Running a condo association is a big responsibility. Residents depend on you to keep the building in safe condition. Recent events show that when that duty is not upheld, disaster can ensue. Securing sufficient condo association insurance coverage is important in case there’s a loss, but that’s not your only duty. It’s also important to keep up with maintenance and keep meticulous records.
Lessons from the Surfside Collapse
On June 24, 2021, a 12-story condominium collapsed in Surfside, Florida. According to USA Today, 98 people died in the collapse, and many more lost their homes. In the aftermath of the disaster, investigations have uncovered evidence that problems in the building had been ignored for a long time. In 2018, an engineering report identified construction errors, but repairs were delayed, apparently due to concerns about cost and convenience.
The collapse has led to multiple lawsuits. About a month after the collapse, The Wall Street Journal reported that around two dozen lawsuits had already been filed. The plaintiffs’ lawyers estimated that fair compensation for everyone involved would total about $1 billion, but the insurance policies in place may only provide about $50 million in coverage. In other words, it seems unlikely that everyone will get the monetary compensation owed to them.
Of course, even if higher condo association insurance coverage limits had been in place, no amount of money could undo the tragedy. Insurance can help policyholders recover from a loss, but only proper maintenance and other proactive measures can prevent the loss in the first place.
The Condominium Association Insurance Market Is Hardening
In response to the Surfside disaster, there is heightened scrutiny related to condo safety in all states, including California, Illinois and Texas. There’s a concern that other buildings may be on the brink of collapse as well.
According to ABC News, in the weeks following the collapse, the residents of several South Florida buildings had to evacuate due to structural concerns. In one example, an eight-story condo building in Miami had to be evacuated after receiving several violations. CBS Miami says that two Bay Harbor Islands apartments were evacuated after being deemed unsafe. One of the buildings was 73 years old and had received repeated citations.
Safety inspectors and city officials aren’t the only ones taking a close look at condo safety issues. Insurance companies are also paying closer attention. ProgramBusiness says U.S. insurers are considering stricter underwriting requirements that could include additional structural inspections and maintenance reports.Because of the impact on the commercial property insurance market, condominium associations may be forced to switch insurance companies in order to secure coverage. On top of tighter underwriting, increased rates are emerging as a concern. Some COAs have already seen significant rate increases.
The Problem Isn’t Unique to Florida
Recently, condo buildings in Florida have been receiving the most attention. That’s because of the Surfside collapse, as well as the risk of saltwater-related corrosion. However, condo building safety issues can be found throughout the U.S.
In one recent example, a condo building in Wisconsin had to be evacuated due to the risk of “imminent collapse.” According to Global Construction Review, before the evacuation, parts of the balconies had begun falling off.
Maintenance Records Are More Important Than Ever
Right now, residents, insurance professionals and city officials are all worried about the safety of condo buildings. Recent events have driven home the point that regular maintenance is absolutely critical. Problems need to be identified and addressed in a timely manner. Otherwise, another disaster may be just around the corner.
When maintenance is carried out, it should be documented thoroughly.
- Maintenance records can improve safety by ensuring that nothing slips through the cracks. Instead of having to rely on memory or feeling when determining whether proper maintenance has been conducted, you can refer to the maintenance records and conduct audits as needed. This can help you catch issues before they become disasters.
- Maintenance records can help position you well during insurance underwriting. Right now, we’re seeing stricter underwriting requirements for condominium associations. If the underwriters determine that your condo association has a high risk of suffering a loss, you may be hit with massive rate hikes or even a notice of non-renewal. By showing that you are diligent about keeping maintenance records, you can position yourself well.
- Maintenance records can help reassure your residents. Your residents may be scared right now. They may want proof that proper maintenance is being performed, and solid maintenance records can help provide that.
- Maintenance records may be needed if there is a safety incident. After a loss, lawsuits are likely. Even if the loss was not your fault, you may face allegations of neglect. If this happens, having meticulous maintenance records can help you prove that you upheld your duty to keep the condo building safe for each unit owner.
Condo Associations Must Be Proactive
What we’re seeing now in condo association insurance is part of a broader trend of rising rates and tighter underwriting. According to MarketScout, the composite rate for commercial insurance was up 6.8% in the third quarter of 2021, and commercial property rates were up 9%. In some parts of Florida, rates were up more than 20%.
But these are averages. As we’ve seen, some policyholders – like the Runaway Bay Condominium Homeowners Association – are seeing much higher rate hikes. Policyholders should brace for rate increases and stricter underwriting, but they should also realize that a 20% increase is not the worst-case scenario.
This is a difficult time for commercial property insurance. Having the right general liability and property coverage is essential. You need the help of an insurer with expertise in condo association insurance. Honeycomb provides top-rated condo association coverage with competitive rates and simple policy management.
Take control of your condo association insurance. Get a quote from Honeycomb.
