Topics covered:

Unique insurance needs

Introduction of form HO 00 06

Similar to broad form HO 00 02

Named perils

Coverage A—dwelling

Coverage C—personal property

Coverage D—loss of use

Additional coverages

What areas comprise the "residence premises"?

Endorsements for open perils coverage

Other endorsements

Other insurance

Unique Insurance Needs

 The condominium method of realty ownership involves a number of unique insurance problems. The condominium is a joint enterprise type of ownership in which there is common ownership of certain portions of the premises, such as an outdoor pool or clubhouse. The individual also has exclusive ownership of the right to occupy a specific unit, and frequently also individually owns certain items of physical property within the unit.

 The ownership deed for a condominium—usually called the condominium declaration or sometimes the master deed—sets forth the exact provisions of ownership and rights of occupancy of all the unit owners. It usually provides for the establishment of a condominium association, made up of all the unit owners, with membership in the association a mandatory condition of condominium ownership. The association, working through elected officers and a board of directors, provides for the management of the condominium, including purchase of insurance on behalf of the unit owners in common.

 The condominium declaration usually contains a section relating to insurance requirements (or this is sometimes found in the condominium association bylaws). This section describes what insurance will be carried by the association on behalf of the unit owners in common. It usually requires that the association purchase insurance on all the common property. In many cases, the association is also assigned the responsibility for insuring all the realty, including portions solely owned by the individual unit owners. Any property not insured by the association is the responsibility of the individual unit owners to insure.

 The homeowners program provides the vehicle for covering residential condominium property. Commercial property forms are used to insure the common property. (See Condominium Association Coverage Form.)

 Introduction of Form

HO 00 06 05 11

 The insurance needs of residential condominium unit owners, while generally similar in most respects to the needs of other apartment dwellers, are sufficiently different that it was found desirable to provide a separate form of property and liability insurance designed especially for condominium unit owners. A form targeting unit owners was first introduced by ISO in 1974. This was the HO-6 form (given its present designation, HO 00 06, under the revised numbering system of the 1991 homeowners program). Before 1974, the contents broad form HO-4 (now HO 00 05 11 00) was the only ISO form available to cover unit owners. Sometimes a dwelling fire policy was used, with a small amount designated for coverage A. A specific form for unit owners was required, however, because the HO-4 form had several deficiencies when used for this purpose, particularly in the area of coverage for the unit owner's interest in the commonly-owned realty housing the individual unit. The same was true with the dwelling fire form.

 The 1984 homeowners program changed the general rules and the name of the HO-6 form (from "condominium unit-owners form" to "unit-owners form") to allow its usage for cooperative apartments as well as condominiums. It might be noted that reference to a cooperative apartment tenant as a unit owner is not technically correct—the tenant does not own the unit as does a condominium owner. Instead, a cooperative tenant has an ownership interest in the cooperative association or corporation that owns all of the units, and through that ownership has a right to a perpetual lease to occupy a specific unit. However, this difference has not caused any problem in interpreting the intent of the coverage with respect to a resident of a cooperative apartment covered by form HO 00 06.

 Similar to Broad Form

HO 00 02 05 11

 As the unit owners form has developed it has come to closely resemble the coverage provided under homeowners broad form HO 00 02 05 11, although some of its provisions are similar to those found in form HO 00 04 05 11, since these forms both usually involve buildings with multiple occupancies. For example, neither form provides the additional coverage of "landlord's furnishings" found in the other homeowners forms. With the addition of two separate endorsements to form HO 00 06, the named perils coverage for building items and for contents can be changed to coverage on an open perils basis so that it parallels that of special form HO 00 05 05 11 with open perils building and contents coverage. These endorsements are discussed later. This discussion compares the unit owners form to form HO 00 02 in order to highlight the differences between coverage on a home and coverage for a unit. The first difference is that the definition of "residence premises" is modified in the HO 00 06. The "residence premises" means the unit where [the named insured] reside[s] shown as the residence premises in the Declarations. Even though the HO 00 06 policyholder might reside in a free-standing unit (sometimes called a landominium), the use of "unit" reflects the lack of ownership of either the building resided in, or the land upon which the building is situated.

