Gelfand & Arpe, P. A.

 

Memorandum To Clients

March 2006

Vol. XVI No. 3

INSURANCE UPDATE: WHO PAYS FOR CONDOMINIUM HURRICANE DAMAGE?

In the firm=s December 2005 "Memorandum To Clients,@ the firm revealed the State of Florida, Department of Business and Professional Regulation, Division of Florida Land Sales, Condominiums, and Mobile Homes= informal policy to require Florida residential condominium associations to pay the deductible amount of its casualty insurance policy. That informal policy appeared to contradict rules of statutory interpretation and rules of contractual interpretation.

Recently, the Division formalized the policy by issuing a ADeclaratory Statement.@ The Declaratory Statement impacts a condominium association=s responsibility for covering the cost of repair of Condominium Property, including certain portions of units, when the damage is caused by an insurable event such as a hurricane. In Plaza East Association, Inc., Docket No. 2005 059934 (2006), a condominium association requested an opinion from the Division concerning the duty to fund a repair shortfall created by an insurance deductible. The issue addressed by the Division is:

Whether the Association which is required to insure the condominium property located outside the unit, the property located inside the units as initially installed, and all portions of the condominium property requiring coverage by the Association under '718.111(11)(a) Fla. Stat. (2003), may pass on to the unit owner the cost of repairing those items that would have otherwise been paid for by the Association=s policy but for the application of the deductible or amounts in excess of the coverage limits, notwithstanding provisions in the declaration defining the condominium property as part of a unit with the cost of repairs to be paid by the unit owner.

In explaining that insurance for the Plaza East Association is a common expense under the Condominium Act, the Division concluded that the deductible is part of the cost of insurance and is a common expense for which reserves might be set aside pursuant to the Statute. The Division stated that the Association may not shift the cost of an insurable common expense to an individual owner. Common expenses must be assessed in the proportions or percentages required under Florida statute.

The Division noted that pursuant to the amendments to the Condominium Act effective in 2004, specifically '718.111(11), Fla. Stat., unit owners are no longer able to insure the structural components of the building, which normally include windows and doors. The Division rationalized that shifting the risk and the liability to individual unit owners for these damages is Aunfair and inconsistent@ with the assignment of insurable risk determined by the legislature under '718.111(11). According to the Division, when the Declaration is inconsistent with the statute under these circumstances the statute controls.

If the Division=s new policy is followed by other condominium associations, then a condominium association may not charge an owner the cost of repairing those items that would have otherwise been paid for by the association=s insurance policy but for the application of the deductible. The Division asserts that this new policy supercedes provisions in a condominium=s declaration which would otherwise shift financial responsibility to a unit owner. Compliance is anticipated to be the most expeditious approach and likely not to be challenged in court; thus, most Florida condominium associations are anticipated to follow the Division=s policy.

It is noted that the Division=s Declaratory Statement does not address who is responsible for supervising repairs or making the repairs to a unit. Thus, each declaration of condominium must carefully be reviewed to determine whether the condominium association or the unit owner is responsible for the reconstruction or repair to a unit.

WORKERS= COMPENSATION:

THE OWNER OF A BUILDING IS NOT IMMUNE FROM LIABILITY

What happens when an employee is injured while working on association property in Florida? The association may be liable as the owner or administrator of the property.

A Florida appellate court recently ruled a company was not entitled to immunity when an injured employee sued the company in its capacity as the owner of the building. In U.S. Holdings, Inc. v. Belance, et al., 31 Fla. L. Weekly D174 (Fla. 3rd DCA, January 11, 2006), a worker was seriously injured when he fell through a skylight of a building his employer, U.S. Foundry and Manufacturing Corporation leased from U.S. Holdings.

The injured worker filed a "tort" lawsuit against U.S. Holdings claiming that U.S. Holdings negligently operated the building. U.S. Holdings moved for summary judgment asserting that it was entitled to workers’ compensation immunity because it served as U.S. Foundry’s self-insured workers’ compensation carrier. The trial court denied the motion.

The Florida appellate court agreed with the trial court’s decision, but only in part. The appellate court pointed out that Section 440.11(3), Fla. Stat. (1997) provides that an employer’s workers’ compensation carrier, service agent or safety consultant shall be immune from tort liability. The appellate court noted, however, that the employee sued U.S. Holdings as the owner of the allegedly defective and dangerous premises. The appellate court explained Section 440.11(3) does not grant immunity to property owners.

his information is provided for public information purposes only and is provided without obligation or fee. It is distributed to the firm's association clients to provide a general notice of recent legal changes. This information is not to be considered as legal advice. The changes in the law may not have been reviewed by Florida courts and may be subject to further challenge. Before taking any action you are urged to consult with counsel to ensure that your legal rights are protected.

8 2006 by Gelfand & Arpe, P.A.