Insurance Claims And Issues

If Commercial Construction Loans Default, Insurance and Bond Claims May Follow.

    Fears continue of possible mass defaults on many Commercial Construction Loans.  Fear of Default has been embedded in the Commercial Construction Loan Market for months.  See generally Floyd Norris, "Off the Charts/Construction Loans Falter, a Bad Omen for Banks" p. B3, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, September 5, 2009).  As compared with the woes of loans for the construction of single-family homes, reportedly "[i]t is in commercial real estate construction -- be it stores or office buildings -- that the pain seems likely to rise."  Id.

    In particular, a research firm cited in the linked article predicts that "the biggest problems are in loans for condominium construction, with 38 percent of all construction loans troubled."  Id.  [Emphasis added.]

    If Commercial Construction Loans go into Default in large numbers, Insurance and Bond Claims will not be far behind.

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Rescisssion? Not so Fast! It Could Be Bad Faith. Maybe.

    Procentury Insurance Company issued a  Commercial Ocean and Marine Insurance Policy to Harbor House Club Condominium Association.  Harbor House owned wharves and piers.  They were damaged by a storm in 2008.  Within 7 months, Procentury denied Harbor House's Claim to Insurance Policy Proceeds "because it found that Harbor House materially misrepresented the risk to be insured."  "On that same day," Procentury filed an action for Declaratory Judgment in Federal Court seeking a Declaration that the subject Policy was rescinded or was otherwise void from inception.  Harbor House counterclaimed for Breach of Contract and Bad Faith.  Download Procentury Insurance Co v. Harbor House Club Condominium Assoc., Inc. (D.N.J. Opinion filed 08.19.09), attached Official Slipsheet Opinion at 3-5.

    Procentury filed a Motion for Summary Judgment on Harbor House's Counterclaim.  In part, Procentury argued that New Jersey substantive First Party Bad Faith Law requires the Insured to prove that the Insurance Company did not have a fairly or reasonably debatable basis for denying the Insured's Claim.  However, there were no undisputed facts in the record which addressed these contentions in the handling of this particular Claim in this particular case.  The Federal Court accordingly denied the Motion for Summary Judgment on the Bad Faith Counterclaim filed by the Insured in response to a Claim or cause of action for Rescission in this case.  Download Procentury Insurance Co v. Harbor House Club Condominium Assoc., Inc. (D.N.J. Opinion filed 08.19.09), at 12.

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Insurance Coverage and Other Issues for Homeowners and Condominium Associations.

           Troublesome issues over Insurance Coverage for Homeowners and Condominium Unit Owners may come from failed Insurance Coverage lawsuits or from Members not kept advised by the Board.  Sometimes both:  See "Associations/Homeowner Association Members Face Huge Assessment for Legal Fees" by Stephen Glassman and Donie Vanitzian (Los Angeles Times Online, Sunday, May 31, 2009).  The linked newspaper report prints this sound thought:  Even with the limited alternatives, the board needs to perform due diligence in obtaining at least a second legal opinion on its options and the proposed settlement.

 

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Property Insurers' Agenda Increases Premiums of Florida House.

    Property Insurance Companies' proposed legislation passed the Florida House.  The bill awaits the Florida Senate and the Governor.  Among other long-sought features, the Property bill would:

• Increase Citizens Property Insurance Company Premiums by 10% per year.
• Enable a Commission to recommend elimination of all or most of the Premium discounts for Hurricane Mitigation measures recently enacted into Florida Law -- measures to strengthen the construction of Florida Homes that were recently demanded by Property Insurance Companies.
• Increase Property Insurance Premiums including Homeowner's Insurance Premiums apparently, by 10% per year.
• Restrict Policyholders and other Insureds on adjusters they hire for assistance on their Homeowner's and other Property Insurance Claims, and enable another Commission to recommend more restrictions.

The potentially biggest feature of this bill even when it is put alongside these other very big features?  "Gradually reduce the $29 billion Florida Hurricane Catastrophe Fund by $12 billion."  Julie Patel, "Rates Would Rise Under Legislation/Florida House Passes Sweeping Property Insurance Bill" (South Florida Sun-Sentinel.com, Friday, May 1, 2009).

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Property Insurers Dovetail With Environmentally Concerned Coalitions.

     The Travelers and Fireman's Fund Insurance Companies are reportedly pressing for innovations to meet climate changes that would alter forever the face of Property Insurance Coverage in the United States.  See, e.g., Cornelia Dean, "Groups See Added Risks From Change in Climate" (New York Times Online, Friday, April 24, 2009);   NU Online News Service, "Group Unveils Blueprint to Save Billions From Hurricanes" published by P & C/National Underwriter, Thursday, April 23, 2009.

