Florida Senate - 2008 CS for SB 2470

By the Committee on Regulated Industries; and Senator Deutch

580-05747-08 20082470c1

A bill to be entitled

An act relating to condominium associations; amending s.

718.111, F.S.; requiring that hazard insurance be based

upon the replacement cost of the property to be insured as

determined by an independent insurance appraisal or update

of a prior appraisal; requiring that the full insurable

value be determined at specified intervals; providing a

means by which an association may provide adequate hazard

insurance; authorizing an association to consider certain

information when determining coverage amounts; providing

for coverage by developer-controlled associations;

providing that policies may include deductibles as

determined by the association's board of directors;

providing requirements and guidelines for the

establishment of such deductibles; requiring that the

amounts of deductibles be set at a meeting of the board;

providing requirements for such meeting; requiring that an

association controlled by unit owners operating as a

residential condominium use its best efforts to obtain and

maintain adequate insurance to protect the association and

property under its supervision or control; providing that

a declaration of condominium may provide that condominium

property consisting of freestanding buildings comprised of

no more than one building in or on such unit need not be

insured by the association if the declaration requires the

unit owner to obtain adequate insurance for the

condominium property; authorizing an association to obtain

and maintain liability insurance for directors and

officers, insurance for the benefit of association

employees, and flood insurance for common elements,

association property, and units; requiring that every

hazard insurance policy issued or renewed on or after a

specified date for the purpose of protecting the

condominium provide certain coverage; requiring that such

policies contain certain provisions; providing that such

policies issued to individual unit owners do not provide

rights of subrogation against the condominium association;

providing for the insurance of improvements or additions

benefiting fewer than all unit owners; requiring that an

association require each owner to provide evidence of a

current policy of hazard and liability insurance upon

request; limiting the frequency with which an association

may make such a request; authorizing an association to

purchase coverage on behalf of an owner under certain

circumstances; providing for the collection of the costs

of such a policy; providing responsibilities of the unit

owner and association with regard to reconstruction work

and associated costs after a casualty loss; authorizing a

multicondominium association to operate such condominiums

as a single condominium for certain purposes by majority

vote of the members of all applicable condominiums;

providing that such election constitutes an amendment to

the declaration of all applicable condominiums; requiring

that an association maintain insurance or fidelity bonding

for all persons who control or disburse association funds;

requiring that such insurance policy or fidelity bond

cover the maximum funds in the custody of the association

or its management agent at any one time; defining the term

"persons who control or disburse funds of the

association"; authorizing an association to amend the

declaration of condominium without regard to any

requirement for approval by mortgagees of amendments

affecting insurance requirements for the purpose of

conforming the declaration of condominium to certain

coverage requirements; providing that any portion of the

condominium property required to be insured by the

association against casualty loss which is damaged be

reconstructed, repaired, or replaced as necessary by the

association as a common expense; providing that all hazard

insurance deductibles, uninsured losses, and other damages

in excess of hazard insurance coverage under the hazard

insurance policies maintained by the association are a

common expense of the condominium; providing exceptions;

allocating responsibility for certain costs of repair or

reconstruction; authorizing an association to opt out of

certain requirements related to such allocation of

responsibility by majority vote; providing a procedure by

which a multicondominium association that has not

consolidated its financial operations may opt out of such

allocation of responsibility; requiring that a decision to

opt out be recorded; providing that such decision takes

effect on the date on which it is recorded; authorizing

the reversal of such decision; providing a procedure for

reversal; providing that an association is not obligated

to pay for any reconstruction or repair expenses for

improvements made by an owner or the development if an

improvement benefits only the unit for which it was

installed; amending s. 718.113, F.S.; revising application

of provision relating to the material alteration or

substantial additions to the common elements or to real

property which is association property to apply to certain

associations; creating s. 718.1265, F.S.; authorizing a

condominium association board to exercise specified

emergency powers during an emergency created by declared

disaster; providing a limitation; providing an effective

date.

Be It Enacted by the Legislature of the State of Florida:

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Section 1. Subsection (11) of section 718.111, Florida

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Statutes, is amended to read:

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718.111 The association.--

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(11) INSURANCE.--In order to protect the safety, health,

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and welfare of the people of the State of Florida and to ensure

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consistency in the provision of insurance coverage to

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condominiums and their unit owners, this subsection applies

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paragraphs (a), (b), and (c) are deemed to apply to every

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residential condominium in the state, regardless of the date of

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its declaration of condominium. It is the intent of the

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Legislature to encourage lower or stable insurance premiums for

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associations described in this subsection section.

