Insurance claims can create financial burdens for homeowner association who have to pay often-substantial deductibles under their master insurance policies. While every insurance policy is different, many HOA insurance policies now have separate deductibles for wind and hail claims that can be as much as 1%, 2%, or even 5% of the total insured value of the property. For example, a condominium building valued at $15,000,000 with a 2% deductible for wind and hail claims would have a $300,000 deductible for insurance claims involving wind or hail damage. Most associations cannot easily cover this deductible.
Most newer homeowner associations can assess their master insurance policy deductibles to their homeowners. And most homeowners' personal insurance policies (HO-6 policies) cover the assessment of the master insurance policy deductible.
Under the Minnesota Common Interest Ownership Act, Minn. Stat. § 515B ("MCIOA"), an association's Board of Directors may have the right to assess a master insurance policy deductible against the Units affected in any reasonable manner without homeowner approval. The Board usually does this by drafting and adopting a formal resolution assessing the deductible back to the Units at a regular or special Board meeting.
Once a Board has assessed a master insurance policy deductible back to the homeowners, homeowners can tender the assessment to their HO-6 insurance carrier for reimbursement. HO-6 insurance policies are designed to cover things that are not covered by the association's master policy, such as an owner's furniture, fixtures, appliances, floor covering, and contents. HO-6 insurance policies usually (but not always!) cover loss assessments by an association. Loss assessment coverage is available as part of a HO-6 insurance policy and provides coverage for certain kinds of losses where the Association assesses a homeowner for their share of an expense, including an insurance deductible assessment.
Under most (but not all!) HO-6 policies, loss assessment coverage is triggered when an assessment is charged during the policy period. This means that once the Board passes this resolution assessing its master deductible back to the homeowners, the homeowner's insurance policy may then pay that homeowners portion of the deductible.
If your association would like help navigating the often-confusing world of master insurance deductibles, contact us today. We can help you determine if and how to fund the master insurance deductible, including helping to draft the paperwork to assess it back the homeowners and their insurance companies. Call Smith Jadin Johnson, PLLC today at 952-388-0289.