    Among the innovations backed by an increasingly broader array of supporters:

• Adopting local land-use policies that deter people from construction in high-risk flood-prone areas.  An example is reportedly provided by City and County officials working together in or about Charleston, South Carolina to restrict development on Johns Island to its interior.
• Enacting more realistic Construction Codes and, at the same time, encouraging existing homeowners and commercial property owners to make their buildings more resistant to storms in storm-prone areas. 

While the members of the coalition were apparently reluctant to endorse the use of Property Insurance Premiums as a planning tool, clearly where Property Insurance in such areas is available at all the Premiums will be very high -- and the Property values are likely to increasingly become lower than they are even now.  See generally John K. DiMugno, Steven Plitt & Dennis J. Wall, "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson-West Publishing 2008).

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Condominium Insurance Confusion Under New Florida Law?

    Condominium Assocations in Florida are required to have Property Insurance for property held by the Association.  Reportedly, as of January 1, 2009 Owners of Condominiums ALSO  (1) must "prove" to the Association that the Owners have Insurance (and if the Owners do NOT have the required Insurance, then in that event the Associaiton ostensibly is empowered to assess the amount of the Premiium and obtain the Owner's Insuance itself) and (2) must prove that the Owner's Insurance Policy names the Condominium Association as an Additional Insured and further (3) the Owner's Insurance Policy "must also include special assessment coverage of no less than $2,000 per occurrence."  See Daniel Vasquez, "Condominium Insurance Law Leaves Confusion in its Wake" (South Florida Sun-Sentinel.com, Wednesday, December 24, 2008).

    Or maybe not.  Reportedly there may be more statutory changes coming when the Florida Legislature meets in March, 2009.

    The linked Florida newspaper article also has this link in it to the potentially confusing Florida law requiring certain Insurance to be purchased by Condominium Associations and/or Owners to take effect before January 1, 2009 as reflected in the linked article:

 "Want to check out the law for yourself?  Go to http:// www.leg.state.fl.us/ and in the search bar type in "718.111" and start reading at 718.111(11)(f)."

Happy Holidays and Happy New Year to ALL!

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Association Directors and Officers.

    Automatic renewal provisions in management contracts reportedly may not be a good thing for Directors and Officers of Homeowner and Condominium Associations.  Association Directors and Officers who agree to such provisions reportedly may be opening themselves up to claims that their agreement is a wrongful act that was not in the best interests of the Association.  See Stephen Glassman and Donie Vanitzian, "Homeowner Associations/Management Contract That Renews Automatically Should Be Rejected" (Los Angeles Times Online, Sunday, September 7, 2008).

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Condominium Associations Insurance, Other Dues And Assessments.

    Insurance Premiums for Condominium Association Insurance Policies are paid either from Owners' dues or from assessments on the Owners.  Dues and assessments are paid to the Condominium Association.  The Association remits the Insurance Premiums to the Insurance Companies.  In broad terms, dues and assessments set by Condominium Associations are explored by Stephen Glassman & Donie Vanizian, "What Can Condo Owners do When Homeowner Fees Spiral Out of Control?" (Los Angeles Times Online, Sunday, August 10, 2008).

    One sign to look for that is explained in the linked newspaper article:  Look at how often special assessments are charged, and for what.

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Condo Costs: Need to Know.

    Condominium Associations may not need to tell buyers what their Insurance Premiums will come to, or perhaps even what buyers can expect to pay in special assessments this year or next.  This newspaper report recommends that you do your homework to find out, including ask the seller.  Financial information is just too important to take "no need to know" for an answer.  Joe Kollin, "Before Buying, Check Out Place Thoroughly" CONDOS/HOMEOWNER ASSOCIATIONS (South Florida Sun-Sentinel.com, Wed., August 20, 2008).

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Homeowner's Associations and Condominium Associations: Professionalism, Business ... And Insurance.

      Boards of Directors of Condominium Associations, and of Homeowner's Associations and of other similar Community Associations, have a hard job.  Their many obligations and expectations are explored by Kay Senay, Forum Publishing Group, published online on Thursday, July 31, 2008 at South Florida Sun-Sentinel .com under the headline, "Board Responsibility Makes All the Difference".

     Among the responsibilties summarized there, is this one at the top of the list:  "Confirm that the association's master insurance policy is appropriate, including D&O coverage."

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