An example of a loss assessment claim occurs when a condominium association's master insurance policy doesn't fully cover the cost of damage to common property, leading to unit owners being assessed for the remaining expenses. For instance, if a fire heavily damages the shared lobby and hallways of a residential building, and the repair costs exceed the association's insurance payout, individual unit owners might face a special assessment to cover the shortfall.
Loss assessment claims arise when homeowners associations (HOAs) or condominium associations levy a special charge on their members to cover an uninsured or underinsured loss to shared property. This typically happens when a significant event causes damage that the association's master insurance policy either doesn't cover completely or has a deductible higher than the available funds.
Common scenarios that can lead to a loss assessment claim include:
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Damage to Shared Property:
- Vandalism: If the building's exterior or shared property, such as a community clubhouse, is vandalized, and the repair costs are substantial, unit owners might be assessed.
- Natural Disasters: Damage to shared interior spaces, the exterior, or other common elements resulting from events like severe storms, hurricanes, or certain other natural disasters can lead to significant repair bills that exceed the association's master policy limits.
- Fire: Costs to repair shared interior spaces or the overall building structure damaged by fire, particularly if they surpass the master policy's coverage.
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Personal Liability Incidents:
- Accidents in Common Areas: If a personal liability incident occurs in a shared area, such as a slip and fall in a common hallway, and the association is found liable, any judgment or settlement costs not fully covered by their liability insurance could result in a loss assessment for the members.
| Incident Type | Example Scenario |
|---|---|
| Shared Property Damage | A hurricane causes extensive damage to the roof and community pool of a condo complex, and the repair cost exceeds the master policy's limit. |
| Vandalism | Graffiti covers the entire exterior of the building, and the cost for professional cleaning and restoration is passed onto residents. |
| Personal Liability | Someone is injured in the building's gym due to alleged negligence of the association, leading to a lawsuit whose costs exceed liability coverage. |
These assessments ensure that the financial burden of large, unexpected expenses to common property is distributed among the members of the association when the master insurance policy falls short.
