RESIDENTIAL CONDOMINIUM INSURANCE
SECTION 718.111(11) - CONDOMINIUMS
In 2008, the Florida Legislature
amended Section 718.111(11), which regulates insurance. This amendment
is a complete rewrite of the old section; therefore, the following summary
will address the new law without reference to whether it is a new provision,
or whether it is a carry-over from of the previous law.
1.What Condominiums Must
Comply With This Law? [Addressed in the Preamble & Subsection (o) of
the new law]
The preamble to this
law provides that the following insurance requirements will apply to all
Residential Condominiums in the state, regardless of when their Declarations
were recorded. This means that commercial condominiums are not governed
by this law.
Subsection (o) specifically
provides that this law does not apply to time share condominiums.
Instead, they are to rely on Section 721.165, F.S.
2. Obligation to Obtain
Insurance During Developer Control Period: [Addressed in subsections
(a)(1), (a)(2) & (b) of the new law]
association must “exercise” its best efforts to obtain and maintain adequate
insurance as defined below. Failure to obtain such insurance is considered
a breach of fiduciary duty by the developer-appointed members of the Board
unless it can be shown that they used their best efforts to maintain the
3. Obligation to Obtain
Insurance After Developer Control Period Ends: [Addressed in subsection
(d) of the new law]
After the developer-control
period ends, the board must “use” its best efforts to obtain and maintain
adequate insurance as defined below. However, unlike the efforts
required by a developer controlled board, the failure to obtain such insurance
is not statutorily considered to be a breach of fiduciary duty.
4. How Is Adequate
Insurance Defined/Appraisals Required? [Addressed in subsection (a) of
the new law]
Regardless of the requirements
in any Declaration, the term “adequate insurance” is now defined to be
the replacement cost of the property, which must be determined by an independent
insurance appraisal or update of a prior appraisal. This determination
must be made at least once every 36 months. As addressed below,
the deductible amounts are used in the calculation of whether adequate
insurance is provided for a condominium.
5. Pooling Arrangements
and Self Insurance Options: [Addressed in subsections (a)(1), (a)(2) of
the new law]
stating such, it is anticipated that the vast majority of the residential
condominiums will utilize typical commercial insurance carriers to obtain
the required insurance. That being said, the following two other
alternatives are permitted:
(a)(1) Subsection (a)(1) permits an association or a group
of associations to provide for such coverage using a “self-insurance” fund
as provided for in Chapter 624, F.S.; and,
Subsection(a)(2) provides that an association may also join with other
associations to obtain and maintain insurance coverage sufficient to cover
an amount equal to the probable maximum loss for a 250 year windstorm event.
Based on the technical
requirements imposed on condominiums by these laws, there is a real question
as to how many communities will be benefitted by these sections.
6. How Are Deductibles
To Be Set By the Board? [Addressed in subsections (a)(3) & (c) of the
provides that, when determining the adequate amount of hazard insurance
coverage, the association may consider the amount of deductibles which
will be chosen. These deductible must be set as follows:
Deductibles must be consistent with industry standards and prevailing practice
for communities of a similar size and age with similar construction and
facilities in the locale where the condominium is located.
When establishing the amount of the deductible, the Association can take
into account the funds available in reserve accounts or predetermined assessment
authority at the time the insurance is obtained.
Deductibles must be established at a Board Meeting, after giving proper
notice, and the notice must state the proposed deductible, available funds
and the assessment authority relied upon by the Board and must estimate
any potential assessment amount against each unit if the deductible must
be paid. The creation of this notice is more complicated than it
7. What Must
Be Covered By The Association’s Policy? [Addressed in subsection (f) of
the new law]
Every hazard insurance policy issued or renewed on or after January 1,
2009 must provide primary coverage for:
All portions of the condominium property as originally installed and replacements
of like kind and quality in accordance with the original plans and specifications.
All alterations or additions made to the condominium property or association
property pursuant to Section 718.113(2) [the material alteration statute].
What is Not Covered By The Association’s Policy? [Addressed in subsections
(f)(3), (g)(1), (j)(1), (j)(2), (j)(3), (j)(4) & (n) of the new law]
A. Items Specifically Excluded From Policy Coverage:
The following two
categories of items will not be included in the list of items to be covered
by the Association’s insurance policy:
(f)(3) Subsection (f)(3) contains a specific list of
items which are not to be covered by the Association’s insurance, including
floor, wall and ceiling coverings, countertops and window treatments.
Importantly, the new law requires that air conditioner and heating equipment
must now be insured by the association.
(g)(1) In addition, subsection (g)(1) provides that, starting
January 1, 2009, all improvements or additions to the condominium property
that benefit fewer than all unit owners must be insured by the unit owner
or owners having use thereof, or by the Association at the cost of unit
owners having the use thereof.
B. Items Included In Policy Coverage, But Not Covered In Case of
Even if items must be insured by the Association, the Association will
not be obligated to pay for reconstruction or repair or expenses due to
casualty losses of those improvements in the following circumstances:
(n) Subsection (n) provides that
Associations are not obligated to pay for reconstruction or repair or expenses
due to casualty loss to any improvements installed by a current or former
owner of the unit or by the developer if the improvement benefits only
the unit for which it was installed and is not part of the standard improvements
installed by the developer on all units as part of the original construction,
whether or not the improvement is located within the unit. This section,
however, states that “this provision does not relieve any party of its
obligations regarding recovery due under any insurance implemented specifically
for any such improvements”.
