Legal liability is liability imposed by the courts or by statute on any person or entity responsible for the financial injury or damage suffered by another person, group, or entity. Legal obligations, or legal liability, can arise from intentional acts, unintentional acts, or contracts.
When the potentially liable parties are mutual beneficiaries and users/occupiers of the same location, the need for each party to be properly insured is of paramount importance. Residential condominium associations and individual unit owners are prime examples of this need to close all gaps in liability protection.
Essentially there are three legal liability possibilities following bodily injury or property damage at a residential condominium property. Legal liability is placed on: 1) the condominium association; 2) the unit owner; or 3) jointly on the association and the unit owner.
When legal liability is assigned to only one party, whether it be the association or the unit owner, defining coverage is easy. The cost of the bodily injury or property damage is covered, subject to policy limits, by the at-fault party's insurance policy:
- The association's commercial general liability (CGL) coverage pays if the association is found to be solely negligent; or
- The unit owner's HO-6 pays if legal liability is solely placed on the owner.
The unit owner's liability coverage (most commonly provided by the HO-6) is generally first dollar protection. Likewise, the association's CGL may be written providing first dollar protection; however, many associations utilize a deductible or self-insured retention (SIR). If the association's deductible is high, or there are several liability claims against the association, the unit owner(s) may suffer an out-of-pocket expense because of the association's decision to use a deductible or SIR.
Unit Owner Assessments
When the association is subject to a deductible or SIR, it generally collects the resulting out-of-pocket expense by assessing all the unit owners a share of the deductible/SIR (however such division is calculated). The unendorsed HO-6 provides the insured with $1,000 for such assessment with two main requirements:
- The loss must be one that would have been covered under the HO-6; and
- $1,000 is all the policy will pay for assessment in aggregate (regardless of the number of assessments for losses occurring during that policy period).
Obviously, the association's choice of a deductible/SIR can be detrimental to the unit owner. But, the unit owner does have the opportunity to increase the coverage for assessment by purchase of the HO 04 35 (Supplemental Loss Assessment Coverage). However, the attachment of this endorsement may not solve the unit owner's deductible/SIR assessment problem – depending on the endorsement's edition date approved and used in the unit owner's state.
Attaching Insurance Services Office's (ISO's) HO 04 35 allows the insured unit owner to incrementally increase the loss assessment limit up to $50,000 (relatively inexpensively). But the limit of coverage for an assessment related to the association's use of a deductible/SIR has been historically limited to $1,000 – even when the HO 04 35 endorsement was attached. This limitation was removed in ISO's 05/11 edition of the endorsement. The HO 04 35 05 11 extends the full amount of loss assessment coverage purchased to all assessments, including those resulting from the association's use of a deductible/SIR.
However, the new endorsement may not yet be approved in the insured unit owner's state (and may not be for some time), or the insurance carrier providing coverage may not be using the new wording (depending on the rules of the state). Agents cannot make assumptions, the insured's policy must be reviewed to confirm which loss assessment wording is in use or available. The difference between the old and new endorsement language can mean hundreds or even thousands of dollars to the properly insured unit owner's bank account.
Joint Liability
If both the association and unit owner are held jointly liable for the injury or damage, court involvement will likely be required. The first problem to be addressed is the amount of liability assignable to each party. Once liability has been assigned, the second question to be considered is - what happens when liability limits differ (which they most likely will)?
Both questions can and might be governed by the legal concept of joint-and-several liability, along with how each state applies this concept. Losses are shared equally or unequally among tortfeasors based on the facts of the case, each tortfeasor's level of "fault," and statute. The concept of joint-and-several liability is designed to assure that the victim is fully compensated for their injury or loss.
