Convo with my Homeowners Insurance

[Alexander Esseveld]

Hi all,
I had a discussion with the insurance company that provides my homeowner's policy. I'm including it on our discussion board here for everyone. Similar to Wally's insurance provider, they were very reluctant to answer my hypothetical scenarios, but I finally got them there with some polite encouragement  :)

I've also included a redacted policy jacket. (redacted simply to limit exposure to opportunistic criminals on the world wide web)

-------------------- Their reply is in red --------------------

Good morning Sunrise,

My HOA is currently discussing restructuring our governing documents and owner responsibilities, and I would like to ensure that my current policy covers any proposed updates. Our townhome condos have exclusive servicing utilities running through Common Area shared walls. (All water, electricity, and drain lines are separate per unit) I've come up with three hypothetical scenarios, and I'd like to know what my current policy covers.

Per your request, I’ve attached your full policy jacket for review of your coverages for your policy and records.  Your questions, although hypothetical, are quite specific.  I will give you a generalized answer to your questions to the best of my knowledge, but keep in mind, I am not a licensed adjuster working on a specific claim.  There are a lot of different aspects of a situation that make up a claim to determine if it is covered or not.  With that said, I looked at your coverage and based off the fact that you are in an HOA and have a condo, there is a coverage you are missing that I would recommend.  The condo policy comes with an automatic $1,000 for Loss Assessments, however it can be increased to $51,000 for $20 at renewal in November for a year.  Loss Assessments will cover for losses to the common areas that would be assessed by the HOA for any type of loss that would be covered under your policy.  If there are losses in common areas the HOA will assess each condo owner a portion of the loss to cover the claim.  It’s an inexpensive coverage and I believe an important one.  With all of that said, her are my general answers for your scenarios:

Hypothetical Scenario 1: One of my waterlines burst within this HOA common area wall. It's upstairs and affects three levels, both on my side of the wall and my neighbor's wall.

• Am I covered for all the water damage to both units?
• Will my current policy cover the repair of pipe and refinishing paint & drywall?
  
• Am I covered for damages incurred to my neighbor's unit?
• What are the limits?

If there is a shared wall between your unit and another, the policy does cover water damage (I have attached a clip of your policy showing how it excludes some water damages so that you can see), however, the adjuster at the time of the loss will have to determine if it is your pipe or your neighbors.  If it is a joint water line, then they will probably look at a 50/50 deal and work with your neighbor’s adjuster.  Your coverage limit for your damages will be $155,920 with a $2500 deductible.  If this pipe is determined to be your unit’s pipe, then you have water damage for your unit and then liability coverage of up to $500,000 would apply to your neighbor’s unit and any level condo the pipe break has affected.  Again, this is a generalization.

Hypothetical Scenario 2: My neighbor's drain leaks gray water within our shared wall, and he doesn't have insurance.

• Am I covered?
• What are the limits?
• And what is my best course of action?

I hope your neighbor would have coverage for this scenario as it would be a liability claim against their insurance and most likely not be a covered claim on your policy.  If they aren’t covered, then your best course of action might end up being a lawsuit against your neighbor for damages unless they pay out of pocket for your damages.  Again, I’m not an adjuster but this is from my years of experience and how I read the policy.

Hypothetical Scenario 3: My toaster starts a kitchen fire. Within the shared HOA common space wall, there is smoke damage to the insulation and damage to my neighbor's pex water lines.

• What is covered?
• Will my coverage repair and replace the insulation and water lines?
• What are the limits?

Fire would be covered by your policy, and it would cover your inside walls, flooring, cabinetry etc.  Smoke damage is also another covered claim.  If they determined you were liable, I believe it would cover the other unit, however, again, this needs to be determined by an adjuster.  It is possible that the neighbor’s policy will also come into play.  The other factor for all these scenarios is what is covered by the HOA.

Thank you,

Alex

[Judith A. Mango]

Thank you so much, Alex.  This helps me in discussing coverage with my insurance agent.   

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[Greg Busch]

Related insurance conversation with my provider Allstate RE: $1,000,000 insurance liability requirement. Sharing here as a data point for other insurance convos. 

 - My policy currently has $300k liability coverage. 

- The maximum Allstate can provide without additional umbrella coverage goes to $500k liability.

- The jump from $300k -> $500k liability is only $24/yr in additional premium. 

- The addition of $1m umbrella would be an additional $356/yr premium. 

How confident are we that the $1m liability requirement is what we want and not just a conservative assumption by a prior drafter? I saw this requirement was in the CCR draft we got a couple years ago when we first started the effort, but unsure of the basis. 

[Alexander Esseveld]

Hi Greg,

Thanks for also doing some research on this. I'll post some quotes I'm still waiting on here as well.