Sunday, July 31, 2011

Senate Bill 167 Utah Condo Insurance Changes

2011 SB167 changed the way Condo Homeowners Association must function. One area of change affects insurance. If you are a HOA board member the following are a few changes to consider. 1) Condo HOA policies prior to the 2011 bill may cover dwelling including tenant betterments inside of each unit or not. The new bill states (57-8-43.9(d)) "Property insurance shall include coverage for any fixture, improvement, or betterment installed by a unit owner to a unit or to a limited common area, including a floor covering, cabinet, light fixture, electrical fixture, heating or plumbing fixture, paint, wall covering, window, and any other item permanently part of or affixed to a unit or to a limited common element." It is suggested that you met with your current insurance agent and make arrangement to increase your Dwelling/Property Coverage to include the items listed above. Your current policy may already include this coverage but likely not. Most HOA Condo Association policies that I have read state that the Dwelling/Property coverage stops at sheet rock - meaning the unit owner is responsible for insuring from the sheet rock in. This new bill shifts the responsibility coverage for these items from the unit owner to the HOA insurance policy. 2) The HOA must have the deductible amount in a reserve fund up to $10,000. "(i) An association of unit owners shall set aside an amount equal to the amount of the association's property insurance policy deductible or $10,000, whichever is less." 3) You must give the unit owners notice if you change the deductible. 4) The unit owners policy is primary 5) If a loss occurs, and the HOA policy is necessary to cover the loss,  the HOA policy  deductible is divided among those unit owners whose units suffered the loss. "(ii) A unit owner who owns a unit that has suffered unit damage as part of a covered loss is responsible for an amount calculated by applying the unit damage percentage for that unit to the amount of the deductible under the property insurance policy of the association of unit owners." For example, if the HOA policy has a $5,000 deductible and three units suffer a loss in which 25% of the damage is in one unit 20% in another and 55% in the third, each unit owner must pay the respective percentage of the deductible.

Suggestion to the unit owner. Each unit own should have a personal unit owners policy to cover those items not covered by the HOA policy. Many of these individual polices offer a "loss assessment rider." This rider will help the condo owner cover the HOA deductible (or portion thereof) that may be assessed in the event of an HOA policy covered loss described above. Call Howard Burkholz 801-451-8880 for further questions.


  1. Nice summary Howard. I have done a lot of training on these changes both for agents, property managers and HOA's. When this all began I really struggled with the issues over coverage A and Loss Assessment. As things are settling down I am finding almost all carriers are covering claims under coverage A and not loss assessment. The way SB167 seems to assess the deductable makes it seem to many trained eyes that it would be loss assessment (including several attorneys I have spoken with). In the end all the carriers are using coverage A. I think the loss assessment has thrown underwriting for a loop. Who knows, it could change in the future.

  2. Howard, How is a condo association supposed to keep up with changes made my the individual owners? Coverage is going to be a moving target with individual owners changing things all the time.

  3. The condo HOA does not have to "keep up" with the individual owners changes. The HOA board/managers need to inform the individual owners what deductible level they have selected for the HOA master policy and the individual owners then should make sure their individual policy covers the HOA deductible assessment that they may need to pay in the event of a covered loss.
    Note - These are broad general statements. These statements do not guarantee any coverage. Read your policy and the HOA master policy for specific coverage and coverage limits.

  4. I am hoping you can help answer a question for me. How is a claim handled if it affects multiple units? Say the HOA deductible is $10,000 and an upstairs unit leaks water down damaging 3 other units below. What is the process to know who is responsible for what?