Joint means that any one tortfeasor can be held responsible for the entire amount (each tortfeasor is responsible for all others). Several means that each is responsible only for its share of the fault. Each state applies the joint-and-several liability differently:
- Nine states apply pure joint-and-several laws: Each defendant is responsible for the entire amount regardless of its amount of fault;
- 27 states utilize modified joint-and-several laws: One specific tortfeasor is potentially responsible for the entire only if they are judged at-fault beyond a specific level or amount. Additionally some of these states bar recovery if the injured party is found to be a certain percentage liable; and
- 14 states employ pure several laws: Each party shares the financial consequences based on its amount of fault.
Generally, there is a wide gap between the association's CGL limits and the unit owner's HO-6 liability limits; maybe as much as $900,000 ($1 million in the CGL vs. $100,000 in the HO-6). Because of this gap, the association may be called upon to cover more than their share of damages in pure and modified joint-and-several liability states. To avoid this potential gap, the association may decide to require each unit owner to carry relatively high limits of liability coverage (maybe even an umbrella).
Many state laws related to condominium ownership prevent an association from subrogating against the unit owner if the unit owner's negligence leads to a liability loss. Again, this could be very costly for the association from an insurance perspective; and it's even more costly if the association does not have enough protection to cover the cost of the injury or damage.
Deciding Which Party is Legally Liable
Disclaimer: This section shall not and cannot be construed as legal advice. Any ruling of negligence and legal liability must be made in a court of competent jurisdiction. The following is simply a guideline that may be useful in determining which party and therefore policy may be called upon to cover the cost of injury or damage suffered by a third party.
Where did the Injury/Damage Occur?
Arriving at the more correct answer to the question: which party (the association or the unit owner) may be ultimately responsible for paying the cost of injury or damage suffered by a third party? Knowing where the injury occurred provides clues as to who is most likely going to be held financially responsible.
Like analysis of the property coverage, analysis of the liability coverage requires knowledge of and a deep understanding of three definitions: common elements, limited common elements, and unit property. The definition of each indicates which party (the association or the unit owner) is responsible for the care and upkeep of the property; and also who is responsible for any injury or damage suffered on the property.
- Common elements are owned by and benefit, to some extent, all members of the association. Land (including trees, shrubs, plants, etc.), parking lots, association roads, and the building's structural foundations and load-bearing walls are examples of common elements. Also included in this definition are club houses, pool houses, pools, fences, gates, playground equipment, tennis courts, and other property owned by and allocated to all unit owners.
- Limited common elements are beneficial to more than one but fewer than all unit owners. Common hallways or corridors providing access to several units, walls and columns containing electrical wiring or sprinkler piping serving or protecting multiple units, or a plenum enclosure providing heating and cooling to multiple units are examples. Doorsteps, stoops, decks, porches, balconies, patios, exterior doors and windows, or other fixtures designed to serve a single unit but located outside the unit's boundaries are often categorized as limited common elements because the appearance and safety of these fixtures directly affects multiple unit owners although connected to just one unit.
- Unit property is defined by the association's declarations or statute and is limited to and benefits only the unit owner. The inside of the exterior walls, interior partition walls, counter tops, cabinetry, plumbing fixtures, appliances, and any other real property confined to the unit are examples. The definition of unit property can vary widely with no universal designation.
Injury or Damage on or Caused by a 'Common Element'
Because a common element benefits all unit owners, the association is nearly always going to be ultimately responsible for covering the cost of any bodily injury or property damage that occurs in or on a common element. This is true even if a unit owner in some way contributed to the injury or damage.
When written correctly, and depending on the state, condominium liability policies generally include unit owners as insureds or name them as additional insureds using the CG 20 04 (Additional Insured – Condominium Unit Owners). This endorsement grants all unit owners additional insured status for liability arising out of any portion of the premises not reserved for the unit owner's exclusive use or occupancy. This means that the unit owner is an insured for any injury or damage on or caused by a common element. Further, as an insured, the insurance carrier cannot seek recovery from the unit owner if he/she is somehow responsible for causing the injury or damage on the common element.
Injury or Damage on or Caused by a 'Limited Common Element'
Assigning financial responsibility for an injury or accident occurring on a limited common element is a little more complicated. Largely, the rules that apply to common elements apply to limited common elements (meaning the association will most commonly be held financially responsible); however, there are gray areas.