(j) Subsections (j)(1)
& (j)(2) provide that any loss caused to the condominium property or
to the personal property of others by the intentional conduct, negligence
or failure to comply with the governing documents by a unit owner, his/her
family members, guests, tenants, etc. must be paid by that owner.
However, Subsection (j)(3) provides that, to the extent that the above
losses are paid for by the association’s insurance policy, the association
must reimburse the owner; and
(j)(4) Subsection (j)(4) provides that Associations are
not obligated to pay for reconstruction or repair or expenses due to casualty
losses as a common expense if the casualty losses were known or should
have been known to the unit owner but were not reported to the Association
until after the insurance claim of the association for that casualty was
settled or resolved with finality, or denied on the basis that it was untimely
Unit Owners Must Obtain Insurance/Power to Enforce: [Addressed in subsections
(g), (g)(2)&(4) of the new law]
(g) Commencing January 1, 2009,
all owners must have their own insurance policies to cover those items
not covered by the association’s policy, including those items addressed
immediately above. These policies must provide special assessment coverage
of no less than $2,000.00 per occurrence and must provide that no rights
of subrogation will exist against the condominium association.
There is some question as to whether the special assessment coverage is
actually available at this time.
(g)(4) According to the last sentence of subsection (g)(4),
the Association must be listed as an additional named insured and a loss
payee under each of those policies. There is some question as to
whether this requirement can be met based on existing policy requirements.
(g)(2) In order to make sure that these policies are in effect,
subsection (g)(2) provides that the Association shall require each owner
to provide evidence of a currently effective policy, but the Association
may not do so more than once per year. If the owner does
not provide evidence of such insurance within thirty (30) days after the
Association’s annual request, the Association can purchase insurance on
behalf of the Owner and charge the cost of the policy against the Owner
as an assessment.
Associations Are Responsible For Performing The Actual Repairs: [Addressed
in subsections (g)(2), (g)(3) & (g)(4) of the new law]
(g)(3) Subsection (g)(3) provides that ALL reconstruction work
after a casualty must be undertaken by the Association, unless the Association
gives specific and conditioned approval to a unit owner to do so.
(g)(2) & (4) However, subsection (g)(4)
still provides that the unit owners are responsible for the COST of such
reconstruction on the property for which he/she is required to carry casualty
insurance. According to that subsection and the last sentence of
subsection (g)(2), if the Association performs the work and the owner does
not pay for that work, then the cost of that work is chargeable to the
unit owner as an assessment.
Who Pays For Repair Expenses, Deductibles and Shortfalls In Insurance Proceeds?
[Addressed in subsection (j) of the new law]
Subsection (j) provides that, unless the owners vote otherwise (see below
discussed opt-out provisions), any portion of the condominium property
required to be insured by the Association against casualty loss pursuant
to paragraph (f) shall be reconstructed, repaired, or replaced as necessary
by the associations as a common expense. This same subsection also
provides that all hazard insurance deductibles and all insured losses and
other damages in excess of hazard insurance coverage are to be paid by
the Association as a common expense.
Associations May Opt-Out of Section (j): [ Addressed in subsections (k)
(l) & (m)]
(k) Associations can opt out
of the requirements of above discussed subsection (j) as it relates to
the allocation of repair or reconstruction expenses and use the provisions
contained in the Declaration or amend the Declaration to provide for whatever
method it chooses.
may also opt out of this provision.
(m) If, however, the members vote to opt-out
of (j), a notice of such action must be recorded in the public records.
The members can also reverse the decision to opt out by the vote of a majority
of the total voting interests.
Land Condominiums, D & O Policies, Employee Insurance & Flood Insurance:
[Addressed in subsection (e) of the new law]
by the Declaration, the obligation to insure may be shifted to the owners
of freestanding condominium buildings (i.e. land condominiums). The
association may also purchase D & O policies for the board members
and officers, insurance for the benefit of employees, and flood insurance.
Effect on Multicondomiums: [Addressed in subsection (g)(5) of the new law]
Subsection (g)(5) permits multi-condominiums, by a majority vote of the
collective members, to operate as a single condominium for purposes of
insurance matters. This election constitutes an amendment to the
Declaration and must be recorded as an amendment.
Fidelity Bonds: [Addressed in subsection (h) of the new law]
(h) requires Associations to maintain fidelity bonds on all persons who
control or disburse funds of the association.
Easier Amendment Procedures: [Addressed in subsection (i) of the new law]
Subsection (i) permits
condominiums to amend their documents to be consistent with this law without
obtaining mortgagee approvals.
The firm of Taylor &
Carls, P.A., with offices located in Maitland, Melbourne, Clearwater and
Palm Coast, Florida, was founded in 1981 and has practiced in the area
of community association law since that date. This edition was prepared
by Robert L. Taylor, Esq. and Elizabeth A. Lanham-Patrie of Taylor &
Carls, P.A. The information contained in The Association e-Lawyer
should not be acted upon without professional legal advice. The opinions
expressed herein are as of the date hereof, and this law firm undertakes
no obligation to advise the Association of subsequent changes in the law.
©2008 Taylor & Carls,
P.A. All Rights Reserved.
The firm can be reached
Toll Free at 1-800-395-6235 or locally at 407-660-1040.
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