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Articles Posted in Insurance

A recent article in the Palm Beach Post chronicled the early signs of the financial strains that Florida condominium associations are beginning to experience. Unfortunately, these early issues involving increased insurance costs represent just the beginning, and things are indeed expected to get worse in the months and years to come.

The article discusses how the 51-year-old Portofino South Condominium in West Palm Beach (pictured below) received a renewal quote from its insurer with an 82 percent increase over the prior year. It had expected an increase of around 25 percent, which was what it got for 2021, so the board of directors had to call a special meeting to increase the association’s annual budget and hike up its monthly dues for its owners.

Mary McSwain, who bought her one-bedroom unit in January, told the Post’s Kimberly Miller that her dues are going from $914 a month to $1,347.

“And it’s likely to get more expensive for owners under the new condo law approved during a special legislative session,” the article reminds readers.

pfino-south-300x200Indeed, while most of those safety provisions do not become effective until 2024, the law will require significant new inspection and maintenance measures on older condos three stories or higher, as well as dedicated reserves to pay for structural repairs.

For the owners at Portofino, the news is even worse. State law now requires it to install a new fire-sprinkler system by Jan. 1, 2024, and that is expected to cost its unit owners more than $7 million.

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Nicole-Kurtz-2021-200x300The firm’s latest Miami Herald “Real Estate Counselor” column authored by Nicole R. Kurtz appears in today’s Neighbors section and is titled “Federal and State Reforms Necessary to Address Florida’s Residential Insurance Woes.”  It focuses on the precarious state of Florida’s home insurance market, which will be the subject of a special session by the state legislature this week.  Nicole’s article reads:

. . . An article by the Miami Herald’s Ben Conarck recently chronicled how the horrific Champlain Towers collapse “has further inflamed an exodus of insurers no longer willing to underwrite policies in an increasingly risky Florida condo marketplace.” It noted that condominium associations are being forced to resort to the surplus market for less coverage at costlier rates.

“Condo associations are having a hard time getting their pre-Surfside policies renewed, forced instead to sift through estimates for less protective plans that cost twice as much, or higher. Those lucky enough to renew their policies are doing so at 30% to 50% premium increases,” according to Conarck’s expert sources.

Herald-clip-for-blog-5-22-22-1-100x300They also indicate “[s]piraling costs and tighter restrictions in both the insurance and lending industries have led to a new fear that some particularly troubled condo buildings will be uninsurable. Companies are going to be demanding inspection and financial records — and even meeting minutes — to determine how much risk is in any given building.”

Indeed, some analysts are predicting that the state’s residential insurance market is nearing a total collapse. They point to the six property and casualty companies that offered homeowners insurance in the state but have liquidated since 2017, with two more that are in the liquidation process this year.

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RobertoBlanch_8016-200x300The firm’s latest “Real Estate Counselor” column, which is featured in the Neighbors section of today’s Miami Herald, was authored by shareholder Roberto C. Blanch and titled “Water-leak Suit at Jacksonville Condo Makes Local Headlines, Reveals Telling Lessons.” Roberto’s article focuses on a recent report that aired on both the ABC and NBC affiliates in Jacksonville that included footage of a severe water leak filmed by a condominium tenant. The owner of the unit terminated the tenant’s lease, and he eventually filed a lawsuit against the association after it allegedly declined coverage for extensive water damage including warped floors of costly imported wood, destroyed light fixtures and dangerous mold.  The column reads:

. . . The news report, which can be viewed at tinyurl.com/3un2ktam, illustrates the significant impacts that water leaks can have in condominiums. It is important to note that not all water loss events in condominiums are the result of improper maintenance by the association, as some may result from clogged sinks and toilets, or other owner negligence and causes.

Condominium associations and their property management must periodically inspect and repair their buildings’ common-element pipes and other components. Any leaks that may arise should be quickly and proactively investigated to determine their source and prevent them from causing any further property damage or possible injuries to residents. Miami-Herald-3-13-22-print-page-1-297x300Regardless of a leak’s cause or source,  an association’s management and directors have an obligation to address and potentially eliminate it.

