Insurance for Condominium Associations

Insurance for Condominium Associations

Randy Opotowsky

Randy Opotowsky

August 9, 2021 05:27 PM

In light of the recent condominium collapse in Surfside, Florida, condominium associations may find themselves questioning whether they are adequately insured for catastrophic casualty events and/or allegations of mismanagement of the condominium. In this article, Randy Opotowsky and Margaret Glass provide an overview of the types of insurance condominium associations are required to have under the Louisiana Condominium Act as well as the types of insurance condo associations should consider, such as coverage for large scale disasters.

Louisiana Condominium Act Provision on Insurance

In Louisiana, condominium associations are required to maintain certain types of insurance covering the condominium property, the association and the unit owners. It is important for the board of directors of the association and the association’s insurance agent to be aware of the Louisiana Condominium Act provision on insurance, La. R.S. § 9:1123.112. This statute requires the association to maintain, to the extent reasonably available, two types of insurance:

  1. Property Insurance. Associations must maintain property insurance covering both the common elements and the units, except this insurance is not required to cover “betterments and improvements,” i.e. upgrades that are of a higher quality than originally constructed, within the units. This insurance must provide casualty coverage for at least 80% of the actual cash value of the property, but associations should consider obtaining coverage for the full replacement value of the insured property.
  2. Liability Insurance. Associations must also maintain comprehensive general liability insurance which provides coverage for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements. This policy must cover the association and also the unit owners with respect to liability arising out of the unit owners’ ownership interest in the common elements or membership in the association. The statute does not require a specific amount of insurance; associations should consult their insurance agents about appropriate amounts.

The above policies are subject to various requirements set forth in the statute, including requirements that the insurance company waive subrogation against individual unit owners and that coverage cannot be voided by the acts of unit owners acting in their individual capacity. In the event of a claim under the association’s insurance policies, the association will generally work with the insurance company in the capacity as a trustee for the unit owners, who have interests in the policies as described above.

The Louisiana Condominium Act, La. R.S. § 9:1123.113, also requires associations that collect assessments for common expenses to maintain a blanket fidelity bond or equivalent insurance providing coverage in the amount of the lesser of (i) $1,000,000 or (ii) the total amount of reserve balances of the association plus one-fourth of the aggregate annual assessment of the association, but no less than $10,000. However, this requirement is considered satisfied if the association’s third-party manager carries a bond or insurance satisfying these requirements and names the association as an additional insured. Associations should further confirm that any third-party manager or management company maintains its own separate liability and errors and omissions insurance.

Other Types of Insurance Condo Associations Should Consider

In addition to the above, the association is permitted, but not required, to carry any other insurance it deems appropriate. Associations should seriously consider maintaining directors and officers liability insurance, flood insurance, workers compensation and employer liability insurance if they have employees, builder’s risk insurance in the event of any construction, personal property coverage if not included in the property policy, and an umbrella liability policy. Particularly in the case of a large scale disaster which involves potential allegations that the association failed to address existing problems, as is occurring in Surfside, adequate directors and officers liability insurance and an umbrella liability policy would be extremely important.

The condominium declaration may also require each of the individual unit owners to carry their own separate insurance policy, sometimes referred to as an HO-6, which typically covers damage to the “betterments and improvements” within the unit, as described above, and provides personal liability coverage to the unit owner in the unit owner’s individual capacity. La. R.S. § 9:1123.112 provides that this insurance is primary with respect to betterments and improvements within the unit owner’s unit, while the association’s property insurance policy is primary with respect to common elements, structural elements and components, and fixtures and improvements of the condominium units that are not classified as betterments and improvements.

If a condominium allows short-term rentals, any unit owner conducting short-term rentals should consider obtaining an endorsement to provide coverage for those activities, which are often not covered by standard homeowners or HO-6 policies and also not by association master policies.

Learn More About Legal Requirements for Condominium Association Insurance

One of the greatest responsibilities of a condominium association is selecting and maintaining insurance to respond to unexpected events. Please contact our office if you are interested in learning more about the legal requirements for condominium association insurance.

Related Articles

Maximizing Your Investment in Real Estate Development with Legal Expertise

by Best Lawyers

Best Lawyers evaluates the various types of real estate development projects and why hiring legal expertise could maximize the outcome of your investment.

Wooden house cut outs in a shopping cart with a blue backdrop

How Real Estate Transactions in the Residential Sector Work

by Best Lawyers

Discover how real estate transactions in the residential sector work with this guide. Learn about the stages, parties involved and legal requirements.

Man looking at houses on computer

House Trap

by Heidi E. Storz

Special districts are often being used as profit centers that leave residents to foot the bill. These homeowners deserve protection from unscrupulous developers who attempt to fleece them and avoid accountability.

