Crist Veto of Condo Insurance Bill Disappoints Unit Owners, Agents
June 8, 2009
Florida Gov. Charlie Crist’s veto of a condo insurance bill has disappointed condo unit owners and insurance agents who must comply with what they say is a costly and confusing existing law that would have been modified by the vetoed bill.
Crist cited fire safety concerns in his veto but critics say he has overlooked other benefits of Senate Bill 714 in refusing to sign it, including correcting apparent drafting errors in the current law (H.B. 601) that was enacted in 2008.
S.B. 714 would have extended the deadline for condo buildings to install fire sprinklers in common areas until 2025; as a result of the veto, the deadline will now remain Dec. 31, 2014.
Some condo, mobile home and cooperative associations across the state are concerned about having to comply with a sprinkler installation mandate that could prove expensive at a time when the economy and the state’s condo real estate market are in deep trouble and many unit owners are struggling to hold onto their properties.
But in his refusal to extend the deadline, Crist said safety for residents and responders trumped cost concerns.
"I am sensitive to the costs associated with installing the fire sprinkler systems, especially in these challenging economic times. However, in the event of a fire, public safety for residents and for the firefighters and emergency medical personnel who lay their lives of the line to provide services greatly outweigh all other considerations," the governor said in his letter explaining his veto.
He called for a study to determine the actual costs to retrofit buildings with the sprinklers and the effect on insurance premiums.
Yeline Goin, executive director of Community Association Leadership Lobby (CALL), whose group called a press conference to protest the veto, said in a letter to lawmakers that "associations will be required to expend hundreds of thousands of dollars to retrofit their buildings or obtain a vote of the owners to forego retrofitting."
S.B. 714 also would have exempted some single and two-story buildings with exterior egress from fire alarm system requirements but now they, too, will have to "spend significant funds" to comply with the law, according to CALL, which represents about 4,000 condo, mobile home and cooperative associations.
According to Gary A. Poliakoff, an attorney with the Fort Lauderdale law firm Becker & Poliakoff, imposing the extra costs for fire sprinklers "adds insult to injury" to condo unit owners suffering through the financial crisis.
In a letter to Crist, Poliakoff blasted the veto advice the governor apparently accepted, asking: "[E]xactly who did your advisors assume will be forced to pay the special assessments to retrofit a condominium where 40 percent to 50 percent of the units are in default in payment of their assessments, or in mortgage foreclosure?"
Condo owners are not the only ones expressing frustration at Crist’s veto. In his group’s most recent newsletter, Jeff Grady, president, Florida Association of Insurance Agents, wrote:
"After all the fuss over the ’glitches’ in last year’s condo bill, after all the re-drafting, the meetings, the coalitions, and striving to explain insurance concepts to a world of those who already thought they understood them; we finally get the bill drafted, amended, and passed, and the governor vetoes S.B. 714. That’s right, affectionately called the ’condo glitch bill,’ it was the one sure to be signed into law. But it won’t become law because of a provision dealing with fire sprinklers!! "
The fire sprinklers are just one concern that S.B. 714 was supposed to address. The bill also would have clarified existing laws involving condo unit owners’ insurance.
The current law requires unit owners to show annual proof of insurance to cover not only typical hazards but also at least $2,000 in "special assessment coverage." The unit owner’s policy must list the association as an additional named insured. Also, the law authorizes condo associations to purchase a policy for any unit owner who does not annually produce proof, a situation known as "force place insurance."
S.B. 714 would have addressed some of the insurance issues by correcting what many see as language errors in the 2008 statute.
"No doubt the drafter’s intent was to make it a unit owner obligation to carry insurance and be responsible for repairs for upgrades or ’betterments’ made to the improvements. But that is not what the law says," Poliakoff told Crist in his letter. "It imposes upon unit owner(s) the obligation for carrying insurance on, and repairing if damaged by casualty, all improvements that ’benefit fewer than all unit owners.’"
The current law doesn’t define "improvements" and other terms, according to Poliakoff, and the result is that unit owners are being forced to pay for insurance for damage to balconies, parking spaces or garages, storage bins, or other improvements generally designated as "limited common elements" that are typically covered by master policies of the association.
Current law states that insurance policies must include "special assessment coverage of no less than $2,000 per occurrence" for these common elements, language that has caused confusion as unit owners seek out "special assessment" coverage, which really doesn’t exist. What the law should say, and S.B. 714 would have made clear, is "loss assessment coverage," according to Poliakoff and insurance agents.
The measure Crist vetoed would also have changed some eligibility rules and responsibilities for those who sit on the boards of condo associations.
But none of these changes will occur now. Until changes are enacted, the fire sprinkler requirement remains in effect; basic unit owner coverage remains mandatory; the unit owner must have additional $2,000 "special assessment" coverage; and the association must be named as an additional insured and loss payee on all unit owner policies.
"So, it’s back to square one; meaning nothing changes as we had hoped," FAIA’s Grady wrote to his agents. "Square one– where your answer was always ’I don’t know.’ ’I don’t know’ what special assessment coverage means or where you can buy it. ’I don’t know’ what happens if the association is supposed to be an ’additional named insured’ and the carrier won’t allow it. ’I don’t know’ whether the unit owner has to buy insurance or not and if he doesn’t buy it where force-placed coverage can be found for the association– thanks to the governor."