Condominium Insurance: Waiver of Subrogation

I. Introduction

water-condoImagine arriving home to your condominium after a long day of work, opening the door to your unit, and being confronted with several inches of standing water. You enter your unit to the sound of dripping and look up to see that the ceiling in your living room is completely saturated with water. Upon further investigation, you discover that a leaking water supply valve in your upstairs neighbor’s unit has caused the serious water damage.

Who is responsible for the costs to repair the damage?

II. Condominium Insurance

Condominium ownership is unique in that it involves competing interests in real estate. Each condominium unit owner enjoys complete ownership of his or her unit and a shared interest, along with all of the other unit owners, in the condominium building and common areas. Typically, a portion of each unit owner’s monthly condo fee is used to pay for the condominium association’s insurance policy, which covers the condominium building, commonly owned property and liability insurance for the association (“Master Policy”).

However, the Master Policy does not usually cover damage to the interior of a unit. The Master Policy typically doesn’t cover damage to the unit owner’s personal possessions and liability for damage to other units .

Many unit owners, therefore, elect to purchase a separate insurance policy – often referred to as an H06 policy – which covers losses to any personal property and any structure and damages to any fixtures or upgrades added by the unit owner since the move-in date (“H06 Policy”).

In fact, more and more condominium associations have amended their By-laws to require each unit owner to purchase an H06 Policy in order to ensure that the unit owner will be reimbursed for damage to the unit, regardless of fault. Requiring unit owners to purchase an individual H06 Policy for the unit is especially beneficial in the scenario where the cost to repair damage to an individual unit is less than the deductible on the Master Policy. [Read more…]