Associations should work with qualified insurance professionals to maintain adequate coverage against the types of damages that are likely to arise from leaks. They should also have a plan of  action in place for the handling of water leaks, including pre-determined arrangements for their immediate remediation and a detailed process for reporting such incidents to the association’s insurance carrier.

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Eduardo-Valdes-srhl-lawAn article authored by firm partner Eduardo J. Valdes is featured in the op-ed “Opinions” page of today’s South Florida Sun Sentinel.  The article, which is titled “Post-Surfside, condo associations must be proactive with change | Opinion,” focuses on the impact that the horrific tragedy of the Champlain Towers South collapse has had on the condominium associations for similar towers nationwide and their boards of directors.  Eduardo notes that in addition to the shared grief and remorse with the families and friends of all the victims, many condo owners across the country are now raising questions about their own buildings’ structural safety and financial health, and some have also begun to feel more concerned about the funding of reserve accounts for major repairs and replacement projects.  His article reads:

 . . . All buildings deteriorate over time, so associations should always set aside funding on an ongoing basis to mitigate and remediate any structural elements that require attention.

As they begin reassessing their associations’ commitments, condominium boards of directors will generally try to avoid special assessments demanding additional funds from all the unit owners. They will need to consult with legal, financial, engineering and insurance professionals to strike a balance between the funding of reserves and the use of special assessments when they become necessary from a life-safety standpoint.

Sun_Sentinel_Logo-300x97Condominium association directors and unit-owner members would also be well advised to come to terms with the new reality that future buyers will now have many more questions and concerns than in the past about the financial health of the association and current state of the actual property from the ground up. Some will surely request that sellers provide them with the minutes from prior board meetings, information on any past or planned special assessments, the status of renovation and remediation projects, past changes to the monthly assessments over the years, the findings of past reserve studies, and the status of current reserve funding. They are also now more likely to conduct a thorough visual inspection of the entire property prior to making a written offer.

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Michael-Hyman-srhl-lawAn article authored by the firm’s Michael L. Hyman was featured as the “Board of Contributors” expert guest commentary column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which is titled “Injunction Petition Against Ornery Condo Resident Sends Important Message,” focuses on a recent petition for an injunction stemming from pre-pandemic confrontations between a current and a former community association board member.  Michael writes that the case illustrates how associations and their directors should proactively address bellicose residents.  His article reads:

. . . The initial incident that led to the petition for the injunction, which was granted by the circuit court but eventually overturned on appeal, took place at a Broward County condominium in December 2018. That was when Patrick Gagnon, a member of the community’s board of directors, was accosted by prior board member Joseph Cash. A second incident later in the same month involved Cash allegedly yelling at Gagnon, calling him a liar and cursing at him.

dbr-logo-300x57Two months later in February 2019, Gagnon alleged that Cash confronted him two times, 45 minutes apart, yelling and cursing about new trees installed by the association that blocked the view from his condominium.

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As new spikes in Covid-19 cases continue to unfold and communities seek to maintain their mitigation measures, the financial trials and tribulations created by the pandemic in condominium association and HOA communities throughout the country become ever more apparent. The continued proliferation of Covid-19 cases underscores that while many may be letting their guard down and growing fatigued as to the measures to protect against the spread of the virus, community association stakeholders should remain proactive and forward-thinking in order to best position their associations for the consequences that may arise due to the pandemic.

Some community associations have begun to experience the burdens resulting from lower collections rates caused by strains on the job market due to the pandemic.  While the exact impact on the many types of community associations may be unknown, it has been suggested that delinquency rates could exponentially increase. Bank-owned-2-300x257 In response to such expectations, we continue to suggest that community association boards and managers should continue considering the development of acceptable uniform payment plans that may be offered to those who have lost jobs and businesses.

Similarly, some have proposed that community associations should also think about postponing discretionary improvements to community amenities until late 2021 or even 2022.

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If you live in a condominium, there is a reasonable chance that, at some point, you will experience one of the most frustrating events for homeowners:   water intrusion caused by plumbing problems and related losses.  The big difference between those who reside in a shared community, such as a condominium building, and those who reside in a single-family home is the added complication for condominium dwellers of determining responsibility and liability for any water damage and resulting remediation work.

