On Master Policy and the Deductible.

How we are covered

Our current condominium master insurance is obtained from PT Phelan and covered by Greater New York. Master policy provides “all-in” coverage, meaning that everything attached to the building would be insured by the policy.  It provides coverage to replace common elements or a unit to the condition it was in at the time of the loss. With this approach, the unit owner is responsible for covering only his or her personal property under the unit-owner insurance HO-6.

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But, who pays the deductible?

With an all-in policy, the deductible for a common area claim is obviously the responsibility of the condo association and drawn out of common expense. If a unit suffers interior damage and the unit owner desires to file a claim with the master insurance, then the owner of the unit that suffers damage is responsible for the master policy deductible. If several units suffer damage, the deductible will be apportioned among them, based on the size of their claims.

Take a pipe leak incident as an example: If a 5th-floor drain pipe leak had affected 6 units at the lower floors, causes $4,000 in damage to 2 units each on the 4th floor and $2,000 for the rest of the 4 units each on 3rd and 2nd floor, total damage cost $16,000. The current association’s deductible is $10,000. The two owners, each with 1/4 of the damage, would be responsible for 25 percent of the deductible ($2,500); the four owners, each with 1/8 of the damage would be responsible for the remaining 50 percent of the deductible with ($1250) for each owner. If common areas are damaged as well, then the deductible would be apportioned similarly among the units and the association.

A board resolution adopted in 2017 specify the owners’ responsibility for paying the deductible on claims affecting their units. Owners should make sure that their HO-6 policy not only insures the contents of their units, which aren’t covered by the master policy, but also includes adequate coverage for the master policy deductible. Owners without deductible coverage are essentially self-insuring for damage to their units up to the deductible amount. The Board of Trustees strongly encourage to get covered with a well-planned HO-6 policy.

How much of a problem could that be? After paying a $1.4 million claim for water damage caused by the accidental tripping of the fire sprinklers, an insurance company increased the community’s water-damage deductible to $100,000. That’s how large a problem the deductible could be for owners who don’t have insurance coverage for it.
Many owners aren’t aware that deductible coverage may not be included in their HO6 policy, but is available as an add-on at a very small incremental cost. Some owners don’t purchase HO6 policies at all, which means they have no coverage for damage to their furniture and other personal possessions, nor do they have liability coverage for visitors who might suffer injuries in their units. The association’s master policy would not cover any of those claims.

In addition to straining the association’s finances, filing multiple small claims (which owner would be encouraged to do if they don’t have to cover the deductible) would increase the association’s premium and possibly make the community uninsurable.