Bills to address flaws in condo-insurance law

A new Florida law requiring condo owners to have insurance is controversial, but two proposed bills could fix “glitches.”

By BEATRICE E. GARCIA
Miami Herald–Janaury 27, 2009

A controversial law requiring condo owners to have property insurance has many of them up in arms, but lawmakers already are working on bills that would change the requirement this spring.

Letters from condo associations to unit owners demanding owners to show proof of insurance within 30 days or the associations will buy coverage on their behalf have prompted hundreds of complaints, lawmakers said.

The law, which took effect Jan. 1, also requires condo owners to add the association as an insured party on the policy.

Associations typically buy insurance that covers the building, while owners are responsible for buying policies to cover their units’ interior — flooring, cabinets, appliances and the like. Many owners, however, opt not to spend the money and were not required to — until now.

After the 2004 and 2005 hurricanes, many associations faced the problem of damaged or destroyed units that were not repaired because unit owners had no insurance. The associations wanted to be able to force owners to have the proper coverage. Before Jan. 1, only lenders could buy coverage for a home or condo if the owner let it lapse or canceled the policy.

The new law has owners confused, and worried about the cost.

‘Condo owners are coming and saying, `Tell me what I should buy,’ ” said Carol Everhart, an agent with BB&T Insurance in St. Petersburg.

Everhart, who sits on the board of Citizens Property Insurance, the state-run insurer, works with more than 200 condo associations.

`ECONOMIC ISSUE’

”It’s not such a bad law. But it’s an economic issue,” said Dulce Suarez-Resnick, an executive at Brown & Brown Insurance.

A condo policy for a small apartment (about 750 square feet in a modest building) can cost about $1,000 a year. A luxury condo with plenty of marble and granite and a high-end interior could cost as much as $5,000 a year, she said.

In addition, the law is flawed, agents said, because no insurer in Florida will sell coverage for an individual unit to a condo association and then have the association bill the owner.

The problem, says Donna Berger, general counsel for the association lobbying group Community Advocacy Network, is that the new law makes having the insurance mandatory rather than voluntary.

Already two bills — one by Rep. Ellen Bogdanoff of Fort Lauderdale and the other by Sen. Dennis Jones of Seminole — have been filed that will make some fixes in the ”glitches” in new law.

Both bills would make the insurance coverage voluntary — not mandatory — for unit owners and would allow the associations to buy the coverage if they choose to and then bill the owners.

`UNHAPPY’

Rep. Julio Robaina of Miami said his office has fielded hundreds of calls from condo owners all over the state who have gotten letters from their associations and don’t know how to proceed.

”They’re unhappy with the mandates of the new law. But [an owner] might have to buy a policy until a new law is passed,” said Robaina.

There is no penalty for not following the law, so associations could decide not to enforce it with their owners.

But agents like Suarez-Resnick and Gaby Dominguez at Avanti Insurance in west Miami-Dade County say buying insurance to cover the contents of their units as well as the interior is a good idea for condo owners to do anyway.

”The biggest mistake condo owners make is to not buy insurance because they think their units are covered by the association’s master policy,” said Suarez-Resnick.

ANOTHER ASPECT

One provision in the new law that isn’t controversial requires unit owners to purchase loss-assessment coverage of at least $2,000. That coverage would help pay for an additional charge levied by the association after a major storm to cover any shortfall to pay needed repairs.

Right now, most policies include coverage of $1,000 and many carriers were already increasing it voluntarily to $2,000, said Everhart.

But she said this coverage should be applied to the assessment deductible so that the additional cost does not burden unit owners.