Maryland Condo Owners May Be Responsible for $10,000 Property Insurance Deductible

The Maryland Condominium Act has been amended to increase from $5,000 to $10,000 the amount which a unit owner may be required to pay where the cause of fire, water or other casualty damage to units or the common elements originates in that owner’s condominium unit, beginning October 1, 2020.

In recent years, it is has become common that the insurance deductible amount for property damage claims is at least $10,000.  Some condo associations are not able to purchase insurance with a lower deductible due to its claims history.  Others choose to have a deductible of $10,000 or more to obtain lower insurance premium costs.

For condos which have a deductible of at least $10,000, an owner will be responsible for the first $10,000 of repair costs to the owner’s units, other units and the common elements if the cause of damage originates in the owner’s water or sewer pipes, kitchen or other parts of the unit.  If the insurance deductible is less than $10,000, a unit owner will be responsible for the lower deductible amount.  The condominium association will be responsible for the repair cost in excess of the deductible amount.

Unit owners can obtain an individual HO-6 homeowners insurance policy to cover the master condo policy insurance deductible.  However, unit owners are not required to have homeowner insurance unless the condo bylaws require such insurance. 

For condo boards which want to shift the maximum $10,000 deductible amount to unit owners, the master policy should have a deductible of at least $10,000.  To ensure that unit owners have the funds to pay the deductible amount, the bylaws should require owners to purchase an HO-6 owner’s policy. To add this requirement, an amendment can be made with approval of owns having 51 percent of the total votes.

The Maryland Condominium Act requires that a condo association send an annual notice to each owner regarding the owner’s responsibility for paying the insurance deductible. For those associations which have a deductible amount of at least $10,000, owners should be informed that owners will be responsible for the first $10,000 of repair costs where the cause of fire, water, or other casualty damage originates in their unit, beginning October 1.

For damage which originates from the common elements, the condo association is responsible for paying the insurance deductible amount.  Beginning October 1, 2020, the deductible amount is also a common expense when the cause of damage originates from an event outside of the condominium units or common elements.

Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations, and housing cooperatives throughout Maryland and Washington, D.C.

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