Of particular interest and problem are those defined limited common elements that benefit only one unit owner, such as stairs, stoops, balconies, decks, etc. Although these elements benefit one unit owner, often the association is responsible for the care and maintenance of these features. Might there be joint negligence or liability assignable to both parties?
Picture a unit owner and his guests sitting on the deck enjoying the evening. They decide to move the party inside nearer the food. As one of the guests crosses the threshold from the deck into the unit he trips on "something" and breaks his arm in the fall. Which party will be held responsible?
The injury occurred leaving a limited common element and moving into unit property. Based on statute, the associations bylaws, and policy wording, who knows? Some situations may require court involvement.
As stated previously, most situations involving limited common elements will follow the rules for common elements. But some may end up in a court of competent jurisdiction to decide if one or both parties will be held responsible for the injury or damage.
Injury or Damage on or Caused by Unit Property
Like assigning responsibility for injuries that occur on or caused by common elements, it is pretty simple to assign financial responsibility for injury occurring within a unit or caused by unit property. The unit owner will be held responsible and his HO-6 will be called upon to pay for any injury or damage within the unit or caused by defined unit property.
Concluding Points
When working with a residential condominium association or the unit owner, each party's potential legal liability must be considered, not just the property exposure. As detailed in this article, the agent must review certain key points when considering liability protection, such as:
- Where did the injury or damage occur?
Coverage limits:
- Does the association require unit owners to carry relatively high limits of liability coverage?
- How great is the difference between the association's and unit owner's liability limits?
- Does the unit owner carry additional loss assessment coverage? What version of the endorsement is being used?
- How does the state in which the association is located apply the concept of joint and several liability?
Comments
Everyone should contact Assembly Woman Aileen Gunther to support this bill... you can go to http://assembly.state.ny.us/
and find information on the Bill Sponsored by
http://assembly.state.ny.us/mem/Vito-J-Lopez
and co-sponsored by
http://assembly.state.ny.us/mem/Sandy-Galef
and also co-sponsored by
http://assembly.state.ny.us/mem/Linda-B-Rosenthal
Everyone should also contact Senator John J. Bonacic to voice support for the bill also.
http://www.nysenate.gov/senator/john-j-bonacic
New York State Assembly
assembly.state.ny.us
While that's over simplified, in general, how should the HOA handle its security requirements such that this kind of claim is mitigated.
We have had 10 years of lack of air, mold, constant service calls and weekly re-set of air. Not asking for any of those extensive coats.
Is there and endorsement through a lloyds company to provide that coverage?
If they do what they are planning my east wall will be tree feet above my front.
They are making me sick.
Also, the defendants attorney says I cannot include the fees incurred to file for the court hearing.
The defendants attorney is trying to sue me for the cost of his clients legal representatation.
1. If the question is a question about legal liability for bodily injury or property damage caused by a door that swings out, I have to say that liability could be assessed against multiple entities. The association could be deemed liable if the door is installed negligently. The person pushing the door could also be deemed liable if they are negligent in using the door.
2. If the question is a question about responsibility for property damage to the door itself, if the door is in a common area, the association is responsible for any repairs that may need to be made. This damage would only be covered by insurance if it is damaged by a covered cause of loss. If we are talking about an individual unit door, that’s a different story. In most cases, the unit’s door would be considered part of the building and therefore fall under the association’s policy. However, if the association allows the unit owners to replace their doors with doors of their own choosing, the door may be covered under the unit owner’s policy under coverage for additions and alterations to the unit. Again, that also depends on how the door is damaged.
"Coverage for damage within the unit can be limited based on the specific policies in play, state condominium statutes, and the condominium association’s bylaws.If the Condo Association is covered on an ISO Condominium Association Coverage Form with Special Causes of Loss (CP 00 17 & CP 10 30). If the insured has an ISO HO-6...
