One of the most complex properties we service from a claims perspective is condominium associations. I would have love to have been in the room when the Hawaii Revised Statutes 514B section 143 was written to truly understand the intent behind its creators. 

There's one sentence in that section that sets the stage for the majority of the complexity we deal with. It says this regarding the Condo Associations master policy, “The insurance need not cover improvements and betterments to the units installed by unit owners, but if improvements and betterments are covered, any increased cost may be assessed by the association against the units affected.” Given that, what makes these claims so complex is the sheer volume of involved parties and their insurance policies we service. I’ll address the complexity from the customer side first, then dive into the different types of policies.

Involved Party Types

The types of parties associated with a condo claim can be broken down into three specific categories building management, condo unit owners and insurance agents/adjusters. For each, I’ll try to define loosely their roles and help define what their concerned about most when the fire sprinkler pipe breaks on the 26th floor. It’s important to note that each building is different and while this information generally applies there are specific nuances for every property.

Building Managers – yeah, that’s most of you reading this article. Within this category roles can vary greatly for sure whether you’re a general manager, property manager, resident or site manager and the board of directors. However, generally speaking, your most concerned with the following.

  1. Making sure it’s the right call to make a claim in the first place.
  2. Ensuring that unit owners are happy with the associations response when an event occurs.
  3. Protecting the association from any liability
  4. Determining and assessing the associations deductible

Condo Unit Owners – This is probably the clearest of the three. Condo Unit Owners are concerned with the following

  1. Making sure their individual unit is restored with the best quality and fastest speed
  2. Restoring or replacing damaged contents
  3. If tenant occupied, ensuring the tenants are happy with the unit owners response

Insurance Adjusters / Agents – These are the individuals who represent the policy that was sold to their named insured. They are concerned with the following.  

  1. Making sure the claim is covered
  2. Funding the insured parties correctly in adherence with the policy language, no less, no more.
  3. Making sure their insureds are happy with the insurance adjuster / agents response

Types of Insurance Policies

The specific types of insurance policies that can come into play in a condo claim are numerous. I’m choosing to focus on the three main types of policies we see daily.

Master Policy / Commercial Liability Policy / As-Built Policy This is the policy purchased by the condo association it’s self. They typically provide funding for the following:

  1. Present day replacement cost of property damage resulting from a covered loss.
  2. This funding is usually limited to only the finishes that were original to the building when it was built (i.e. laminate countertops, carpet floors, etc.)
  3. Damage to personal property owned by the association

Condo Owners Policy / HO-6 Policy / Betterments and Improvements Policy – This is the policy purchased by the unit owner. It typically provides funding for the following.

  1. The total increased cost of upgrades from original as-built finishes. (ex. Tile flooring is $12 per sqft – Master Policy funds for Carpet at $3 per sqft, the HO-6 policy would find the balance of $9 per sqft)
  2. Any damaged personal property owned by the unit owner, this policy does not cover tenant owned property
  3. If owner occupied, any adjusted living expenses for the unit owner (hotels if displaces, meals if kitchen is inoperable, etc.)
  4. If tenant occupied, any loss of income

Renters Policy – If the condo unit is tenant occupied, this is the policy that should be purchased by the tenant. While it is uncommon for tenants to purchase this coverage, mostly because they don’t know they should, we do see an increase in the ratio of tenant occupied condo units with renters policies in force. This policy typically provides funding for

  1. Any damaged personal property owned by the tenant
  2. any adjusted living expenses for the tenant (hotels if displaces, meals if kitchen is inoperable, etc.)

Typical Scenario

Here’s a quick breakdown of the customers we’re interacting with and the insurance policies funding the loss for a typical 4 unit water damage. This is a live real world scenario.

Customers – 16 total parties requesting information from their restoration contractor

Insurance Policies – 6 total insurance policies were balancing coverage with adjusters on.

The world of condo association insurance claims can be a very complicated one. Fortunately a majority of the insurance participants and contractors have a ton of experience in handing these scenarios so you shouldn’t be scared. They’ll help walk you through the claims process. Knowing the basics of how condo claims get handled can help anyone make sure their next claim is handled better and faster.


Article by Anthony Nelson, President, Premier Restoration Hawaii from the February 2021 Issue of Building Management Hawaii.