Commonly owned condominium property in Florida was damaged in October 2016 by Hurricane Matthew. On March 20, 2018, the condo board voted to assess unit owners $900 for the Matthew claim. A condo unit owner was insured by Carrier A (using an ISO HO-6) in 2016 and by Carrier B (using a non-ISO condo policy) at the time of the assessment.
Here is the Loss Assessment language in the ISO HO-6:
We will pay up to $1,000 for your share of loss assessment charged during the policy period against you, as owner or tenant of the “residence premises”, by a corporation or association of property owners. The assessment must be made as a result of direct loss to property, owned by all members collectively, of the type that would be covered by this policy if owned by you, caused by a Peril Insured Against under Coverage A….
Note the language “charged during the policy period.” The ISO policy that responds to a condo association loss assessment is the one in force when the assessment is made, not the policy in force when the loss occurred.
When the unit owner filed the loss assessment with his current Carrier B, it was denied by the insurer because the policy in force at the time of the 2016 loss was with Carrier A. Keep in mind that, if Carrier B had an ISO HO-6, it is clear that they would be responsible for the assessment, regardless of the date of the loss.
However, Carrier B’s non-ISO policy says:
We will pay for your share of any assessment charged against all unitowners by the association when the assessment is made as a result of…a direct loss to which Section I of this policy would apply….
The carrier’s argument is that there is no loss assessment coverage because Section I of the policy would not apply to a loss that occurred prior to the policy’s inception date.
This results in significantly less coverage than the ISO form, especially if the $1,000 limit has been increased, say, to $50,000 by endorsement. And, given that loss assessments in coastal areas are likely to occur and possibly charged long after the policy in force at the time of direct loss expires, this is not a minor issue.
Once again, this illustrates that personal lines insurance is NOT a commodity and minor differences in policy language can potentially result in significant uninsured loss exposures.
Note: There is an argument that the carrier is wrong and that the “would apply” language is arguably comparable to the ISO “of the type that would be covered by this policy if owned by you, caused by a Peril Insured Against under Coverage A” language. Regardless, the carrier is denying the claim and sticking to their guns. Caveat emptor.
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Bill Wilson
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UPDATE: This captive agency company has reversed its denial and is paying the claim, thanks to the intervention by an independent agent aided by the G5.