The question about the flooring and damage to the walls within the units is handled in both of these policies and here’s where coverage can be found.
If these are the policies that the association and unit owners have AND if the condo association bylaws require that the unit owner cover wall coverings (specifically the sheetrock, think about everything down to the wall studs) and flooring OR if the bylaws comply with the state condo statute AND the state requires that the unit owner cover these items, coverage can be found on the HO-6.
If the condo association bylaws and/or state statute requires the association to cover these items, coverage could be found on the CP 00 17.
If the unit owner did anything to change wall coverings or flooring, or they requested a custom build out when buying the unit, coverage could be found on the HO-6."
There is a potential for liability.
If there is an accident and there are damages related to that accident (someone is hurt or something is broken), someone is normally found to be legally liable and therefore their insurance should pay for the damages.
Regarding the specific case where a unit owner is disregarding HOA rules and something happens, it’s likely that the unit owner will be liable for those damages. Depending on the circumstances, the HOA could also be found to be liable for part of the damages simply because of the location and the situation.
About the issue of disregarding rules, that’s going to be an argument of who knew what and when. Policies are normally only voided due to material misrepresentation. Issues of negligence, even gross negligence aren’t normally the sort of thing that would void a policy. It’s possible that there would be an exclusion that might apply for such an event, depending on all of the facts and the specific policy.
Another separate in incident, a friend in another building same Condo/HOA, Common roof leak. I help them while they are away. I reported there was a leak and was told by the property manager, it was an old leak. After the heavy rains last week, I went over there and the condo was filled with water. Whose responsibility is it to pay for all internal damages to flooring cabinets and other personal items?
Please get back to me ASAP.
Who is responsible -
This is kind of simple, but can get complicated fast. In short, the fastest way for Flooded Garage to get their damaged property repaired or replaced would be to submit the claim directly to their insurance company. The insurance company then investigates the claim, makes appropriate payment, and then if they determine that the Refusing to Pay is actually responsible for the damages, insurance company will send a demand letter to Refusing’s insurance company that they repay insurance company for the damage to Flooded Garage’s property. That’s subrogation in a nut shell.
The kick in this whole thing is that Refusing to Pay may not have insurance, which is why he refused in the first place. In that case, insurance company can send the same letter to Refusing to Pay, but that’ll be like getting blood from a turnip (as they say).
Separate incident -
Similar answer here because it’s a similar situation. It may be a bigger problem depending on how good the condo association’s insurance is.
Thanks
This is interesting and thoughtful. The short answer is maybe.
Let’s think this through. If I go to a condo for a party and I suffer bodily injury because the unit owner served me some bad shrimp (I don’t know why, but bad food in my mind is usually seafood…), I’m hiring #billboardlawyer and we are going to discover what the limits of insurance are on the unit owner’s policy and the association’s policy.
As soon as we discover that the unit owner doesn’t have an HO-6, we start to explore two other things. First, what assets does the unit owner have that might have an opportunity to change ownership, and what the D&O policy limits are for the association. Then we file suit against the unit owner for bodily injury due to food poisoning, the association for owning the building, and then the board for failing to make sure that unit owner has and maintains an active insurance policy that would cover any injuries a person might suffer related to the ownership and use of a unit within the condo.
Once we do that, we trust the process and see where the checks come from.
That’s a little tongue in cheek, but you get the point, there’s always more than one way for an injured person to receive compensation.
Sell the condo immediately and move on. This is poor management and I would run, not walk, away.
Seriously though, there are two things going on at once. If there is damage to the building, the first question is whether or not it is insurable damage. The second question is which policy responds to what parts of the damage. The problem with attempting to get the unit owner’s policy to cover damage that would fall under the association’s policy is that it’s likely not covered property on the unit owner’s policy, making it so that the policy would not respond without the association suing the unit owner, making it a liability claim instead.
This seems like a bad idea that was brought out by someone who doesn’t understand insurance, whether it’s a board member or their attorney. This won’t work the way they think it will, at least according to the way I read the question.
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