We all know what the cost of insurance is doing to our way of life. In most condominium associations, the cost of windstorm and peril insurance has tripled over the past few years, if not quintupled. And from what I am being told, there is no end in sight. God forbid another major storm hits and the insurance companies have to shell out another couple of billion. The cost of insurance would go up even more.
Believe it or not, I am being asked by more and more associations if it is absolutely necessary for the building to be insured with windstorm and peril insurance. The first place we need to start is the Florida Statutes.
Florida Statute 718.111(11)(b) states:
(d) An association controlled by unit owners operating as a residential condominium shall use its best efforts to obtain and maintain adequate property insurance to protect the association, the association property, the common elements, and the condominium property that must be insured by the association pursuant to this subsection.
What in the world does “best efforts” mean? Does it mean that if a policy is available at any price, the association must purchase the insurance? Does it mean that if the cost of the insurance is too high and will force residents into foreclosure, the insurance does not have to be purchased? Nobody knows and it is a terribly worded statute.
Let’s assume for the sake of discussion that we interpret the above statute to allow the Board to refrain from purchasing insurance if the cost is too high. We still have to look in the community’s governing documents to determine if the docs require that the association property is covered by windstorm insurance. If the docs require it, then it shall be purchased. Period. Many, if not most declarations do have a requirement that the Board insure the property. Now what?
What would you do if you did not like a provision in your governing documents? You would try to amend it. And that’s exactly what some associations are doing and voting to remove any requirement in the governing documents for the board to purchase windstorm and peril insurance.
Is the move to go without windstorm insurance risky? Yes. First of all it’s risky for the obvious reason…..if a storm comes and destroys the place and you have no coverage, you would have to use your own money to return the place to a livable condition. The second reason it’s scary is because if anyone has a mortgage, they would likely be in immediate default, because the condominium property is not uninsured. The bank may potentially either force place insurance or simply file a foreclosure action. You would also never be able to sell your unit to anyone requiring a mortgage.
It sounds crazy that in a hurricane prone state like Florida we are even having a discussion about waiving insurance on our condominiums, but I’m telling you now…..it’s happening. A lot. The thinking is……..better to have an uninsured unit that no unit at all.