by Tom Schild
As arctic temperatures blanket Maryland and much of the eastern United States, frozen pipe breaks are causing havoc for homeowners.
Typically, the cost of repairing a burst pipe is not covered by property insurance but repair costs for the related water damage to the building is covered. For condominium owners, there are special challenges in sorting out whether the condo association–or the individual unit owner–pays to repair damage to walls, floors, carpet and other portions of the building.
In Maryland, the Condominium Act requires the condo association to have property insurance for both the common elements and the individual units. Repair costs in excess of the insurance deductible amount will be paid for by the insurance company.
However, who pays the first $5,000 of repair costs depends on whether the broken pipe is a common element or part of the unit. Under Section 11-114 of Maryland Condominium Act, the entire insurance deductible amount is paid for by the condo association if the cause of the damage originates in a common element pipe. But, if the frozen pipe is a unit pipe, the owner of the unit where the cause of the damage occurs must pay up to $5,000 of the repair cost not paid by the insurance company.
The individual unit owner is also responsible for the cost of repairing or replacing any upgrades or additions to the unit–commonly referred to as “betterments and improvements” in insurance jargon–beyond what was in the unit as originally constructed.
To cover up to $5,000 of the condo association insurance deductible and the cost to repair or replace betterments and improvements, unit owners can obtain their own individual unit insurance known as an HO-6 policy. This insurance also covers damage to an owner’s furniture and other personal property. The deductible amount to be paid by the unit owner in individual insurance policies can be as little as $250.
Yet, many condo owners do not have individual HO-6 coverage and are not able to pay the first $5,000 to repair their unit, other units and the common elements when the broken pipe is part of the unit. This can leave other unit owners or the condo association to make repairs and then seek reimbursement from the owner of the unit where the cause of the damage originated.
To avoid surprises and disputes over payment of the first $5,000 of repair costs, each condominium association is required by the Condo Act to provide annual written notice of the amount of the deductible in the condominium master insurance policy and the unit owner’s responsibility for the property insurance deductible. Additionally, the condo bylaws can require each unit owner to maintain an individual condominium unit insurance policy. Existing bylaws can be amended to require unit owner insurance with approval of 51 percent of the unit owners.
Water damage can occur year round. But, the arctic temperatures of the winter of 2015 will gladly soon be a blast from the past.