HO-6 denies claim without confirming coverage...

Oct 25, 2018

  1. Scott9342
    Offline

    Scott9342 New Member

    Posts:
    6
    Likes Received:
    1
    State:
    California
    I live in a condo built in 1972. I've lived there for about 5 years.The condominium's CC&Rs (which date back to 1972) require the HOA board to purchase hazard insurance for all "improvements" to the "project" ("project" is defined in the CC&Rs as the entire real property including all structures thereon), with the exception of "tenants' improvements."

    In August of this year, the cartridge in my kitchen faucet went bad and my kitchen sustained water damage to the cabinets, drywall, and hardwood floor. I made a claim on my HO-6 policy. My HO-6 insurance denied the claim (at least tentatively) based on its interpretation of the CC&Rs being that the HOA master insurance is the primary insurance responsible for all original specifications ("improvements") to the complex while the HO-6 is the primary insurance responsible for all tenant improvements (i.e. improvements/betterments made by the owner to the unit). For purposes of my question here, at least, I will assume my HO-6 insurance company's interpretation of the CC&Rs is correct.

    So, clearly the next logical question(s) are (1) which damaged items/materials in my unit have been there since 1972 and (2) which were added by the previous owners during the 40-year period prior to my purchasing the property. After several days of trying to obtain this information from the adjuster, I was provided an answer: they don't know.

    Another question I had for the adjuster is what informational resources were at their disposal to determine whether damaged items in my unit were original to the structure or added later. His answer: me and public records. So I wanted to know what the public records revealed. I still have yet to receive an answer to this question, but was advised that these "public records" consist of Zillow and Redfin. Really? In the adjuster's most recent email to me, he advised (for the first time) that the HOA should have documents which detail the original specifications of the unit.

    So, in sum, my claim has been denied on the basis that the HO-6 is the primary insurance for tenants' improvements only. At the time of denying my claim, the insurance company had no idea whether any of the damage in my unit was to "tenant improvements" or original materials (and, by the way, I strongly suspect that at least the hardwood floor was added by a previous owner). Its efforts to distinguish between the two were limited to searches on Zillow and Redfin which, predictably, revealed nothing. And further, it knows, or suspects, that there are documents in possession of the HOA which would specify what the original specifications of my unit are, but has made no effort to secure those documents and didn't even raise the subject of those documents until now.

    Can someone please confirm whether my suspicions that my insurance company's behavior here is not proper is well founded? Can anyone offer any advice for proceeding further? Of course I will be researching further to find out if any documents concerning the original property exist, and I am trying to deal w/ the HOA regarding its insurance.
     
  2. adjusterjack
    Offline

    adjusterjack Guru

    Posts:
    851
    Likes Received:
    236
    State:
    Arizona
    I did hundreds of condo water damage claims and never had this issue come up. Improvements to real estate are buildings. With condos the building structure is defined as "common element" and what is owned by an individual is defined as "unit."

    All of the condo CC&Rs that I have ever read specify that the mater policy covers "common elements" and the individual owners get their "units" covered under and HO-6.

    A "unit" generally consists of fixtures, cabinets, sinks, tubs, carpet, tile, laminate flooring and, in some cases, drywall and paint.

    There was never any question that those items were covered by an HO-6.

    I think your adjuster is nuts but without reading the CC&Rs I can't be of much help to you.

    I suggest that, at this point, you file a complaint with the Department of Insurance and get one of their investigators on it. And if that doesn't work you'll need a lawyer who is experienced in suing insurance companies for bad faith.

    Your adjuster's position is just plain wrong.
     
  3. Scott9342
    Offline

    Scott9342 New Member

    Posts:
    6
    Likes Received:
    1
    State:
    California
    I wish my CC&Rs said that. They don't. Whether they can be interpreted to that effect is another story.

    I've uploaded the relevant portions of the CC&Rs if you'd like to take a look.


    As to which part? Interpretation of the CC&Rs?
     

    Attached Files:

  4. adjusterjack
    Offline

    adjusterjack Guru

    Posts:
    851
    Likes Received:
    236
    State:
    Arizona
    I see I have to eat a little crow here. I've never seen CC&Rs written this way. Your adjuster is correct in his interpretation.

    It's on Page 14 Paragraph 4.

    Taking that literally and unambiguously (as a court would do) means that YOUR HO-6 would cover any such improvements that YOU made.

    Therefore, whatever was done by previous owners is irrelevant so looking into the history of the unit is not necessary.

