Under the Uniform Condominium Act, if any portion of the condominium for which insurance is required to be maintained by the association is damaged or destroyed, the association is obligated to promptly repair or replace such damage. The cost of repair in excess of the insurance proceeds and reserves is a common expense of the membership.
Under the Condominium Act, the association is required to maintain the following insurance coverage:
• property insurance on the insurable common elements insuring against all risks of direct physical loss commonly insured against, including fire and extended coverage, in a total amount of at least 80 percent of the replacement cost or actual cash value of the insured property as of the effective date and at each renewal date of the policy [and for buildings containing units that have horizontal boundaries (stacked units), the association's property insurance must also include the units, but need not include improvements and betterments installed by unit owners]; and
• commercial general liability insurance, including medical payments insurance, in an amount determined by the board but not less than any amount specified by the declaration covering all occurrences commonly insured against for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements.
It should be noted that to the extent that any damages involve personal property in a unit or, in projects with stacked units, improvements made by the owner (improvements and betterments in the unit), the association has no liability to obtain insurance coverage on and no obligation to repair these items under Texas law.
In order to comply with Texas law and to prevent a situation where a special assessment is required to repair or replace portions of the project that should have be covered by insurance, it is suggested that association representatives present this information to their insurance carrier and confirm that the proper insurance for their project is in place. It is also timely for association representatives to remind their owners of the value of maintaining insurance polices for their personal property and unit improvements and betterments.
As the estimated amount of damage caused by Sandy continues to increase, now is a good time to make sure that your project has sufficient insurance coverage in place.