Given the unexpected spike in homeowners’ insurance rates in California, one step condominium associations can take to help minimize claims filed against their master policy is to adopt a Water Leak Policy. Beyond insurance considerations, having this type of policy in place is just smart governance. This policy supplements the governing documents and provides homeowners with guidance for dealing with water leaks, repairing units, filing insurance claims, and paying deductibles.
Condominiums often suffer water leaks due to an owner’s failure to properly care for their plumbing fixtures (i.e. angle stops, shower valves, bidets, etc.) or such plumbing fixtures fail without any negligence. However, many governing documents do not spell out who is responsible for repairing the owners’ unit components, who is responsible for filing insurance claims, or who is responsible for paying for the association’s insurance deductible when water damage occurs within a unit. As a result, associations spend substantial time and money repairing water damage within units without any contribution from the responsible owner of the unit where the water damage originated. Filing too many claims may cause an association’s insurance company to discontinue property insurance coverage if there is an excessive claims history.
What’s in a Water Leak Policy?
In order to develop a plan for responding to water leaks and to prevent the association from filing excessive claims against its master policy, the board of directors should consider adopting a Water Leak Policy that:
- Clarifies that owners are responsible for their unit components such as plumbing fixtures;
- Requires owners to pay for the association’s insurance deductible if claims are filed as a result of water emanating from the owner’s unit or the owner’s negligence;
- Recommends that owners purchase a comprehensive HO-6 insurance policy to cover their unit interior and personal property;
- Requires owners to repair and replace their own unit interiors, including damaged cabinetry, floor coverings, and personal property, unless the association’s negligence caused such damage;
- Provides protocol for owners’ prompt notification, investigation, and repair so that water leaks can be quickly repaired; and
- Specifies preventative steps such as periodic inspections and repair of plumbing supply lines, hoses, sewer lines, shut-off valves, appliances, and fixtures to avoid future water leaks.
A Water Leak Policy would not require a membership vote, so it can be an important tool to deal with water damage claims until the CC&Rs are amended to clearly assign maintenance responsibilities, require owners to carry insurance, and add exculpatory language for water leaks coming from the common area. Once the Water Leak Policy is adopted by the board of directors, this Policy becomes part of the association’s governing documents.
This blog information is general in nature and is not a substitute for qualified legal advice. Contact us at (925) 926-1200 if you require specific legal advice.