ch5notes - Chapter 5 Other Commercial Property Coverage...

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Chapter 5 – Other Commercial Property Coverage Forms BPP may not fit the needs of unique exposures given the difference in risks o Condominiums o Construction projects What is special about these kinds of risks? How do the property coverage forms differ from BPP? Unique Characteristics of Condominiums Condominium is a group of units and surrounding land o Offices o Apartments o Attached/detached homes Ownership interests are different from other types of property A condominium unit is a portion of a condominium that are individually owned o A unit is the “box of air” enclosed by the walls, ceilings, and floors “Common elements” are owned and managed by condominium association o Association is composed of all unit owners Applicable laws and association agreement assist in determining who should insure specific property o Association vs. unit owner Common Elements Benefit all unit owners Can include real and personal property Foundation and roof Exterior walls Hallways and stairs Lobbies Interior walls (between units) Fixtures such as power, light, heating/cooling systems Parking Central A/C, light, heating Grounds, pools, courts Structural columns in units Laws Related to Dividing property Interests Bare walls concept - Association has no ownership interest within the unit’s bare walls o Association would only insure the structure Single entity concept (original specifications coverage) o Association owns property contained when unit was new (even if property is replaced) o Most common approach All in concept (additional installation coverage) o Association ownership includes improvements made by unit owners o Least common approach Condominium Association Agreement
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Defines the separation ownership between individual condominium units and common elements Separation of property highlights risk exposures and insurance needs for both unit owners and association Association agreement may also assist in determining association insurance coverage o Responsible party o Required limits o Budget – collection of association dues of unit owners (used to pay association premiums) Obtaining Insurance The following questions arise related to protecting condominiums Which party should insure specific items? o Association can get very broad coverage What limit should be requested? o Want to avoid coinsurance penalty o Options include: Agreed value optional coverage Blanket insurance Coverage can be difficult to get if little property risk to balance huge liability risk of common areas (e.g., swimming pools) Condominium Coverages Condominium association coverage form o Covers the association’s building and personal property (such as exercise room equipment), plus personal property of others
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