Handling Claims Under the Georgia Condominium Act

by Bob Caspar, PA, March 2017
They are everywhere! In the heart of Buckhead, out in the countryside, at the tops of mountains in Blue Ridge and along our beautiful Georgia Coastline. CONDOMINIUMS! CONDOMINIUMS! CONDOMINIUMS!
Everywhere you look another condominium is springing up just around the corner. So you better know a little something about handling their insurance claims.
The dictionary defines a condominium as:
a multiple-unit complex, an apartment house, or office building, units of which are individually owned, each owner receiving a recordable deed to the individual unit purchased, including the right to sell, mortgage, etc. that unit and sharing in joint ownership of any common grounds, passageways, etc. 
Under section §44-3-71 of the Georgia Condominium Act the definition states:
“Condominium” means the property lawfully submitted to this article by the recordation of condominium instruments pursuant to this article. No property shall be deemed to be a condominium within the meaning of this article unless undivided interests in common elements are vested in the unit owners.
Under either definition, a Condominium is a property with multiple units, each individually owned, sharing the “common elements” which are all the portions of the condominium other than the individual units.
So how does this effect how insurance claims are handled? This brings us to the Law in the state of Georgia called the Georgia Condominium Act which I will shorten for this article to the “Condo Act”.
First, get yourself a copy of the Condo Act. You can go to the website and look under the following:
  • US CODES AND STATUTES – pick Georgia
  • 2015 GA CODE
  • TITLE 44
  • ARTICLE 3 – Condominiums
There you will see a copy of the Condo Act Sections and can download the ones that apply to claims, especially:
 §44-3-107 – Insurance Coverage
 §44-3-94 – Damage or destruction of units
So let's take a look at these sections:
  • 44-3-107 – Insurance Coverage
This is the basis for all insurance coverage by a Condo Association. It starts out by stating:
 (a) The association shall obtain:
(1) A property insurance policy or policies affording fire and extended coverage insurance for and in an amount consonant with the full insurable replacement cost, less deductibles, of all buildings and structures within the condominium.  Regardless of the boundaries of the condominium units, the insurance required by this paragraph shall include, without limitation, all portions of each building which are common elements including limited common elements, all foundations, roofs, roof structures, and exterior walls, including windows and doors and the framing therefor, and all convertible space within the building.
There is no question, the Association MUST carry property insurance to cover the structures. It must include coverage for fire and all extended coverages such as lightning, explosion, smoke, windstorm, hail, aircraft and vehicle damage, Riot or civil commotion, vandalism or malicious mischief, falling objects, weight of snow, ice or sleet, etc. Please notice that water damage coverage is NOT a requirement under the Condo Act. It goes on to say:
Such insurance shall cover the following items with respect to each condominium unit regardless of who is responsible for maintaining them under the condominium instruments:
(A) The HVAC system serving the condominium unit; 
(B) All Sheetrock and plaster board comprising the walls and ceilings of the condominium unit; and 
(C) The following items within the condominium unit of the type and quality initially installed, or replacements thereof of like kind and quality in accordance with the original plans and specifications, or as they existed at the time the condominium unit was initially conveyed if the original plans and specifications are not available: floors and subfloors; wall, ceiling, and floor coverings; plumbing and electrical lines and fixtures; built-in cabinetry and fixtures; and appliances used for refrigeration, cooking, dishwashing, and laundry. 
So in addition to property coverage on the structure, the Association must carry insurance that covers many items inside the individual unit from the HVAC system to appliances, walls and ceilings, floors and subfloors, plumbing and electrical lines and fixtures as well as built in cabinetry. WOW!! So it basically covers everything, right? Wrong! It does not cover ANY improvements or betterments installed by anyone since the time the condo was initially made available for sale. So if anyone replaced the original carpet in the bedroom with hardwood flooring, the Associations policy would only pay to replace carpet and pad. There is also no coverage for contents such as furniture, clothing, dishes, towels etc. There is also no coverage afforded for the unit owner as additional living expense (ALE). These are the responsibility of the unit owner to obtain their own coverage.
The Association policy may have additional coverage for the Associations contents, such as furniture in the office, clubhouse or cabana, tools and equipment used to maintain the property, etc. However, this coverage must be added to the Association policy under a separate coverage.
Now let's look at Section §44-3-94 – Damage or Destruction of Units
You can read this section in full, but the important items to be concerned with are:
Unless otherwise provided in the condominium instruments, in the event of damage to or destruction of any unit by a casualty covered under insurance required to be maintained by the association pursuant to Code Section 44-3-107, the association shall cause the unit to be restored. Unless otherwise provided in the condominium instruments, any funds required for such restoration in excess of the insurance proceeds attributable thereto shall be paid by the unit owner of the unit;
So the Association MUST rebuild the unit or units involved unless two-thirds of the owners agree not to rebuild. Also, if the funds received under insurance do not cover the damages, any excess would be paid by the unit owner. So if there is not sufficient coverage under the association policy, the unit owner or owners may be responsible. This would be true of all owners if the damages were to common areas. If the clubhouse burns down, all the units owners may have to be assessed if the funds are not sufficient to rebuild.
The second part of this section, and a very important one, is as follows:
To the extent provided for in the condominium instruments, the association may allocate equitably the payment of a reasonable insurance deductible between the association and the unit owners affected by a casualty against which the association is required to insure; provided, however, that the amount of deductible which can be allocated to any one unit owner shall not exceed $2,500.00 per casualty loss covered under any insurance required to be maintained by the association under this article. The existence of a reasonable deductible in any required insurance policy shall not be deemed a failure to maintain insurance as required by this Code section. 
This section says the Association may allocate on a pro-rata basis, any deductible that pertains to the loss under the Association policy. It also states that they can only allocate up to $2,500.00 PER UNIT (since changed to $5,000.00 in July 2013). This only pertains to coverages required by the Condo Act, which are fire and extended coverage. Since water damage is not a required coverage, but accounts for at least 75% of the losses in Condominiums, The Association policy may cover water and have a separate water damage deductible which can be allocated in full to the units involved on a pro-rata basis, as well.
It should be noted that the Associations governing documents need to be reviewed to see what they say about the coverages and deductibles. Any discrepancies would fall on the side of the governing documents. So it is important to get a certified copy of the updated documents filed by the Association. If you are handling a loss for a specific unit and not the Association, the owner will be able to secure these documents as a unit owner. 


Why Hire a Public Adjuster?

Claimants who hire a Public Adjuster receive substantially more on their insurance claim than those who try and go it alone.