Can a Co-op Board Require Homeowners’ Insurance?

Can a co-op board require shareholders to carry homeowners’ insurance? 

"Co-op (insurance ) requirements generally are not especially onerous and serve to stop the co-op from having to act as the intermediary when water-damage claims impact multiple apartments," Jeffrey Schneider of Gotham Brokerage tells Brick Underground. "However, requests for personal liability coverage in excess of $1,000,000 can mean substantially higher insurance costs." 

Co-ops have master policies that cover events such as fires, vandalism, and the breakdown of machinery or damage to furnishings in public areas of the building. But this protection does not extend to individual apartments. Shareholders need to purchase their own policies to protect personal property and the unit’s floors, walls, appliances, and fixtures. A personal liability policy will protect the shareholder in the event someone is injured in the apartment or an overflowing bathtub causes damage to neighboring apartments. 

While some attorneys urge boards to require shareholders to carry homeowners’ policies, the requirement can be enforced only if it’s written in the right place. If it’s in the co-op's proprietary lease, "the board would be able to enforce the shareholder obligation by threatening to terminate the proprietary lease, impose a fine or fines, or obtain the insurance at the shareholder’s sole cost and expense," says Jeffrey Reich, a partner at the law firm Schwartz Sladkus Reich Greenberg Atlas. "Conversely, shareholder insurance requirements that stem solely from a cooperative’s house rules may not be enforceable."