Good Housekeeping: Homeowners Insurance

BY DAN MILLER - CHOICE NEW YORK

On May 14, 2011, Kimberly Wilson, an elderly resident in a cooperative apartment building, died of natural causes in her sleep. The board of directors only became aware of this after management was notified that Ms. Wilson’s person was seeping through the ceiling of the below apartment. After the situation was triaged, the board rightful moved to hold the owner of the unit, the building sponsor in this case, responsible for a cleanup of the common space cavity between the two apartments. It was fortunate that the sponsor was able to ultimately compel their homeowner’s insurance company to cover the remediation whose costs exceeded $50,000.

However, without the insurance in place, it was clear that a lengthy and costly legal process would ensue. It also meant that the cooperative avoided having the make hard choices about using funds to cover the remediation of the common space in the short-term and that they would not be distracted by legal discussions in the following months and a loss of revenue by a sponsor potentially protesting being compelled to clean a common space. While this scenario is unusual, typical events such as fires and flooding that trigger the same issues for board scan drag coops and a condo’s into time consuming, possibly fund sucking legal battles. It may also force the building to file a claim with their own insurance carrier which requires the building to cover the deductible usually $2,500 to $5,000 and will result in higher premiums.

While most residents do wisely carry insurance, there are still many who don’t and this presents a liability to every apartment building. Cooperative and condominiums have a number of ways to limit this exposure. At a minimum a reminder letter can be sent to all residents strongly encouraging them to carry insurance. More aggressively, owners can be asked to submit a copy of the declaration page of their policy to Management to confirm there is a policy in place. Going further, buildings can work with their Management company to monitor individual policy expiration dates and reach out to request proof of renewal.
Some offering plans actually require owners to carry insurance and this should be checked in the event that some owners are not cooperative(no pun intended) and this can minimize contention. In addition to the above noted benefits, homeowner insurance covers damages to their own property which is the most likely scenario and also covers personal items which building policies do not. The coverage extends to robberies and other liabilities and having insurance is one way to be a good neighbor and avoid infighting. For those who don’t know this a reminder is never a bad thing.