What is better for Water Damage Claims?

Turn it in to the Condo Master Policy or have unit owners pay and have lawsuits or Subrogation Claims?

Maintain Coverage


Condo associations carry insurance to cover common areas while individual condo owners carry coverage covering the interiors of their units, including the walls, flooring, and contents. A toilet supply line may have failed.

A homeowner’s association (HOA) consists of condo unit owners and it manages the condo through a board of directors elected by the membership. It can exist under various names depending on the jurisdiction, such as … “condominium association.”

Section 3-113 of the UCIOA says that the condo association must maintain property insurance on all the common elements of the condo property, commercial general liability insurance, and fidelity insurance. Additionally, § 3-113(b) of the UCIOA says that if the condo units share common walls, the insurance must include the units because of the great interdependence of stacked units. Furthermore, if there is multiple-insurance coverage, the condo association insurance is primary. Our webpage on dual coverage.   The subrogation section states:

(d) Insurance policies carried pursuant to subsections (a) and (b) must provide that:

(1) each unit owner is an insured person under the policy with respect to liability arising out of the owner’s interest in the common elements or membership in the association;
(2) the insurer waives its right to subrogation under the policy against any unit owner or member of the owner’s household;
(3) no act or omission by a unit owner, unless acting within the owner’s scope of authority on behalf of the association, voids the policy or is a condition to recovery under the policy; and
(4) if, at the time of a loss under the policy, there is other insurance in the name of a unit owner covering the same risk covered by the policy, the association’s policy provides primary insurance. Claims Journal.com


Who is responsible for maintaining what Civil Code §4775

Generally speaking, water that comes from the top down, such as rainfall, is covered by a standard homeowners insurance policy, while water that comes from the bottom up, such as an overflowing river, is covered by a separate flood insurance policy.




The Institute for Business & Home Safety offers the following tips:

Inside Your Home

  • Inspect hoses and faucets. Check hoses leading to water heaters, dishwashers, washing machines and refrigerator icemakers annually. Replace those with cracks or leaks, and replace them all every five to seven years.
  • Inspect showers and tubs. Check the seal and caulking around showers and tubs to make sure they are watertight.
  • Shut off the water supply to the washing machine while away on vacation, and never leave the house while the washer or dishwasher is running.
  • Know the location of the main water shut off valve in your home. A damaged hose or a burst pipe can send water racing into your home. By knowing where this valve is located and how to shut off the main water supply, you can save yourself time and money.
  • Install an emergency pressure release valve in your plumbing system. This will protect against the increased pressure caused by freezing pipes and can help prevent your pipes from bursting.
  • Check pipes. Look closely for cracks and leaks and have the pipes repaired immediately.

Outside Your Home

  • Caulk and seal windows. Preventive maintenance will guard against water seepage.
  • Inspect your roof. Look for missing, damaged, and aging shingles.
  • Check your downspouts. Remove debris that may have accumulated in downspouts and rain gutters. Position downspouts so that they direct water away from the house.
  • Check sprinklers and irrigations systems. Be sure sprinklers and irrigation systems are not damaging the walls and foundations of the house; turn off and drain outside faucets to protect against frozen pipes.
  • Install gutter guards.Gutter guards are the device used to protect the clogging of the roof gutter so that the water from the roof may flow easily and accumulation of water does not take place on the roof but away from the house. Insurance Information Institute *

See our webpage on Maintenance

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Water Damage Insurance


Master Policies. If an association carries “bare walls” insurance, the carrier will not pay for an owner’s damaged cabinets, counters and carpets–it pays only for bare walls. However, some CC&Rs require coverage for unit improvements in addition to the common areas. This type of insurance is referred to “original builder’s specs,” or “all in” policies. In that case, the association’s insurance will cover the owner’s carpet, cabinets and fixtures even though he caused the loss.

Sometimes CC&Rs are irrelevant. Some master policies provide broader coverage than required by the governing documents. As a result, even when CC&Rs exclude unit improvements and require owners to carry their own insurance, carriers will confound boards by covering a negligent owner’s loss. This encourages more claims by negligent owners and drives up insurance premiums.

Submitting Claims. Many boards try to keep premiums under control by managing which claims are submitted and which are not. Unfortunately, some CC&Rs allow owners to make claims directly against the association’s policy. This encourages owners to go uninsured and file claims, no matter how small, against the association’s policy. The higher the claims history, the higher the premiums.