 Named Perils

 Some of the perils insured against in form HO 00 06 differ from those found in the homeowners broad form (HO 00 02). See Homeowners Perils, for a discussion of the scope of the named perils.

 In the peril of vandalism, coverage is precluded if the building containing the residence premises has been vacant for more than 60 consecutive days. Note, the entire building, not just the insured's unit, must be vacant. In the HO 00 02, the dwelling must be vacant for sixty consecutive days to eliminate coverage.

 The peril of theft does not apply to certain property if it is away from the residence premises or the location of the residence premises. As in the HO 00 02, the personal property not covered consists of watercraft, trailers and campers, or property at another residence of an insured unless that insured is temporarily living there. Likewise, an at-school student's personal property is covered for theft if the student has been at the at-school residence at any time in the 60 days preceding the loss.

 Some minor differences exist between the language of form HO 00 02 and HO 00 06 regarding the peril of accidental discharge or overflow. Form HO 00 06 covers the cost to "tear out and replace any part of a building or other structure owned solely by [the named insured] which is covered under Coverage A" and at the location of the "residence premises," necessitated by repairs to the system or appliance from which the water or steam escaped. Form HO 00 02 pays for the cost of tearing out and replacing any part of the building on the residence premises. This variance merely reflects the different nature of building ownership in the unit owner's situation.

 If an "other structure" is the subject of the tear out and replacement, then the escaping water or steam must cause actual damage to a building owned solely by the named insured at the insured premises location.

 More significant is the wording of the exclusion of coverage for accidental discharge or overflow that occurs "away from the building containing" the residence premises. Form HO 00 02 excludes coverage for such losses when the accidental discharge or overflow occurs "off the residence premises." Rather than providing the narrowest coverage possible (i.e., excluding loss when it emanates from outside the particular unit), the unit owners form includes a reasonable geographic coverage boundary, so that, for example, if the "accidental discharge" from the next unit invaded the insured's unit, there would be coverage.

 As with the other named perils coverages, clarification has been added in the current homeowners forms that the section I water damage exclusion 3. paragraphs a. and c. that apply to surface water and water below the surface of the ground do not apply to loss covered by the peril of accidental discharge.  

 In the 1991 forms, there are also differences in the peril of freezing. Form HO 00 06 states that, unless the insured used reasonable care to maintain heat or shut off the water and drain the system and appliances, there is no coverage for freezing loss on the residence premises while the unit is "unoccupied." Form HO 00 02 eliminates coverage for freezing if the residence premises is "vacant, unoccupied or being constructed" and the insured has failed to take the necessary precautions. Courts have distinguished between "vacancy" and "unoccupancy" by emphasizing that "vacant" means empty of both human beings and inanimate objects, whereas "unoccupancy" denotes that the insured no longer habitually uses the dwelling as a home. It would seem that in the vast majority of cases, if the unit or dwelling is vacant or under construction, it is also unoccupied. However, it is quite common to have a dwelling or unit that is not vacant (i.e., that is furnished or contains personal effects) but from which the insured is temporarily or permanently absent. These cases turn on the meaning of "unoccupied." (See Homeowners Perils. Briefly, if the insured has not yet moved in, or has moved out but not yet sold the unit, it is not clear whether the unit is considered "unoccupied." The unit owner may have coverage that the homeowner does not under those circumstances. Of course, these questions will not arise, and coverage will unquestionably apply, if the insured takes the prescribed precautions while away from the premises for any length of time.

 But in the current forms (having begun with the 2000 edition), references to "vacant or unoccupied" have been removed. Now, insureds are required at all times to maintain heat or shut off the water supply and drain appliances, unless there is an automatic fire sprinkler system. In that case, insureds must maintain heat and continue the water supply.

 Coverage A—Dwelling

 Form HO 00 06 contains three property coverage agreements rather than four, because it includes what would be coverage B (other structures) within coverage A (dwelling). Four items are protected under coverage A:

 We cover:

1.The alterations, appliances, fixtures and improvements which are part of the building contained within the "residence premises";

2.Items of real property which pertain exclusively to the "residence premises";

3.Property which is your insurance responsibility under a corporation or association of property owners agreement; or

4.Structures owned solely by you, other than the "residence premises," at the location of the "residence premises."

