Critical condo insurance lessons from the Surfside tragedy
The tragedy provides a lesson on the importance of transparency and honesty when completing insurance applications.
As of July 16, a search of Miami-Dade Court records revealed more than 20 lawsuits that have been filed on behalf of the deceased, grieving families, and the dozens of survivors rendered homeless following the Surfside Condo collapse. As the investigation unfolds on the recent tragedy, so too has the pursuit for accountability and compensation for victims.
Initially, litigants focused on the potential coverage limits of the condo association’s property insurance and liability insurance policies as sources of compensation. Indeed, at one of the first hearings, Judge Michael A. Hanzman, the judge presiding over the Surfside Condo matters, observed that the combined funds of these policies, totaling $48 million, are unlikely to adequately “compensate everyone fully for the extent of their losses.”
While the property and the liability insurers may choose to surrender policy limits due to the tragic nature of the loss, assuming coverage is not a foregone conclusion.
Indemnification under property and casualty policies is generally subject to exclusions and limitations, such as the insured’s knowledge of pre-existing damage and failure to timely remediate. Moreover, the burden is on the plaintiff(s) to establish that the damage occurred during the insurer’s policy period. The date of the collapse may appear cut and dry; however, evidence has already come to light revealing that the condo association was informed of structural deficiencies and the need for repairs at least several years earlier.
It is likely that a key dispositive issue as to coverage will be whether Champlain Towers South disclosed the structural damage to its insurer in the insurance application or otherwise. If the insurer was not informed of the true condition of the property when it agreed to accept the risk, and the insurer would not have issued the policy under the same terms had it been aware, then the insurance policy is void as a matter of law.
The tragedy provides critical instruction to condo association policyholders statewide about the importance of transparency and honesty in completing the insurance applications. While policyholders undoubtedly desire lower premium expenses and are reasonably concerned that damage disclosures may increase premiums, a material misrepresentation in the insurance application can easily void the entire policy. Then the steep costs incurred for the insurance will have been for naught.
As a related matter, policyholders should know that under Florida law, there is a duty to read and understand documents before signing. When an insured signs an insurance application, the insured is affirming to the carrier that all of the information provided is correct. This is true even if the insurance agent filled out the application and simply requests a signature. Likewise, policyholders who do not speak English have a duty to obtain translation assistance. Florida law is unforgiving in this respect, and even more so in the context of insurance, where the documents often provide an emboldened statement adjacent to the signature line that the insured has reviewed the entire document and swears, subject to the penalties of perjury (a third-degree felony in Florida), that the information submitted is accurate.
While Florida’s Condo Act prescribes how much property insurance coverage condo associations must obtain, it does not provide a similar standardization for the amount of liability insurance. The Surfside collapse has sparked a statewide evaluation of the current self-governing model of condo associations, with unit owners and legislators reconsidering the wisdom of entrusting an elected board of non-expert volunteers with life-safety related decisions.
As countless condo residents contemplate whether their own associations’ internal politics could have played out in a similar manner, time will tell what measures state lawmakers and local building departments take to prevent the recurrence of such a catastrophic loss. In the meantime, the public nature of the investigation may provide important lessons to policyholders to safeguard the availability of coverage when a loss occurs.
Join an upcoming free webinar, “Condomimun Insurance: Your Questions Answered,” on Wednesday, July 28 at 2 pm ET, which will discuss common issues surrounding condo insurance coverage.
Tiffany J. Rothenberg is a partner at Kelley Kronenberg, focusing her practice on commercial first-party property litigation. She may be reached at trothenberg@kklaw.com.
Opinions expressed here are the author’s own.
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