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Condo associations should have insurance

July 12, 2013
By SYLVIA HELDRETH - Real Estate Law , Cape Coral Daily Breeze

QUESTION: We live in a condo. I watched in horror yesterday as one of the landscaper's trucks almost ran into our neighbor's car. My husband is on our condo board. It occurred to me that if the landscaper had damaged or destroyed the car, the association, and possible my husband, could be sued because the association hired them and they are working on the common areas. Should I be worried?

ANSWER: This is why associations have insurance. Many companies perform services that if done improperly could result in damage to persons or property. This damage could result in claims against the association.

Most associations conduct an annual review of insurance coverage. If that has not been done recently, perhaps you should suggest that your husband ask the board to consider a risk management review for this eventuality and others like it.

Additionally, service contracts should require the contractor to indemnify the association. The clause is simple and usually reads something like: Party A (the contractor) agrees to the fullest extent permitted by law, to indemnify and hold harmless Party B, the association, its officers, directors, members and employees from all liabilities, damages, losses and costs.

This means that the contractor has contractually obligated himself to protect a second party, the association and others mentioned, against damages resulting from the contractor's conduct. Damages include anything reasonable foreseeable. The contractor should not refuse to agree to these terms and should show proof that he has sufficient insurance. If the contractor does not have adequate coverage then the indemnification may be worthless.

For example, Highrise Condominium has contracted with Elvis Elevator Company a company with few assets and recently lapsed insurance. If an Elvis truck were to destroy a resident's property that was on a common element, the association could be sued.

Even if the language of the contract included indemnification, Elvis would not have the wherewithal to defend the association or even itself. Elvis Elevator could declare bankruptcy and the association would have to defend itself against the claim through its own insurance carriers with no recourse against Elvis for out-of-pocket costs including the insurance deductible.

Clearly, it is important that the association negotiate adequate indemnification and insurance terms in its contract. Together, they would provide adequate protection for the association.

Consider involving your attorney in reviewing your association's potential vulnerability.

Attorney Sylva Heldreth is a certified specialist in real estate law. Her office is located at 1215 Miramar St., in Cape Coral.

This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.



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