 Alterations and appliances are covered. These are items such as built-in cabinets as well as plumbing and lighting fixtures. Items of real property pertaining exclusively to the unit might include, for example, an air conditioner located outside of the unit.

 The HO 00 06 differs from the HO 00 02 in its treatment of structures. The structure does not need to be set apart from the unit by a clear space, as applies to other structures coverage in the HO 00 02. This is because form HO 00 02 treats attached structures as part of the covered dwelling, requiring a distinction between attached and detached structures. Form HO 00 06 covers structures under the full coverage A limit, whereas the broad form HO 00 02 provides coverage at 10 percent of the coverage A limit. An example of a structure covered under the HO 00 06 would be a garage.

 Form HO 00 02 includes protection under coverage A for building materials and supplies located on or next to the residence premises and used for work on the dwelling or other structures. There is no similar provision in the unit owners coverage A, with the result that such items fall under personal property coverage (that coverage applies to the insured's personal property "anywhere in the world"). The theft peril, remember, excludes coverage for theft of construction materials and supplies until the "residence premises" is finished and occupied. Note, the "residence premises" —the unit where the named insured resides—must be finished and occupied, not the entire complex in which the unit is located.

 An exclusion appearing within the HO 00 06 coverage A provision states that there is no coverage for structures from which any business is conducted, or for structures rented or held for rental purposes or rented to any person not a tenant of the dwelling except for use as a private garage. Its placement gives it the appearance of applying to all four building items under coverage A, although in the 1982 form it applied only to structures owned solely by the insured, other than the residence premises, at the location of the residence premises. Similarly, in other homeowners forms, the exclusion affects coverage for other structures only. This would suggest that the clause should be read as applying to structures other than the residence premises unit. However, the provision on its face makes possible the interpretation that it also applies to the dwelling if the insured in any way, at any time, engages in any business activity in the residence.

 A change made to the HO 00 06 (and to the other homeowners forms as well) is that structures used to store "business" (as defined) property are not excluded from coverage as it was previously ("structures used in whole or in part for 'business'"). The stored business property must be owned solely by an insured, or by a tenant of the dwelling, and cannot consist of gaseous or liquid fuel (other than fuel in a fuel tank of a vehicle or craft parked or stored in the structure).  

 The manual rules state that a $5,000 limit is automatically provided for named perils protection on coverage A property; this may be increased, as explained in general rule 507. Whether the basic coverage limit is sufficient or not depends largely on how the association insurance is written. If the association insurance covers the entire unit—including all interior fixtures, pipes, wiring, partitions, and other building items within the unit, and if the association carries enough coverage to provide full replacement of the entire building, the unit owner will not require additional individual coverage.

 However, if the association coverage insures only the condominium building as originally constructed (or for replacement for original equipment only) but not improvements or additions made subsequently by the unit owner or previous owner, additional coverage by the unit owner may be required.

 Another situation requiring more than the basic amount of coverage is where the association insurance is "bare walls" coverage. This means that the unit owner is responsible for insuring all items in the interior—all fixtures; built-in appliances; interior partitions; plumbing; wiring; paint, paper, or paneling on the walls and ceilings; the tile or carpet on the floor; and, in multi-story units, even the floors, stairs, and ceilings between the lowest floor and highest ceiling.

 Note that the commercial condominium association coverage form (CP 00 17) declares covered property to be ″Any of the following types of property contained within a unit, regardless of ownership, if your Condominium Association Agreement requires you to insure it: (a) Fixtures, improvements and alterations that are a part of the building or structure; and (b) Appliances, such as those used for refrigerating, ventilating, cooking, dishwashing, laundering, security or housekeeping." Therefore, when arranging coverage for the unit owner, careful attention must be paid to the coverage provided by the association.

 In addition to the other reasons for increasing the basic limit, an increase may be appropriate if the association property insurance has a large deductible so that the individual insured is covered for property loss below the deductible. Although the HO 00 06 form has an "other insurance" clause stating that other insurance in the name of the association is primary and the unit owner's coverage is excess, a good argument can be made that dual insurance coverage does not exist below the amount of the association's deductible. (For a further discussion of the other insurance provision, see Other Insurance later in this article.)

