Braverman Greenspun partner Kelly Ringston and of counsel Jillian Menna were recently quoted in Habitat Magazine on the growing trend of co-op and condo boards shifting insurance deductibles onto the unit owners responsible for a loss, rather than absorbing the cost through the building’s operating budget.
Kelly spoke with Habitat about a Manhattan high-rise condo she works with that had been hit by a string of water claims from leaking risers and burst washing-machine hoses. The board was paying deductible after deductible, typically between $10,000 and $15,000 each. “It was getting problematic,” Kelly told the publication.
Kelly noted that the board ultimately passed a resolution allocating the responsibility for payment of the deductible to the party receiving the benefit of the building’s insurance, stating “[i]f it was a loss to the common elements where the condominium received insurance proceeds to make the repairs, the condominium would pay the deductible. And if there were multiple units impacted, then multiple units shared the deductible.”
Jillian, however, cautioned against shifting insurance deductibles onto unit owners responsible for a loss. “I don’t think co-ops and condos should transfer the responsibility of a property-policy deductible to the unit-owner or the shareholder,” she said. “When you buy into a condo or a co-op, you are in essence agreeing to community living. Insurance is a shared risk. Everybody collectively is paying maintenance fees or common charges that pay the building’s insurance premium. That deductible remains a shared risk amongst all the property owners, all the unit-owners, just like the premium does.”
The article notes that the practice, known as a deductible resolution, remains a subject of debate among industry professionals, who are divided over whether it fairly assigns accountability or unfairly shifts risk onto individual owners.
Read the full article here.