Special Districts Changing Property Ownership

Announcing the 2022 Best Lawyers: Real Estate and Infrastructure Publication

by Best Lawyers

Featuring the top legal talent from The Best Lawyers in America, Best Lawyers: Ones to Watch in America and "Lawyer of the Year" recipients for real estate and infrastructure as well as thought leadership from some of the nation's top lawyers.

Real Estate and Infrastructure Publication

Choosing a Title Company: What a Seller Should Expect

by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

Is New Always Better?

by Janice Zhou

The rapid rise of gentrification in major cities leaves residents wondering.

Road facing bridge at sunset

Gimme Shelter

by Janice Zhou

Being able to afford housing in Boston, and other desirable cities like it, is increasingly out of reach for too many. What can be done, legally and politically, to combat the problem?

Housing Shortage in Boston

Great Rebuild

by Best Lawyers

Néstor Méndez discusses labor peace, junk-bond repercussions, and the laudable resilience of those who call this storm-battered island home.

An Interview With Pietrantoni Méndez & Alvare

WATCH: Best Lawyers Discusses COVID-19 & Rental Agreements

by Best Lawyers

Three legal experts join the CEO of Best Lawyers to talk about a general approach to “the rental” market and what happens if tenants can’t pay rent in May.

COVID-19 Panel: Rental Agreements

Impact of Climate Change on Real Estate Law

by Best Lawyers

Dr. Christian Schede discusses rent in large cities, the effect of Airbnb, and more.

An Interview With Greenberg Traurig

Property Rights...and Wrongs

by Chad Cooper and Steven S. Kaufman

Winning a legal battle often boils down to finding and targeting the weakest part of an opponent’s case. Four recent real estate disputes in northeast Ohio are good examples.

Strategies for Real Estate Litigation

Trending Articles

Presenting The Best Lawyers in Australia™ 2025

by Best Lawyers

Best Lawyers is proud to present The Best Lawyers in Australia for 2025, marking the 17th consecutive year of Best Lawyers awards in Australia.

Australia flag over outline of country

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™

by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

How To Find A Pro Bono Lawyer

by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

How Palworld Is Testing the Limits of Nintendo’s Legal Power

by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

Announcing The Best Lawyers in New Zealand™ 2025 Awards

by Best Lawyers

Best Lawyers is announcing the 16th edition of The Best Lawyers in New Zealand for 2025, including individual Best Lawyers and "Lawyer of the Year" awards.

New Zealand flag over image of country outline

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom

by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Announcing The Best Lawyers in Japan™ 2025

by Best Lawyers

For a milestone 15th edition, Best Lawyers is proud to announce The Best Lawyers in Japan.

Japan flag over outline of country

The Best Lawyers in Singapore™ 2025 Edition

by Best Lawyers

For 2025, Best Lawyers presents the most esteemed awards for lawyers and law firms in Singapore.

Singapore flag over outline of country

Announcing the 16th Edition of the Best Lawyers in Germany Rankings

by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

How Much Is a Lawyer Consultation Fee?

by Best Lawyers

Best Lawyers breaks down the key differences between consultation and retainer fees when hiring an attorney, a crucial first step in the legal process.

Client consulting with lawyer wearing a suit

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™

by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Presenting the 2024 Best Lawyers Employment and Workers’ Compensation Legal Guide

by Best Lawyers

The 2024 Best Lawyers Employment and Workers' Compensation Legal Guide provides exclusive access to all Best Lawyers awards in related practice areas. Read below and explore the legal guide.

Illustration of several men and women in shades of orange and teal

Things to Do Before a Car Accident Happens to You

by Ellie Shaffer

In a car accident, certain things are beyond the point of no return, while some are well within an individual's control. Here's how to stay legally prepared.

Car dashcam recording street ahead

Combating Nuclear Verdicts: Empirically Supported Strategies to Deflate the Effects of Anchoring Bias

by Sloan L. Abernathy

Sometimes a verdict can be the difference between amicability and nuclear level developments. But what is anchoring bias and how can strategy combat this?

Lawyer speaking in courtroom with crowd and judge in the foreground

The Push and Pitfalls of New York’s Attempt to Expand Wrongful Death Recovery

by Elizabeth M. Midgley and V. Christopher Potenza

The New York State Legislature recently went about updating certain wrongful death provisions and how they can be carried out in the future. Here's the latest.

Red tape blocking off a section of street

Attacked From All Sides: What Is Happening in the World of Restrictive Covenants?

by Christine Bestor Townsend

One employment lawyer explains how companies can navigate challenges of federal and state governmental scrutiny on restrictive covenant agreements.

Illustration of two men pulling on string with blue door between them