Deductibles. One of the best methods for controlling claims is to adopt a deductible policy that spells out that whichever entity (association or homeowner) causes the damage is responsible for paying the deductible, and then increase the deductible. Association deductibles used to be in the $500 to $2,500 range. Now they commonly vary from $5,000 to $25,000 with most at $10,000. If negligent owners are made responsible for the deductible, and the deductible is high enough, owners will be less inclined to file claims or “run naked,” i.e., be uninsured.

Recommendation: Boards should have their insurance broker compare the association’s insurance against their CC&Rs to make sure the policy meets or exceeds what is required by the governing documents. To keep insurance premiums down, associations should amend their CC&Rs to clearly assign maintenance duties, broadly define exclusive use common areas, add mitigation provisions, require owners to carry insurance, make owners responsible for losses originating in their units, and define liability for deductibles. In addition, boards should consider raising their deductibles. Davis Stirling.com *

Develop Condo Written Policies


So as to minimize litigation, boards should develop written policies for such maintenance – the upkeep of property or equipment Merriam Webster which are compatible with the association’s governing documents. The policies should then be published to the membership and made part of the rules and regulations of the association. Davis Stirling.com *

Tinnelly Law 
CondoWater Damage Claims 
Understanding the Proper Role and Use of Association Insurance

HO 6 Condo Unit Owners Policy

State Farm Advertising & Get a Quote 

Know what’s really covered



Specimen HO 6 Nevada


We cover items of real property which pertain directly to your unit and are your insurance responsibility under the governing rules of the condominium. This includes building additions and alterations, installations or additions comprising a part of the described unit. This also includes your share of any association deductible but only when the deductible is not assessed against all unit owners

The legal definition of real property is land, and anything growing on, affixed to, or built upon land. This also includes man-made buildings as well as crops. Real property is best characterized as property that doesn’t move, or that is attached to the land. This is in contrast to personal property, which can be moved or transferred physically.  Legal Match.com


We will pay for your share of any assessment charged against all unit owners by the association when the assessment is made as a result of:

1. a direct loss to which Section I [Real & Personal Property] of this policy would apply except as provided in SECTION I – LOSSES NOT INSURED, to the condominium property, including personal property, owned by all unit owners collectively



12. Sudden and accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or from within a household appliance.

This peril does not include loss:

a. to the system or appliance from which the water or steam escaped;
b. caused by or resulting from freezing;
c. caused by or resulting from water or sewage from outside the residence premises plumbing system that enters through sewers or drains, or water which enters into and overflows from within a sump pump, sump pump well or any other system designed to remove subsurface water which is drained from the foundation area; or
d. caused by or resulting from continuous or repeated seepage or leakage of water or steam which occurs over a period of time and results in deterioration, corrosion, rust, mold, or wet or dry rot.

3. We do not insure under any coverage for any loss consisting of one or more of the items below

b. defect, weakness, inadequacy, fault or unsoundness in:

(4) maintenance;

Water Damage – most frequent Claim 

It comes as no surprise that the answer is water damage.  There may be an occasional fire or a trip and fall but there is never a shortage of water damage claims.  Adverse loss histories can lead to non-renewals, higher insurance premiums and difficulty finding replacement coverage.    You may find it surprising to know that five to ten small paid water damage claims are worse than one large paid claim.   Why?  It shows a troubling trend and  underwriters frown upon seeing these type of  loss histories with “claim frequency”.

As Associations mature, buildings and pipes get older! Aging pipes are prone to start developing pin hole leaks or simply burst.   This type of leak, if on an upper floor will make its way down and damage multiple units. If you live in a 100-unit condominium association that has walls-in coverage and one-unit owner has a $50,000 water loss all 100-unit owners could be affected with higher insurance premiums which lead to increases in assessments.  Associations with adverse loss histories will often see separate higher water damage deductibles of $20,000 – $50,000 to protect against future “paid” claims.

We recommend condominium associations of any size give serious consideration to adopting a $10,000 deductible.   It is important to remember that if unit owners have proper coverage in their HO-6 (Condo) policy they will be protected against whatever the deductible is in the Association Master Policy.  

Carriers offer discounts for associations with favorable loss histories that are willing to adopt higher water damage deductibles even if they have no paid claims.   Please consider exploring these options with your current broker.    [email protected]| Direct 949-381-7720

How does the condo master policy work with a unit policy?


