Chapter 514B-143(d), Insurance, states that “…The board, in the case of a claim for damage to a unit or the common elements, may:
(1) Pay the deductible amount as a common expense;
(2) After notice and an opportunity for a hearing, assess the deductible amount against the owners who caused the damage or from whose units the damage or cause of loss originated; or
(3) Require the unit owners of the units affected to pay the deductible amount…”
In addition 514B-143 (g) Insurance, states that “…The board, with the vote or written consent of a majority of the unit owners, may require unit owners to obtain reasonable types and levels of insurance. The liability of a unit owner shall include but not be limited to the deductible of the owner whose unit was damaged…”
These two provisions are mutually exclusive. In other words, even if the association is silent with respect to the requirement that all unit owners carry “reasonable” amounts of insurance, the board can still “require the unit owners of the units affected to pay the deductible amount”, as required in Ch. 514B-143(d)(3), above.
As a matter of policy, we feel that all associations should require that all owners carry a minimum amount of insurance at least equal to the association’s deductible. The individual unit policy is commonly referred to as an HO-6 policy. This policy is applicable regardless of whether the unit is owner-occupied, rented or left vacant.
We also recommend that unit owners consider using the same insurance carrier used by the association in order to minimize counter-claims between the insurance carriers when the insurance claim affects both the common areas and the unit.
Please feel free to contact is you have any questions of comments concerning this article.
Prepared by Ronald A. Kawahara, CPA, CVA, CPM, PCAM
President Destination Maui, Inc.
220 Imi Kala St., Suite 104
Wailuku, Maui, Hawaii 96761