 Coverage C—Personal Property

 Most of the provisions included in coverage C of form HO 00 6 are identical to those in form HO 00 02, with one exception worth noting. Both forms cover personal property owned by "others while the property is on the part of the residence premises occupied by an insured," but the extent of coverage may differ because of a distinction between the definitions of "residence premises." The broad form defines the term to include other structures and grounds, whereas form HO 00 06 limits the meaning to the "unit" (an undefined term) in which the insured resides. The fact that the term "unit" is undefined creates some problems in interpreting various parts of the HO 00 06 form, as discussed later. In the case of coverage for personal property, if "unit" is interpreted narrowly, a unit owner might not have the option of extending coverage to a guest's property destroyed in the unit owner's garage or on the lawn appurtenant to his dwelling.

 Coverage D—Loss of Use

 The coverage D insuring agreement of form HO 00 06 has been adapted to take into account the multiple occupancy of many condominium buildings. Rather than providing coverage if the insured's part of the premises is not fit to live in, the unit owners form provides coverage if a loss by a covered peril "to covered property or the building containing the property" renders the unit unfit for habitation. So unit owners coverage D can apply even when there has been no direct physical loss to the insured's particular unit.

 The amount of coverage D has been increased from 40 percent of the coverage C amount to 50 percent of the coverage C amount effective with the 2000 (and subsequent) program rules.

 Additional Coverages

 There are some differences in the HO 00 06 from the other forms. For example, a unit owner owns property in common with other owners, so the coverage for debris removal refers to ″trees you solely own." Likewise, the coverage for trees, shrubs, etc., refers to ″trees, shrubs, plants or lawns you solely own at the location″ of the residence premises. The amount of coverage for these items is 10 percent of the coverage A amount, rather than the 5 percent found in the other homeowners forms.

 There are two other exceptions in the additional coverages of form HO 00 06. The first is the omission of coverage for landlord's furnishings in form HO 00 06. This additional coverage was introduced to all forms except HO 00 04, HO 00 06, and HO 00 08 10 00 in the 1991 program and provides up to $5,000 coverage for loss to the landlord's appliances, carpeting, and furnishings located in an apartment on the residence premises. Formerly, no coverage at all applied to the landlord's property in an apartment. However, unit owners and homeowners have had $2,500 coverage since the 1984 edition under coverage for business property (i.e., furnishings supplied with a rented room) on the residence premises. The reason becomes apparent when considering that forms HO 00 02, HO 00 03 10 00 HO 00 05, and HO 00 08 may be used for "the two, three, or four family dwelling" where the named insured resides in at least one of the family units. The owner occupant may well own furnishings in the units held for rental. But the condominium unit or cooperative apartment owner form of home ownership does not encompass building ownership. Hence, there is no additional coverage for landlord's furnishings.

 Sometimes a problem of interpretation has arisen where coverage has improperly been denied when a unit has been rented to others based on the ″property not covered″ g. ″property in an apartment regularly rented or held for rental to others by an 'insured'." The HO 00 06 makes it clear throughout that it covers the unit, and not an apartment.

The second difference is that coverage for breakage of glass or safety glazing material (additional coverage 9) applies to glass that is part of a building, storm door or storm window and covered under coverage A. A loss is not covered if the building containing the residence premises—not the residence premises itself—is vacant more than 60 consecutive days.

 Worth repeating is the change made to the additional coverage of loss assessment. See ISO Homeowners Section I for more information. The form states that only one deductible "per unit" is to be applied to "the total amount of any one loss to the property [of the type that would be covered by the policy if owned by the named insured] regardless of the number of assessments. Prior language did not address the application of the deductible, which left open the possibility that the deductible could be applied on a per assessment basis, rather than on a per loss basis.

 What Areas Comprise the "Residence Premises"?

