Answer: The ISO HO 06 05 11 clearly states that ALE is paid for the shortest time to repair or replace the damage, or until the insured permanently relocates, whichever is shorter. Since the property is uninhabitable, the insured should continue to receive ALE.

As far as who should pay to repair the damages, the HO 06 states that the policy covers real property that pertains exclusively to the “residence premises” — “residence premises” is defined as the unit where the insured resides and is shown in the declarations.

It needs to be determined if the sewer line exclusively serves the unit. If it does not, there is no coverage under this section.

Also, the HO 06 provides coverage to property which is the insured's responsibility to insure under a corporation or association of property owners agreement. So the insured's carrier need to look at the condominium master agreement between the insured and the association. This will indicate what the insured and the association are responsible for. Most often the association is responsible for anything used in common with other unit owners. Likewise many states make the association primary on such things, you'd have to check the statutes.

Related: How well do you know condo insurance exclusions?

Is condo association or unit-owners policy primary?

Question: On businessowners form BP 00 03 01 01 10, a condominium association filed claim when a unit, which was rented out, was damaged when the tenant shot and killed his wife. The tenant's carrier denied the claim. The unit owner and condo association have presented a claim under the association's policy stating that it is primary under Conn. Stat. Sec 29, Section 47-225. Does this statue call for the association policy to be primary and cover all damages, including tenants improvements and betterments?

— Virginia Subscriber

Answer: The actual reference in the Connecticut statutes is 47-255.

In section (b)(1), the statues says that if the building contains units that are divided by horizontal boundaries described in the declarations or by vertical boundaries comprising or located within common walls between units, the insurance would “include the units, and all improvements and betterments installed by unit owners, unless the declaration limits the association's authority to insure all improvements and betterments or the executive board decides, after giving notice and an opportunity for unit owners to comment, not to insure such improvements and betterments.” So, while this is governed somewhat by statute, it depends on how the units are divided, what the policy says, and what the board and the unit owners have decided regarding insuring improvements and betterments.

In section (d), the statute says that “if, at the time of a loss under the policy, there is other insurance in the name of a unit owner covering the same risk covered by the policy, the association's policy provides primary insurance.” If both the unit owner's and the association's policies do cover improvements and betterments, the association policy is primary.

Homeowners policy and condo association policy deductible

Question: Our HO-6 insured suffered covered water damage from plumbing to their unit. When we reviewed the condo association policy, it appeared the condo association was responsible for insuring the building, including the units, except for the insured's own additions and alterations and personal property. The association policy had a $1,000 deductible.

Our insured has $5,000 coverage A, and the damage is $998. Should the HO-6 provide coverage, since the association will not be submitting a claim? It seems that the HO-6 is covering the association's deductible. How does this fit with the “other insurance” clause, that states the homeowners insurance “will be excess over the amount recoverable under such other insurance”?

— Massachusetts Subscriber

Answer: The HO-6 will respond to the insured's claim. The wording of the homeowners “other insurance” clause does not contain the wording, as do many other “other insurance” provisions, that the coverage will be excess “over other insurance, whether collectible or not.” The recoverable amount in this instance is zero, so the HO-6 pays for the covered loss.

Condominium coverage under commercial and personal policies

Question: Our claims department continues to struggle with coverage provided by the CP 00 17 10 00 for (specifically) carpeting, and also wallpaper and paint inside a condominium unit. We are currently of the opinion that if the condo documents (master deed and bylaws) require the association to insure, for example, all units, common elements and limited common elements, the CP 00 17 would pick up coverage for carpet, wallpaper and paint.

We frequently encounter losses where the damage is confined to a single unit and it is necessary to replace vinyl or carpet and padding because of the buckling of the sub flooring. Confusion (not to mention frustration) occurs in trying to determine where the coverage comes from.

The HO-6 policy contains a statement making it excess over the association policy, and the CP 00 17 is specific that it is primary and not contributing. Is it the intent of the CP 00 17 to include carpet, etc., if the association is charged with insuring it? And, in the second paragraph of the HO-6 “other insurance” clause, the word “recoverable” could indicate that if the master policy has a deductible which prevents recovery from its policy, the HO-6 will drop down and become primary to that policy.

What are your thoughts about these two matters?

— South Carolina Subscriber

Related: My homeowners' policy covers that?

