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New Laws Affect Residential Condominium's Insurance Requirements
by Daniel Kennedy   

Recently, five bills passed into law which will affect the way members of common interest communities, such as residential condominium associations, will conduct business, enforce bylaws and insure their property.

Condominium insurance is always a matter of significant concern to association members. It is often oneof the largest items on the annualbudget, is required by both law and mortgage holders and is intended to protect all members of the association from unchecked property and liability losses. It is also prudent to consider insurance for crime, professional liability (to protect the board of directors), flood, earthquake, mechanical breakdown and pollution among others. The new laws codify how many of these decisions will be made.

newlawsAs of July 1, 2011, all condominium insurance policies in Utah are required to comply with the new statues, often commonly referred to as the Utah Common Interest Ownership Act or UCIOA. The new laws apply to both the unit owners and the association, regardless of when the association was originally formed. Specific changes to the insurance provisions include: The association must maintain both property and liability insurance.

The association’s property insurance policy must provide 100 percent full replacement cost coverage at the time of purchase for all common areas and all fixtures, floor and wall coverings, cabinets, windows and any other items permanently attached to the unit, even items installed by a unit owner specifically for that unit owner’s private use.

The association must amend the insured property values, up or down, to the then current 100 percent full replacement amount at each renewal of the association’s property insurance policy. Each unit owner is an “insured person” under the association’s property and liability insurance policies.

The unit owner should have an HO6 (condominium association unit owner’s insurance policy) with property (coverage A) limits equal to or greater than the association’s property insurance deductible. Otherwise, the unit owner could be
responsible for paying the deductible out of their own pocket after a loss. The association’s policy is always primary; the unit owner’s policy is secondary.

If a unit owner makes a claim against the association’s property policy, that owner alone is responsible for meeting the association’s policy deductible.

If two or more unit owners make a claim against the association’s property insurance policy, then each is responsible for a portion of the deductible in proportion to their percentage of loss. The association is responsible for putting aside money in the amount of $10,000 or the full property insurance deductible, whichever is less.

The association must provide notice of changes in the property insurance deductible, if they don’t do so in compliance with UCIOA then the association, not the unit owner, is responsible for the difference between the old deductible amount and the new deductible amount.

Property losses, not exceeding the association’s property insurance deductible, need not be reported to the association’s property insurance carrier. Further, if such a loss occurs in an individual unit, that unit’s owner, and not the association, is solely responsible for the cost of repair. If the unit owner affected doesn’t have insurance, then they must pay for all repairs out of their own pocket.The limit of liability insurance may be set by the association, but cannot be less than an amount specified in the association’s documents.

While many other parts of the law become effective July 1, compliance with the insurance provisions is required at the association’s next renewal. Meaning that if you happened to renew your association’s policy on June 30, 2011, you would not have to make any insurance changes for a full year, until June 30, 2012.

Only highlights of the insurance provisions of the new laws have been reviewed here. Sweeping changes also affect many other significant portions of Utah’s common interest community law, and many of them go into effect July 1, 2011.

Daniel Kennedy, CIC, is a vice president of Ascend Insurance Resources and can be reached at  This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 435.604.9729.


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