Disaster Aftermath: The Difference Between Co-op and Condo Insurance Claims

The Co-op and Condo Difference

"In a co-op, the building's insurance is responsible for the original structure," Gross notes. "The plaster walls the original wood floors, the original doors, and molding. Any changes or improvements made by the unit-owners falls under the unit-owners' homeowners' insurance."

For example, let's say there's a leak from 14A that damages 13A. "The building's insurance is responsible for the wood floors, but the unit-owner's insurance is responsible for the finish on the floors," Gross says. Damage to the plaster walls? Building's insurance. Damage to the paint on the walls? Shareholder's insurance. "It's crazy, I know," Gross says, pointing out that the insurance company for flood victim 13A will go after the insurance company for the offender in 14A, in a process called "subrogation."

For condos, Gross says the situation is much more cut-and-dried: unit-owners are responsible for everything within their units, whereas the building's insurance will pay for damages to public areas, behind walls, building-wide piping, basements, rooftops, and elevator shafts.

If He Doesn't, You Suffer

"Sometimes, you have situations where people do nothing," Gross says. "That can have an impact on the building's health in the short and long term." For example, one flood victim dries out his unit, but the guy above him does not and that slow, seeping moisture comes back to menace the neighbors who have already paid to have work done.

"Over the long term, if there is water damage and people do nothing about it, you can have mold proliferate and [affect] the air quality in the whole building," Gross says.

To avoid that situation, many savvy boards and managing agents take it upon themselves to hire a remediation firm, work on all the units at once, and then go after shareholders and owners to pay up.

"The managing agents will generally notify each unit-owner of the damage and get their permission to enter the unit to get emergency services performed to mitigate damage to the building," says Gross.

"What generally happens is that the condo association will request that the invoice gets split up per unit affected, with public areas separated out as well, then the condo association will pay the bill and then charge back each unit-owner for their share, usually by adding it to their common charges," Gross says. "The unit-owner then needs to submit the charges back to their individual carrier for reimbursement."

Adapted from "After the Flood" by Jennifer V. Hughes (Habitat, February 2015).

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