In condominiums, the association is generally responsible for losses emanating from the property’s common elements.  Complications for assigning responsibility, however, typically arise from losses that may originate from inside an owner’s dwelling unit, and may cause damage to adjacent or below units, as well as to the common elements.

Such cases are often resolved through a negotiation between insurance carriers for unit owners and those for the association’s property, assuming the owners have adequate coverage. water-300x225 Insurers tend to find the most common sources of water loss from inside a dwelling unit to be sinks, showers, toilets, faucets, drains, supply lines, valves and pipes.  In addition, problems with appliances, such as dishwashers and refrigerators, are also likely culprits.

For shared walls and plumbing lines, insurers for multiple unit owners may be involved.  In those cases, carriers often work together to inspect the affected property, determine the cause of the water loss and assign responsibility where it lies.

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susanodess-srhl-thumb-200x267-94402The firm’s Susan C. Odess authored an article that appeared as the featured guest commentary column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which is titled “Court Opens Citizens Property Insurance to Claims for Consequential Damages,” focuses on a recent precedent-setting ruling with a certified question to the Florida Supreme Court by the state’s Fifth District Court of Appeal.  Her article reads:

. . . The appellate panel overturned the trial court’s decision and remanded the case back to the lower court for hearings on whether the claimant is entitled to consequential damages for lost rental income caused by the insurer’s delays and denials.

The case began with an insurance claim by Manor House with Citizens Property Insurance Corp., which accepted responsibility for the loss and paid $1.93 million. The property owner later reopened the claim seeking $10 million, and the insurer subsequently made additional payments for approximately $345,000. However, Citizens’ adjuster estimated the actual cash value and replacement cost value of the policyholder’s loss to be in the $5.5 to $6.5 million range.

dbr-logo-300x57The property owner eventually sued in 2007 seeking prompt payment of the allegedly undisputed amount of $6.4 million and asking the court to compel Citizens to engage in the appraisal procedures called for under the policy.

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susanodess-srhl-224x300An article authored by shareholder Susan C. Odess was featured as the “Board of Contributors” guest commentary column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which is titled “Florida Legislature Passes Assignment of Benefits Insurance Claim Reform,” discusses the ramifications of the new state law to reform the insurance industry practice known as assignment of benefits, or AOB.  Her article reads:

. . . The AOB process, which has been in place for decades, has become controversial in recent years because of an increase in residential water-damage claims, primarily for broken water pipes and leaks. Property owners sign over their claim benefits to contractors, which are then able to pursue payments directly from the insurers.

The proponents of AOBs say they help to ensure claims are properly paid, but the legislators supporting the bill have said it is aimed at curbing abuses of the AOB process. Insurance carriers have contended for many years that AOB fraud and the excessive litigation it generates have led to higher property-insurance rates.

dbr-logo-300x57The new law limits attorney fees in AOB lawsuits filed by contractors against insurers. The legal fees will be calculated using a set formula, but the caps would not apply to lawsuits filed by policyholders.

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susanodess-srhl-thumb-200x267-94402Stuart-Sobel-2013-200x300Firm partners Stuart Sobel and Susan C. Odess won a $3.67 million jury verdict in federal court in Miami for the St. Louis Condominium Association, which sued its insurer Rockhill Insurance Co. over a denied claim for extensive damage to the Brickell Key tower caused by Hurricane Irma.  The verdict was filed last Wednesday, June 5, and it is chronicled in an article in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article reads:

. . . the judgment is good news for the association since it stood to get nothing from its insurer, said Stuart Sobel, who was part of the Siegfried Rivera team representing the association.

“I believe in juries, and I am pretty pleased with the results. In light of the alternative where the insurance company basically said, ‘We are not paying any money.’ They said we suffered no damage form Hurricane Irma,” Sobel said.

He said the hurricane churned in the condominium’s vicinity for 24 hours. The building sits on Biscayne Bay east of downtown Miami.
Sobel worked on the case with Siegfried Rivera’s Susan Odess . . .

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