Much has been written about the insurance requirements for condominium associations and condominium owners. The Florida Condominium Act has been amended significantly over the years in this regard. Major changes resulted from the 2003 legislative session, by defining the terms “building”, “condominium property,” “insurable improvements,” and other terms contained in declarations of condominium when dictating the scope of property covered by the master policy. More recent amendments, some of which effective January 1, 2009, caused a whirlwind of controversy over unit owner coverage mandates and provisions allowing associations to “force place” coverage. On the other hand, the Florida Statutes pertaining to Cooperative Associations have not received much attention, nor is there any statutory guidance for the scope of coverage required other than a reference in Section 719.104(3), Florida Statutes, to the obligation to procure “adequate insurance” to protect the association property. Consequently, the directors of a typical Cooperative Association containing multi-family buildings (whether high rise or low rise buildings) are often offered the same products that are available for Florida Condominium buildings and properties, regardless of whether the coverage is appropriate. As a preliminary matter, there is a fundamental difference between a condominium and a cooperative property, even if the buildings are exactly identical. In a condominium, the unit owners (often referred to as “Members”) actually own a parcel of real estate subject to individual ownership – the condominium unit (as defined by the Declaration of Condominium). Those owners (Members) also own a share of the common elements. In a cooperative, the corporate entity (the Cooperative Association) is the usually the sole owner or lessee of the entire property, which includes the land and all buildings and improvements upon the land, including the individual units. The owners (often referred to as “Stockholders”, “Shareholders” or “Members”) own a share of the corporation and are assigned the exclusive use right to one unit. Thus, the “cooperative parcel” is defined as the share or other evidence of the ownership interest in the corporation (such as a membership certificate, stock certificate or the like) along with the Proprietary Lease, Occupancy Agreement or other muniment of title or possession to the unit itself. The insurance products designed for condominium properties may not be “adequate” for cooperative properties, as the coverage required for a cooperative is dictated by the governing documents of the Cooperative Association. The Proprietary Lease (or Occupancy Agreement), Bylaws and other governing documents should clearly delineate the responsibilities associated with maintenance and insurance of the cooperative property, allocating certain portions of the property to the Association and others to the Shareholders. While the insurance industry appears to address the differences between various types of properties it is abundantly clear that many association leaders are not aware of the differences, nor able to ensure the policies they purchased are “adequate”, leaving themselves exposed to liability for damages in the event of uninsured losses. Cooperative Association Boards are encouraged to undertake a comprehensive review of their insurance policies and the coverage afforded by each policy. Consult with counsel to determine whether amendments to the governing documents or changes in coverage are necessary or advisable under the circumstances.
Florida Condominium ActInsuranceUninsured Losses