Ask Atty. Pat: Who Is Responsible In Case Of Damage To Condo Unit?
IN THE EVENT OF A CASUALTY LOSS, THE ASSOCIATION MUST REPAIR THE DAMAGE AND IS RESPONSIBLE FOR THE DEDUCTIBLE UNLESS THE UNIT OWNER IS AT FAULT.
The argument continues over whether the Association or the individual unit owner should be responsible for repairs to a unit in the event of a casualty loss. The basic argument depends upon a policy that protects either the rights of the many or the rights of the individual.
The argument is just a mental exercise. When the legislature has already established the policy, it is our obligation to conform to the law that was adopted. The Connecticut legislature has already established how the risks of a casualty are split between the Association and the individual in the Common Interest Ownership Act. The costs of repair of casualty damage in excess of the insurance proceeds received by the Association, including the deductible, can only be passed on to the unit owner by the Association if the unit owner or his tenant, guest or invitee caused the damage by engaging in risky behavior.
Connecticut courts have recognized that the Connecticut Common Interest Ownership Act is based on the Uniform Common Interest Ownership Act, promulgated by the Uniform Law Commission. The mission of the Commission is to provide “well-conceived and well drafted legislation that brings clarity and stability.” Although the Connecticut legislature did not adopt the comments that accompany the Uniform Act, Connecticut courts have recognized that the comments provide insight as to the intent of the drafters.
Readers of the Connecticut Common Interest Act might notice that there is an apparent discrepancy in the allocation of responsibility for the repair of units. Section 47-249 (a) states that “each unit owner is responsible for maintenance, repair and replacement of his unit.” Section 47-255 (h) (1) states that ‘[a}ny portion of the common interest community for which insurance is required under this section which is damaged or destroyed shall be repaired or replaced promptly by the association.” Because the Association is required to insure portions of the unit under Section 47-255 (a), this subsection (c) makes the Association responsible for the repair and replacement of those portions of the unit in the event of a casualty loss. The subsection (c) continues, “the cost of repair or replacement in excess of insurance proceeds and reserves, regardless of whether such excess is the result of the application of a deductible under insurance coverage, is a common expense.”
Actually, there is no discrepancy. Section 47-249 (a) applies for maintenance, replacement and repair that results from ordinary wear and tear. Section 47-255(h) (1) applies to repair and replacement that results from a casualty loss. Note that Section 47-249 (a) includes “maintenance,” as well as “repair and replacement” and Section 47-255(h)(1) only discusses “replacement and repair.”
The drafters of the Uniform Act intended that the casualty repairs be the responsibility of the Association and that the deductible be a common expense.. Comments to Section 3-113 of the Uniform Act, on which Section 47-255 is based, explores the question of “whether and under what circumstances the association may charge the cost of repair for damage to a unit or common elements to an individual unit owner, whether or not the association has insurance covering that loss.” The Comments posit several theoretical answers to the question:
(1) charging only the deductible to the damaged unit regardless of fault;
(2) charging the entire cost of repair of units and common elements against the damaged units, regardless of fault; or
(3) doing either (1) or (2) only in circumstances evidencing “fault.”
The Comment discusses the philosophical underpinnings for each answer. First, it discusses arguments for and against the position that the deductible should be allocated against the unit damaged, regardless of fault. The argument supporting this position is that individual unit owners commonly carry their own insurance. Passing the deductible on to the individual unit owner, and thence the individual carrier, will allow the association to incur lower premiums by having larger deductibles and filing fewer claims.
The Comment notes that the argument for passing the risk to the individual unit owner is inconsistent with condominium insurance practices established by the Act. First, if an insurance claim is paid by an insurer, there is no right of subrogation against a unit owner. Second, when the insurance premiums are paid by the Association, the cost is allocated against all of the unit owners based on their shares in the common expenses so that everyone shares the benefits of lower premiums. Finally, the Association might not file a claim when the unit owner needs to have the Association file a claim.
I have my own arguments against allocating the deductible to the unit owner. The Association receives the insurance proceeds and decides how they are spent. Often, the proceeds are more than is required to actually repair or replace the damage. In addition, the unit owner does not establish the Association deductible and has no say in the amount of the risk. At this juncture, some individual insurance carriers are refusing the pay the amount of the Association deductible and argue that the Association is responsible for the deductible, not the insured unit owner. Finally, the premium of the individual’s insurance may rise because of the claim or the individual policy may be cancelled. Some unit owners do not even have individual insurance coverage.
Shifting the deductible to the unit owner is even more problematic if the cost of the unit repairs are less than the Association insurance deductible. If the Association is incurring no costs for repairing a unit, the Association has no incentive to eliminate an ice dam or repair a leaking roof. The unit owner is helpless if the Association does not act. The unit owner can not remove snow and ice from the common element roof to prevent ice dam damage without incurring liability for damage to the roof or fines for violating the documents. Similarly, after the damage occurs, the unit owner can not make the repairs to the common element roof to prevent further damage to the unit without the risk of liability.
The Uniform Commissioners, and subsequently the Connecticut legislature, took the position that the excess costs, including the deductible, should be the responsibility of the Association. The Comment does note that there is a situation in which it would be unfair if the Association bore the cost: when the damage is the fault of a careless unit owner or a unit owner’s risky conduct.
As the Comment notes, the Commissioners took a middle position. They allowed the costs exceeding insurance proceeds to be charged back against the unit if there was “fault.” The charge back is in Section 3-115(e) of the Uniform Act. The corresponding Connecticut section is Section 47-257 (e).
Here is the resulting process. Under Section 47-255, the Association still repairs the casualty damage. The costs that exceed the insurance proceeds, including the deductible, are still a common expense. Then, under Section 47-257 (e), that common expense caused by the cost of the repair in excess of the Association’s insurance proceeds, including the deductible, can be assessed against the unit if the damage was caused by willful misconduct, gross negligence, or failure to comply with a written maintenance standard by the unit owner or his or her tenant, guest or invitee. Section 47-257 (e) adds the additional unit owner protection of notice and hearing.
The comment to Section 3-115(e) clearly states that the subsection was to address the concerns raised in Section 3-113 about who eventually pays the costs of repairs, including the deductible, for a casualty loss. There has to be fault for the unit owner to be assessed the costs. The comment states that “the section does not permit a charge back in a ‘no fault’ or in a ‘simple negligence’ situation. Instead, the unit owner to be assessed must be guilty either of ‘willful misconduct’ or ‘gross negligence.’”
Associations attempt to use another provision in Section 47-257 to claim that the costs in excess of insurance, including the deductible, can be charged back against the unit owners. Section 47-257(c) allows the assessment of common expenses from services benefitting fewer than all units, be assessed against the units benefits. Subsection (c) does not apply to casualty losses. As the Comment to Section 3-115, the Uniform Act provision notes, these provisions only apply to “services included in the regular budget.”
Pat Ayars is a Glastonbury attorney who specializes in condo issues. She is a member of the Connecticut Condo Association Advisory Committee.