[This post originally appeared four years ago but I was reminded of it this week when a water leak issue surfaced in another condo building. The issues remain relevant.]
I woke up in the middle of the night to the sound of a huge crashing noise that sounded like it came from my bathroom. I grabbed the nearest weapon (a formidable broken post-hole digger handle) and tiptoed into the bathroom ready for imminent batting practice. I was relieved to find not an intruder but the entire ceiling above my bathtub resting peacefully and soggily in my tub in a pool of dirty water. Turns out the upstairs neighbor had forgotten to turn the water off when filling her tub and it had overflowed and leaked through the floor and walls onto my ceiling which eventually collapsed from the weight. It got way more interesting after the initial incident.
Who is responsible for damages in this sort of incident in a multi-story condo building; the offending unit owner, the damaged unit's owner or the association? I got lucky and my neighbor made the repairs to my unit at her expense without my even asking. Had she not, I would have had to make a claim on my unit insurance as the other owner's insurance does not cover my unit. Surprisingly, neither does the association's policy. Unknown to me at the time, my insurance company would probably have paid me and then gone after my neighbor and her insurance company and possibly the association for recovery of the money they paid me.
A similar incident happened in a unit I manage when the washer failed and leaked into the downstairs kitchen causing damage. Like my upstairs neighbor I paid to have the electrical and sheetrock damage repaired. Unknown to me, that unit owner filed a claim with their insurance company for inflated damages and collected a check for far more than the actual damages including the items that I had already taken care of and paid for. Several months later, the owner of the unit I managed received notice of a suit for damages from him by the downstairs unit owner's insurance company.
I was reminded of this last week when a lender's search of court records for a condo purchase in Cocoa Beach turned up a lawsuit against the association by a unit owner's insurance company in a similar water leak incident from one unit into another. I understand that it makes sense in a lawsuit to name as many parties as possible to increase odds of eventually settling with someone. Being named in a lawsuit even where no liability exists can be more than just a hassle for a condo association as we found out. An unsettled lawsuit against an association will stop the mortgage process faster than a Stop Stick in the path of a speeding 69 Camaro.
In our case, the underwriter refused to sign off on the file that was otherwise approved because of unknown liability to the association, Florida law be damned. Florida Statutes appear to actually prevent an association from insuring the interior of units. For your reading enjoyment as applies to the association's insurance coverage requirements from the Statute (below); Make your own interpretations and decisions.
718.113(2). 3. The coverage must exclude all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any insurance thereupon is the responsibility of the unit owner.
Hopefully we will overcome the underwriter's objections and close. Takeaway: A specific person/entity's liability may matter less than the implications of a lawsuit initiated by an owner or her insurance carrier in the absence of an equitable settlement between involved unit owners. In my original experience, no insurance company was involved, remedy costs were minimal and no other owners were affected. In my second experience and in last week's incident, all unit owners were affected by the route taken by the affected owners. Sales involving a mortgage in a complex with an unsettled lawsuit against the association even if frivolously filed as in this case may be put on hold until the suit is settled and recorded.
It may not seem fair but if you're involved in a water leak incident in a condo building you may want to weigh the costs/benefits of settling without insurance company involvement against the unintended effects of an insurance company lawsuit's scattergun approach. The damages to you or one of your neighbors from a lost or delayed sale could be far more than the cost to repair the water damage.
"There are downsides to everything; there are unintended consequences to everything." __________Steve Jobs