Questions & Answers about Proposed Insurance Amendments

1. QUESTION: Why was there confusion about insurance coverage in the Master Deed?


Currently, Section 13 of the Master Deed provides that the Association shall insure “the Property” against risk of fire, windstorm and all other risks normally insured against.

The term “Property” is defined in Section 1.c. of the Master Deed as “the property, including without limitation, the land, buildings and improvements thereon…” Confusion has arisen as to whether the Association’s obligation to insure the “Property” includes an obligation to insure individual Apartments.

2. QUESTION: What is the definition of “Apartment” and what Apartment elements will be insured by FSHA?


The definition of “Apartment” in Section 7 of the Master Deed includes elements of the building which are more appropriately insured by the Association.

The proposed amendment specifies those elements of an Apartment that are required to be insured by the Association. Thus, under the proposed amendment the Association is responsible for insuring the following:

(i) The General Common Elements;
(ii) The Limited Common Elements;
(iii) The following elements of an Apartment:

-Sheet rock or other unfinished dry wall material on the ceilings and perimetric walls;
-Load bearing columns, if any, located within the area bounded by the perimetric walls of an Apartment;
-Window panes;
-Window frames;
-Sliding glass door frames;
-Sliding glass plates;
-Window screens and frames.

All other elements of an Apartment (including contents) are the Apartment Owner’s responsibility to insure.

3. QUESTION: An Owner owns the windows in his/her apartment. Why is the Association insuring this and the other Apartment elements?


It is important to understand that these amendments address only the Association’s obligation to insure against risks, such as fire, flood, wind & hail, etc. as well as the Association’s obligation to repair insured elements when there is an insured loss. In the absence of an insured loss, the Apartment Owner is responsible for repairing and replacing all damaged elements of the Apartment. The Owner is always obligated to maintain all elements of the Apartment. By way of example, windows are defined in the Master Deed as being part of the Apartment. Under the Master Deed (Section 7) the Owner is responsible for the maintenance, upkeep and repair of the Apartment. This includes the windows. However, the Association is required to insure the windows against certain risks. If the windows are damaged or destroyed by an event covered by insurance, the Association is responsible for repairing or replacing the window using insurance proceeds. If the window is damaged or destroyed by an event not covered by insurance, then it is the responsibility of the Owner to repair or replace the window.

4. QUESTION: What are the deductible amounts in the case of an insured loss?


The deductible is the amount of money that the Association/Owners are responsible for paying in the case of an insured loss. Currently the deductible amounts for the Association insurance policies are as follows:

Flood: $2,000 deductible
Earthquake: $25,000 deductible
Named Storm: 2% deductible
Other: $5,000 deductible

5. QUESTION: Who pays the deductible in the case of an insured loss involving one or more Apartments?


If there is an insured loss, then the insurance company pays the total claim minus the deductible amount. The deductible is paid by those Owners affected in the claim in proportion to their part of the total claim. For example, an insured loss claim comes to $100,000, where Apartment #1 has damages of $10,000 and Apartment #2 has damages of $90,000. In this case the Owner of Apartment #1 pays 10% of the deductible and the owner of Apartment #2 pays 90% of the deductible. At no time and under no circumstances would the Association use money in the Operating and/or Reserve accounts and/or through an assessment to pay the deductible amount, unless there were damages to Common elements. In that case, the Association would pay its percentage proportion.

6. QUESTION: What happens if an Owner fails to maintain or make repairs in his apartment?


Because Owners of condominiums live in close proximity to one another, what occurs in one Apartment can adversely affect another Apartment. The Board has determined that it is in the best interest of all of the Owners that the Board have the authority to make repairs to an Apartment in emergency situations and in situations when the Owner fails or refuses to make repairs and the repairs are necessary to prevent further damage to the common elements and/or to another Apartment. Therefore, the Board is proposing to add provision 29 to the Master Deed, entitled “Failure to Maintain or Repair.”

7. QUESTION: What does waiver of subrogation mean?


If the Master Policy contains a waiver of subrogation, that means that if the FSHA insurance company has to pay for damages caused by an insured loss, the insurance company cannot then sue the person who was “at fault” (who caused the damage) assuming someone was actually “at fault” (i.e., negligent). Note that most insurance claims are not determined to be negligent, rather they are considered an accident. One benefit to including this in the amendment is that It would limit lawsuits against Owners and the Association.

8. QUESTION: Why do we need two amendments?


We need an amendment for the Master Deed to clarify the confusion regarding the definition of “Property” and “Apartment.” See Questions #1 and #2 above. Because there are specific provisions in the Bylaws dealing with insurance requirements, we need to make sure that the Master Deed and Bylaw provisions are consistent and do not create an ambiguity if they contain different provisions concerning insurance coverage.

9. QUESTION: What kind of homeowners insurance should Owners purchase?


The Board of Directors recommends that each Apartment Owner have an HO6 Policy that provides Contents coverage, General Liability coverage and “Bare Walls IN” insurance coverage (excluding the bare walls). The Association cannot be responsible for property damage other than “Bare Walls OUT,” since there is no way to contemplate the value of updates and improvements without an appraiser going into each and every apartment.

10. QUESTION: Who can I contact if I have questions?


You can contact any board member or the Building Manager, Joe Yetsko. Contact information is available on the Fort Sumter House web site here:

11. QUESTION: What is the procedure for voting on these amendments?


We are using a written ballot that must be submitted on or before December 31, 2013. Instructions are provided on the enclosed ballot page.


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