needs to thoroughly read the policy and the HOA Covenants to see if they address the situation. Simply not making the repairs is typically not allowed. However, if the repairs were already made and this money is simply replacing the money already spent, I can see why the attorney might be offering this advice. As you know I am not an attorney and neither is my friend. We offer no legal advice here. My friend suggested to me that if your association filed a claim for $10m and received a payment of $5m for those damages then one would have to assume the damage is significant and would need to be repaired. If the association does not make the repairs then those items will not be paid for in a future loss.
Also, most carriers will not pay Replacement Cost unless the replacements are made, so they may only be talking about being paid at ACV – actual cash value at the time of loss. Without repairs being done they would lose the difference between RCV and ACV. Also, only getting about 50% of the claim after Fees & Expenses seem excessive. Again, I’m not an attorney but It seems like poor advice to me. Perhaps the association should speak to a Public Adjuster (PA) before going ahead with the attorney’s advice! A PA would not charge all that much and might offer a different opinion.