    Now I'd have to say that the association's master policy would cover the damage to cabinets, walls, and flooring.
     
  5. VolAgent
    Offline

    VolAgent Guru

    Posts:
    14,685
    Likes Received:
    1,333
    State:
    Tennessee
    The only problem is that interpretation would either make the association liable for any improvements made by the previous owner, or completely uninsurable. I can't see a court going either route.

    I would think the association would be against the first as they have no control over what if any improvements are made, and I can't see a court knowingly putting a condo owner in a position where they are unable to insure any prior improvements.
     
    VolAgent, Oct 26, 2018
    #5
  6. Allen Trent
    Offline

    Allen Trent Guru

    Posts:
    250
    Likes Received:
    153
    I have seen several Condo developments with CC&Rs like this & those developments also insured the units entirely including what would normally be a unit owners responsibility. not sure why, but they did.

    Also, I believe you are misreading section 4 on page 14. it doesn't define improvements by the "current owner", it says improvements by "an owner", which would mean any owner since the date the property was developed. this is why most of these are a train wreck to figure out. There is no way to go back over 40+ years and possibly numerous phases where the "base unit" varied greatly to figure out what was an "owner improvement" by 1, 3 or 10 previous owners.

    Not sure who should pay for what in this specific case, but I am sure they want it to start with the master Condo policy before the HO 6 pays.

    only more complicated condo claim I saw was when a car in Michigan ran into a condo. MI no fault provides ACV property damage, so the auto carrier would only pay pennies on damaged items like kitchen cabinet even though entire cabinets were needed. Master commercial condo policy then paid for what was deemed part of the original basic unit when constructed & finally, the HO 6 picked up all the rest of improvements & difference in Replacement Cost to ACV on those improvements. It was a complete mess for the contractors to do work as it required 3 different insurance carriers to authorize their aspects.

    Developments should be required by law to specifically state what is currently considered part of the basic unit if the CC&R references such. Makes it too hard for unit owner & insurance agent to guess at how much HO6 coverage & then you have ignorant lenders on top of it directing way too much HO6 coverage based on how much they loaned the unit owner merely to appease the mortgage Underwriters
     
  7. adjusterjack
    Offline

    adjusterjack Guru

    Posts:
    851
    Likes Received:
    236
    State:
    Arizona
    I believe that a court would interpret that section as applying to the current owner as compelling an owner to go back 40 years to try to piece together what previous owners did would be unconscionable and against public policy. Further, ambiguities are generally construed against the party who drafted the document, especially when it is a contract of adhesion.

    Agree. CC&Rs that I have read (other than this one) specifically and comprehensively define "unit" and "common elements" and specify how the master policy provides coverage.
     
  8. Allen Trent
    Offline

    Allen Trent Guru

    Posts:
    250
    Likes Received:
    153
    I believe there are 3 type of CC&Rs & Master Condo Policies. 1. Bare Walls 2. Builders Specs 3. All in. This CC&R appears to be written as a "Builders Spec" type where the master policy will cover what the original base units were & because this is 40+ year old development, that will be an issue to be debated between both insurance carriers, the board & the unit owner.
     
  9. Scott9342
    Offline

    Scott9342 New Member

    Posts:
    6
    Likes Received:
    1
    State:
    California
    I think the reason is to avoid a result where the unit owner makes a claim on his/her HO-6 and collects the money without repairing the unit. I might be wrong.

    I think this is the more likely interpretation. The language, read literally, would apply to all tenants' improvements, which would mean improvements by all unit owners.


    That's interesting. I can see how various coverages would create confusion between the contractors. One might say that it becomes less confusing over time, when after multiple owners have lived in the unit and made multiple replacements and repairs, there's much less that's "original" to the unit.

    Perhaps, but the problem I have currently w/ my HO-6 company is that they're ignoring some damaged items which are clearly not original to the unit on the apparent basis that they can't confirm that it is a tenant improvement, and furthermore have practically no investigation into the same.


    If there is a document(s) specifying exactly what the original specs are which can be easily retrieved, then there probably won't be much guesswork. If there's not, then the combination of the reading of the CC&Rs and my HO-6 insurance company's position would lead to an absurd result.
     
  10. Scott9342
    Offline

    Scott9342 New Member

    Posts:
    6
    Likes Received:
    1
    State:
    California
    I think that makes sense. The coverage afforded by the HOA policy would change every time ownership of a unit changes hands.
     
Loading...