Generally, a condo association insures the building and common elements under a single policy, called the master policy. This policy typically provides one of three kinds of coverage:

  • The basic building (walls, roof, floors, elevators), but not unit items (such as appliances, carpeting, cabinets, wall coverings) and in some cases not interior walls.
  • The basic building and unit items, but not unit additions, alterations or improvements made by you at your expense.
  • The basic building and unit items, including additions, alterations and improvements.

When a master policy is in place, you’ll need to purchase an individual policy to cover the items and changes in your unit not covered by the association master policy, including your personal property, personal liability and assessments made against all members of the association. You may also want to consider coverage for damage to your unit not compensated because of the master policy deductible.

Keep in mind that unit owner insurance responsibilities can vary widely. For example, some associations may have no master policy, which shifts the responsibility for insuring the structure to the unit owners. Review your building’s insurance documents and bylaws with a qualified agent early in the purchasing process to make sure you comply with all requirements and purchase adequate coverage for your home. State Farm.com *

Condo Master Policy


Customizable features available in the Business Condo Association Policy:

  • Building Coverage – Covers the building and anything attached to it, i.e. fixtures, flooring and cabinets, as well as any common buildings a Business Condo Association might have.
  • Backup of Sewer and Drain – May provide coverage for accidental direct physical loss caused by a covered back up to business personal property at your location.
  • Comprehensive General Liability – Helps protect the insured against legal liability caused by bodily injury, property damage, personal injury, and advertising injury to others.
  • Directors and Officers Liability – Protects members of the association board against claims alleging wrongful acts in carrying out their duties.
  • Employee Dishonesty – Provides coverage in the event of a direct physical loss to Business Personal Property and money and securities caused by a dishonest act committed by an employee. If an association contracts someone to manage the property for them, i.e. a Property Management firm, the association should consider obtaining a Fidelity Bond.
  • Ordinance and Law – Covers the increased cost to repair or rebuild due to increased cost due to the enforcement of municipal laws or ordinances regulating the construction or repair of damaged buildings caused by an insured loss.
  • Inflation Coverage – This coverage automatically increases the amount of insurance on your buildings and association’s personal property to help keep pace with inflation.
  • Loss of Income and Extra Expense – This covers up to 12 months of lost income if there is a suspension of your business operations caused by an accidental direct physical loss covered by the policy. This includes necessary Extra Expenses you incur during the period of restoration after the same loss.
  • Replacement Cost Claim Settlement – Claim payments may be based on the cost of replacing your damaged property, subject to policy conditions or provisions.


Unacceptable Risks

1. Risks containing any daycare or assisted living operations.
2. Farms, ranches, orchards or groves.
3. Dwellings containing any EIFS/Dryvit (synthetic stucco), or Chinese Drywall.
4. Risks containing any religious operations (churches, synagogues, mosques, etc).
5. Any risk that is for sale.
6. Risks in foreclosure proceedings. (Submit to NIU )
7. Any insured with a bankruptcy. (Submit to NIU )
8. Any insured with a conviction for arson, fraud, larceny, or any other crime of dishonesty.
9. Protection class 9 or 10. ( Writing agent should verify protection class prior to submission)
10. Risks with more than 1 location.
11. Dwellings rented to others.
12. Risks with more than 2 mortgages.
13. Risks with a trampoline or any other such rebounding device and/or any skate boarding.  ramps /jumps or rails; *Note: Risk is acceptable, but policy will Exclude Liability.
14. Risks where any animals (including but not limited to dogs or show dogs) or livestock are bred, boarded or raised are not eligible for coverage.
15. Risks with attractive nuisances such as unfenced pools, junked vehicles, unregistered vehicles.
16. Risks with wood stoves.
17. Risks with galvanized or polybutylene plumbing.
18. Risks with electrical supply containing fuses or knob and tube wiring.
19. Risks with corrugated stainless steel tubing gas lines. Such risks may qualify if adequate remediation measures have been taken. Submit any such risk to NIU for consideration.
20. Square footage valuation below $75 per square foot. (Sq ft valuations are state specific and can vary by state: (contact NIU Underwriting for assistance; Sq Ft valuations may change without notice).
21. Risk with any prior or current sinkhole activity on the premises whether or not it resulted in a claim.
22. Dwellings under renovation (may be submitted for approval to NIU).
23. Mobile homes, house trailers, or travel trailers
24. Any home built on active or expansive soils

National Insurance Underwriters – Unacceptable Risks 

confidential trade secret underwriting guidelines


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