ARIZONA HOUSE OF REPRESENTATIVES Fifty-sixth Legislature First Regular Session
	House: COM DPA 8-1-1-0 | 3^rd Read 31-28-1-0 Senate: GOV DPA 5-1-2-0 | 3^rd Read 29-1-0-0

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HB 2251: condominiums; insurance coverage; claims

Sponsor: Representative Wilmeth, LD 2

Senate Engrossed

Overview

Makes various changes to condominium insurance coverage requirements.   

History

In accordance with statute, a common expense is defined as expenditures made by financial liabilities of the association, together with any allocations to reserves. Common elements are defined as all portions of a condominium other than the units (A.R.S. 33-1202).

The unit owner's association (Association) must be formed by the date the first condominium is conveyed. The Association may be a profit or nonprofit, corporation or unincorporated organization. The membership of the association must be exclusively comprised of: 1) all the unit owners; 2) all previous unit owners entitled to distributions of proceeds after termination; or 3) their heirs, successors or assigns (A.R.S. 33-1241).

Historically, the Association must have property insurance on the common elements and liability insurance that begins by the first conveyance of a unit to a person. The insurance policies require the unit owner to be insured regarding liability that stems from interests in the common elements. Additionally, if an insurance loss occurs and there is other existing coverage in the unit owner's name of the same property, the Association's policy provides primary insurance. An insurer that is issuing a policy regarding condominiums must issue certificates or memoranda of insurance to the association and, with written request, to any mortgagee or beneficiary under a deed of trust.

In regard to insurance for condominiums, any damage or destruction will be repaired by the Association unless: 1) the condominium is terminated; 2) the repair or replacement is statutorily illegal; or 3) 80% of unit owners vote not to rebuild. The cost of repairs and replacements in excess are considered a common expense. Lastly, the Board of Directors, may obtain additional or greater amounts of insurance coverage if determined appropriate and a general requirement of additional or greater amounts of insurance are permitted (A.R.S. 33-1253).

Provisions

1. Requires the Association to maintain property insurance on the units, if required by the condominium documents. (Sec. 1)

2. Removes the requirement that the Association's property insurance insure against fire and extended coverage perils, as determined by the board of directors. (Sec. 1)

3. Allows the Association to determine the liability insurance amount. (Sec. 1)

4. Specifies the Association's property insurance includes the units or any portion of the units, rather than if determined by the board of directors. (Sec. 1)

5. Adds that each unit owner is an insured person under the policy with respect to property damage arising out of the unit owner's interest in the unit, if required by the condominium documents. (Sec. 1)

6. Requires the Association's insurance policies to provide that each unit owner has the right to report a loss under the property insurance policy. (Sec. 1)

7. Instructs a unit owner, prior to reporting a loss under the Association's property insurance policy, to report the loss to the Association. (Sec. 1)

8. Allows the Association five business days to determine whether to report the claim to the master carrier or pay for the Association's portion of the loss without reporting the claim. (Sec. 1)

9. Stipulates the Association must provide how the Association's portion of the repairs will be accomplished and funded if the Association decides not to report the claim to the master carrier. (Sec. 1)

10. Requires an annual written notice to each unit owner from the Association that informs the unit owners of their responsibility for the Association's insurance deductibles for all property and liability coverage and the amount of each deductible. (Sec. 1) 

11. Makes clarifying and technical changes. (Sec. 1)

Senate Amendments

1. Removes the Association's option to determining to pay for the Association's portion of the loss without reporting the claim and to provide how the portion of the repairs will be accomplished and funded.

2. Extends the time, from 5 business day to 10 business days, for the Association to provide the unit owner with a written decision on whether the Association will be reporting a claim to the master policy.

3. Requires, if the Association decides not to report a claim, to provide the reason for the decision.

4. Makes clarifying changes.

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                        HB 2251

Initials PRB     Page 0 Senate Engrossed

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