The last phone call an Association or its manager wants to receive is a call where the owner says “I have a water leak.” However, these calls happen and the Association must be prepared to efficiently and effectively deal with the situation. While leaks occur in all types of communities, single family, townhome, and condominium, the Association typically only receives call as related to townhome and condominium communities.
Further, as townhomes are individually owned and maintained (with the exception of certain components outlined in the declaration), the Association is not typically involved in the maintenance and repair of townhomes. Thus, an interior pipe leak in a townhome will not usually impact the association. Consequently, this article relates primarily to condominium communities.
Generally, in a condominium community, the best course of action when a leak is actively flowing is to have the association immediately step in and stop the leak. The association should also take the initiative to make arrangements for the impacted area to be dried out. The association, by taking these steps, may be assured that the leak is properly addressed, that there is no risk of additional or further damage to association common elements or units, including mold, and that the dry-out will be performed in a proper manner by a reputable contractor.
After the water leak has ceased and the impacted area has been dried, the association may then survey the damage and make a determination as to: (1) whether the same is covered by insurance (association or individual insurance); and (2) if the damage is not covered by insurance, who is responsible for the additional repairs needed and the costs associated with the emergency response and initial dry out.
With respect to insurance, not every leak is considered a covered cause of loss. Moreover, even if a leak is considered a covered cause of loss it may not be covered due to other exclusions in the insurance policy or because it falls below the insurance deductible. Whether a leak is covered will be determined by the insurer. If the leak is considered a covered cause of loss and, is in fact covered, the insurer will remit payment to the association for all portions of the remediation and damage which are covered.
The association then has the ability to hire contractors, make the repairs, and remediate the damage. The cost and repair obligations for remediation, work, or damage which are not covered by insurance shall be allocated based on the maintenance obligations as outlined in the declaration. If the entire claim is not considered a covered cause of loss, the maintenance, repair, and remediation costs will be allocated solely based on the maintenance obligations as outlined in the declaration.
Assuming the claim is covered, the association may be able to allocate the insurance deductible to the party receiving the benefit of the insurance claim. However, this ability is conditioned, in part, on the language in the association’s declaration. If the association has language in its declaration which specifically allocates the deductible, the association must rely on the same. If the association is a pre-CCIOA community (created before July 1, 1992), and no such language exists, the association may allocate the deductible as it so desires (as long as it is done in a consistent manner with respect to all owners).
While an insurance deductible policy is not required per the law for pre-CCIOA communities, it is recommended so as to avoid complaints of discrimination and/or different owners in the community being treated differently. If the association is a post-CCIOA community (created on July 1, 1992 or after), and no insurance deductible language exists in the declaration, the Association will be responsible for the entire deductible unless it has a policy in place detailing the same. This is a legal requirement to allocate a deductible. Thus, a policy is highly recommended in this case.
Please note, should the loss occur due to negligence on the part of the owner, the association may have the ability to assess common expense costs related to the repair of association maintained components to the individually negligent owner. While the association has the ability to make a determination of negligence, should the owner refuse to make payment and if the parties end up in litigation, the association must be prepared to prove its claim of negligence to the court.
If the association is trying to determine whether someone was negligent, it must be able to prove the following elements in court: (1) duty—did the person owe a legal duty to the association; (2) breach—did that person breach his or her legal duty by acting or failing to act in a certain way; (3) cause—was it that person’s action or inaction that actually caused the association injury; and (4) damages—did the association suffer damages as a result of the person’s action or inaction.
If you have any questions on water leaks, insurance, or negligence, or wish to adopt an insurance deductible policy, please do not hesitate to contact an Altitude Community Law attorney at 303-432-9999 for more information.