Answer: At one time condo unit owners were considered to have purchased “air space” and everything from bare walls out was considered the owner's responsibility to insure. Now the condo association master policy may cover individual unit owners' “fixtures, improvements, and alterations that are part of the building structure” so long as the association agreement requires it. Improvements and alterations that are part of the building include (but are not limited to) paint, wallpaper, lighting fixtures, counters, etc. There is also coverage for appliances such as dishwashers.

Coverage for carpeting follows the same logic. If wall-to-wall carpeting is included in the mortgage it is part of the realty and thus falls under the “improvements and alterations” that are part of the building structure. If not so designated, then generally where carpet is laid over an unfinished floor it is considered part of the building and would be covered as such. If the carpet is laid over a finished floor, and its removal would not materially damage the floor, courts have generally held it to be contents. Coverage would therefore be found under the HO-6.

You are correct in your interpretation of the deductible application. If the association has insurance covering the same property as the HO-6, the unit owner's insurance “will be excess over the amount recoverable under any other insurance.” So, if nothing is recoverable because the association's deductible is greater than the amount of the loss, the unit owner's coverage becomes primary. The purpose is to prevent double payment for a loss, not to prevent payment for a claim.

Related: Here's why some water damage claims aren't covered

Additional living expenses when vacation property is damaged

Question: We're dealing with a loss of use claim under a HO 6 10/00 and are having a dispute with the insured about some of the damages as submitted. This is a vacation condo not rented to others and is about 2.5 hours from their primary residence. Water damage caused the unit to be untenable for approximately 4 months. During this time the insured stayed at vacation property in other coastal areas in other states and is claiming that cost as part of the LOU. There were similar accommodations available in the same area as the condo. Would these trips to destinations so far away qualify for coverage? Would it be reasonable to allow for what it would have cost to stay in a property next door to their condo instead? 

— Virginia Subscriber

Answer: Additional living expense is designed to keep the insured at his normal standard of living. Additional costs in order to obtain that standard are what are paid. If the insured condo is in Virginia, then coverage for the cost of a similar condo in Virginia is what is covered.  If the insured goes to Florida and the cost of renting condos there is more expensive than those in Virginia the insured is only compensated for what the cost to rent a similar condo in Virginia would have been. Likewise the expense to get to Florida is not covered over what it would have cost for the insured to visit the condo in Virginia.

Property held for rental covered by homeowners policy?

Question: Our client has an HO 00 03 05 01 on his primary residence in Florida. He also owns a condo in a vacation area of New York that he rents during the months of June, July, and August. In March of this year, the condo was destroyed by a fire. Our client's HO 00 06 05 01 policy paid the policy limits for the lost contents. However, he was underinsured.

We have now turned to his primary homeowners for coverage under the 10 percent extension on contents at a secondary location. However, the insurer has denied coverage, saying that the condominium and its contents are held for rental and, therefore, not covered by the HO 00 03.

We disagree. The condo was not occupied. The vacation community was shut-down as it was out-of-season. We would appreciate your comments.

— New York Subscriber

Answer: The 10% extension you noted is for personal property usually located at an insured's residence, other than the residence premises. So, before the insured can seek coverage for the damage at the condo, the property that was burned has to fit this description. If the property that was damaged was not personal property usually located at an insured's residence, the 10% extension of coverage in the policy is not available.

As for the insurer's declination of coverage, that is based on the property not covered part of the homeowners policy, specifically paragraph h., property rented or held for rental to others off the residence premises. Since the fire occurred in March and the condo was locked up and no one had access to it, the condo certainly was not rented at the time of loss. However, whether the condo was held for rental is another issue.

A case can be made that a condo that is rented only during the summer months is not actually held for rental during the other nine months of the year. Just because something may be rented at one time, does not mean that it is being held for rental all the time. On the other hand, the insured could have rented the condo at any time he chose, and that could be interpreted as implicitly holding the place for rental. Of course, since the policy language is not clear on this point and an interpretation is subject to reasonable disagreement, the insured is entitled to the benefit of the doubt.

We believe that the homeowners policy would apply to this claim. In accordance with the terms of the policy, the insured is entitled to coverage up to 10% of the limit of liability for coverage C, or $1,000, whichever is greater.

See also:

15 preventable homeowners' insurance claims and how to avoid them

Super Bowl short-term home rentals & insurance coverage

Update on homeowners' insurance market