 The 1982 edition of the unit owners form introduced a definition of "residence premises" that means the "unit" where the insured (and spouse, if a resident) reside. "Unit" was not defined when this language was created and remains undefined, so it is not clear whether the residence premises are limited to the insured's portion of the building or include all areas of which the unit owner is the exclusive occupant (such as a yard, patio, or assigned parking spot on commonly held property). This question is pertinent where the coverage applies differently away from the residence premises, e.g., business property, and theft of watercraft, trailers, and campers—excluded or more limited away from the residence premises. However, in the current edition's peril of theft is that certain property, like watercraft, is excluded from coverage if the theft occurs away from the residence premises or the location of the residence premises. Therefore, if the insured unit owner's watercraft is stolen from the condominium building's parking lot, there is coverage.

 A reasonable interpretation of unit would seem to include any patio, yard, or parking areas contiguous to the unit owner's portion of the building and occupied exclusively by the unit owner, but not any areas that do not immediately adjoin the unit owner's part of the premises (except where specifically addressed as in the theft peril). If the term unit is used in the association declaration or by-laws, whatever definition is given there would seem applicable.

 Endorsements for Open Perils Coverage

 The unit owner may purchase open perils coverage on either coverage A property (dwelling), coverage C property (contents), or both. Open perils coverage provides the broadest extent of coverage in terms of the perils insured against. The perils are not named; only restrictions on coverage are specified. There is coverage for any loss to insured property not reached by an exclusion, limitation, or exception to a category of covered property. Endorsement HO 17 32 05 11 is used for broadening the dwelling coverage (coverage A). Coverage provided under HO 17 32 05 11 is identical to dwellings coverage provided under form HO 00 03, although "residence premises" (the unit where [the named insured] resides) is used instead of "dwelling" throughout the endorsement. An important broadening of coverage provided by the 2000 endorsement (and continued in the 2011 endorsement) is that loss caused by accidental discharge or overflow of water or steam from a storm drain, or water, steam or sewer pipes off the residence premises is covered.

 The 1991 homeowners program introduced endorsement HO 17 31 for open perils contents coverage. Note that when covered perils are broadened for either building or contents, the change also broadens the perils insured against for purposes of coverage D—loss of use.

 Endorsement HO 17 31 05 11 closely resembles contents coverage under HO 00 15, the open perils endorsement previously used with form HO 00 03 in the 1991 program. (Remember, the HO 00 15 was withdrawn with the advent of the HO 00 05 in 2000.) The major difference between these two open perils endorsements was that the introductory paragraph of the unit owners' states that coverage is provided "with the understanding" that the insured occupies the unit in which the covered contents are located. An exclusion in endorsement HO 17 31 emphasizes this point by excluding coverage for loss to property "in a unit regularly rented or held for rental to others by you" (Section I—Perils Insured Against exclusion 2.). Form HO 00 03 contains a similar exclusion, but with an exception to the exclusion, i.e., the additional coverage of $5,000 for landlord's furnishings. Contents in units rented to others may be covered by adding endorsement HO 17 33 05 11, as explained below. For information on general use homeowners endorsements, see Standard Homeowners Endorsements.

 Beginning with the 2000 edition of the HO 17 31, and carried into the 2011 edition, there are three important changes from the 1991 edition. The first is that coverage for earth movement damage to personal property has been eliminated. If the insured wishes to insure against this peril, additional coverage must be purchased. See Standard Homeowners Endorsements. The second difference is that, unless otherwise excluded, there is coverage for accidental discharge or overflow emanating from a storm drain, or water, steam, or sewer pipe off the residence premises. Finally, there is coverage for mold, fungus or wet rot hidden within the walls or ceiling of a structure if the loss results from the accidental discharge of a storm drain or water, steam, or sewer pipe, or from a plumbing, heating, air conditioning, or sprinkler system on the residence premises. (This coverage likewise found in the HO 17 32).

 Other Endorsements

 Coverage for unit-owners rental to others may be added by attaching the HO 17 33. This endorsement may be added to form HO 00 06 if the unit owner either regularly rents the condominium or apartment, or holds it for rental (see rule 508 in the ISO homeowners manual). The endorsement provides personal property coverage, theft coverage for most items in the unit or apartment, and coverage for liability and medical payments to others. Items that are not covered for theft are some of the items, such as money, securities, and jewelry, to which the special limits would otherwise apply. (Endorsement HO 05 41 10 00 extended theft coverage may be attached to provide theft coverage for a unit occasionally rented to others, unless the policy is also endorsed with the HO 17 31.) Although the HO 17 33 states that it provides coverage when the unit is "regularly rented or held for rental," it cannot be used when the unit is not also the insured's residence. Coverage applies only to the "residence premises," defined as the unit where the insured resides. Of course, the term ″regularly rented″ is not defined in the endorsement, and so it is entirely possible, should the matter go to court, for the insured to achieve a positive outcome. The only case found in a brief survey of Westlaw® was State Farm Fire and Casualty Co. v. DeLondono, 511 So. 2d. 604 (Fla. App. 1987). Here, the court said that the term was susceptible to different interpretations.

 Many unit owners find additional loss assessment coverage appropriate. Form HO 00 06 provides an additional coverage of $1,000 property loss assessment for perils insured against in coverage A, except for loss by earthquake or land shock waves or tremors before, during, or after volcanic eruption. This additional coverage appears in all homeowners forms. Endorsement HO 04 35 05 11 may be used to increase the amount of coverage. Endorsement HO 04 36 05 11 may be used to purchase loss assessment for earthquake damage.

 Since ordinance or law coverage is now additional coverage 10, endorsement HO 04 77 10 00 may be used to purchase an additional amount of insurance.  The basic 10 percent of coverage A may be increased to 50 percent of the coverage A limit, with further increases in 25 percent increments available.

Other Insurance

 The 2000 edition of the HO 00 06 contained condition F. Other Insurance and Service Agreement, which had three provisions. The first, (F.1.a.) dealt with situations where there is more than one personal insurance policy covering the same property (″other insurance, except insurance in the name of a corporation or association of property owners″), in which case each insurer prorates the loss based on the proportional relationship that each policy limit has to the total amount of insurance on the loss. This provision appears in all of the homeowners forms—see ISO Homeowners Section I Conditions.

 A provision that was new in the 2000 edition of all homeowners forms refers to a service agreement or other type of warranty plan (″except a service agreement in the name of a corporation or association of property owners″). If there is such a plan in place, the insurance provided by the HO 00 06 is excess over any amounts payable.

 Thus, the first two provisions (F.1.a. and F.1.b.) address other insurance or a service plan other than that in the name of a corporation or association of property owners.

 An additional provision appeared in form HO 00 06 10 00 that made an exception to proration when the other insurance on the property is in the name of a corporation or association of property owners. In that case, the unit owner's insurance is excess over any amount recoverable under such insurance. It is unfortunately conceivable that, because of a high deductible, the association policy may not recover anything. ISO has developed endorsement HO 17 34, which replaces this condition. The wording of this endorsement states that if, at the time of loss, there is other insurance in the name of the association, the insurer will pay the amount of the loss that is excess of the amount due from that other insurance, whether or not the association can collect on it. The words "whether or not the association can collect on it" seem to imply the endorsement would only be triggered if the association insurer went bankrupt, or some other reason precluded the association's ability to collect. But the intent appears to be (since an additional premium is required on the part of the insured) to provide first dollar coverage. 

 The difference may lie in the HO 00 06 use of "this insurance will be excess over the amount recoverable" as opposed to the endorsement's "we will pay only for the amount of the loss in excess of the amount due from the other insurance." Say, for example, the association policy has a $10,000 per unit deductible, and the unit owner sustains a $5,000 loss to additions and alterations covered under the association policy. Since the amount the association can collect is zero, the unit owner collects the amount in excess, or $5,000 (less the unit owner's deductible, if any). But this example appears to fit the unendorsed HO 00 06 as well—excess over zero recoverable is still $5,000. The final determination of the meaning may lie with the courts.

 However, the current edition (HO 00 06 05 11) clarifies coverage intent. Condition G.2. states that ″if, at the time of a loss, there is other insurance or a service agreement in the name of a corporation or association of property owners covering the same property covered by this policy, this insurance is: a. excess over the amount due under such other insurance or service agreement, whether the corporation or association of property owners has collected that amount or not; and b. primary with respect to any amount of the loss covered by this policy and not due under such other insurance or service agreement because of the application of a deductible." With this new wording, the unit owner can feel confident that the coverage he or she has purchased will be in place regardless of the association's high deductible.