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(a) Adequate hazard insurance, regardless of any

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requirement in the declaration of condominium for coverage by the

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association for full insurable value, replacement cost, or

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similar coverage, shall be based upon the replacement cost of the

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property to be insured as determined by an independent insurance

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appraisal or update of a prior appraisal. The full insurable

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value shall be determined at least once every 36 months.

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1. An association or group of associations may provide

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adequate hazard insurance through a self-insurance fund that

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complies with the requirements of ss. 624.460-624.488.

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2. The association may also provide adequate hazard

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insurance coverage individually or for a group of no fewer than

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three communities created and operating under this chapter,

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chapter 719, chapter 720, or chapter 721 by obtaining and

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maintaining for such communities insurance coverage sufficient to

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cover an amount equal to the probable maximum loss for the

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communities for a 250-year windstorm event. Such probable maximum

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loss must be determined through the use of a competent model that

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has been accepted by the Florida Commission on Hurricane Loss

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Projection Methodology. No policy or program providing such

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coverage shall be issued or renewed after July 1, 2008, unless it

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has been reviewed and approved by the Office of Insurance

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Regulation. The review and approval shall include approval of the

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policy and related forms pursuant to ss. 627.410 and 627.411,

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approval of the rates pursuant to s. 627.062, a determination

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that the loss model approved by the Commission was accurately and

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appropriately applied to the insured structures to determine the

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250-year probable maximum loss, and a determination that complete

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and accurate disclosure of all material provisions is provided

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to condominium unit owners prior to execution of the agreement by

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a condominium association.

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3. When determining the adequate amount of hazard insurance

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coverage, the association may consider deductibles as determined

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by this subsection.

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(b) If an association is a developer-controlled

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association, the association shall exercise its best efforts to

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obtain and maintain insurance as described in paragraph (a).

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Failure to obtain and maintain adequate hazard insurance during

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any period of developer control constitutes a breach of fiduciary

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responsibility by the developer-appointed members of the board of

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directors of the association, unless the members can show that

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despite such failure, they have made their best efforts to

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maintain the required coverage.

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board.

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1. The deductibles shall be consistent with industry

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standards and prevailing practice for communities of similar size

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and age, and having similar construction and facilities in the

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locale where the condominium property is situated.

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2. The deductibles may be based upon available funds,

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including reserve accounts, or predetermined assessment authority

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at the time the insurance is obtained.

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3. The board shall establish the amount of deductibles

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based upon the level of available funds and predetermined

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assessment authority at a meeting of the board. Such meeting

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shall be open to all unit owners in the manner set forth in s.

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718.112(2)(e). The notice of such meeting must state the proposed

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deductible and the available funds and the assessment authority

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relied upon by the board and estimate any potential assessment

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amount against each unit, if any. The meeting described in this

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paragraph may be held in conjunction with a meeting to consider

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the proposed budget or an amendment thereto.

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(d) An association controlled by unit owners operating as a

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residential condominium shall use its best efforts to obtain and

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maintain adequate insurance to protect the association, the

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association property, the common elements, and the condominium

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property that is required to be insured by the association

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pursuant to this subsection.

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(e) The declaration of condominium as originally recorded,

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or as amended pursuant to procedures provided therein, may

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provide that condominium property consisting of freestanding

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buildings comprised of no more than one building in or on such

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unit need not be insured by the association if the declaration

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requires the unit owner to obtain adequate insurance for the

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condominium property. An association may also obtain and maintain

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liability insurance for directors and officers, insurance for the

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benefit of association employees, and flood insurance for common

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elements, association property, and units.

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(f) Every hazard insurance policy issued or renewed on or

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after January 1, 2009, for the purpose of protecting the

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condominium shall provide primary coverage for:

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1. All portions of the condominium property as originally

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installed or replacement of like kind and quality, in accordance

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with the original plans and specifications.

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2. All alterations or additions made to the condominium

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property or association property pursuant to s. 718.113(2).

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3. The coverage shall exclude all personal property within

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the unit or limited common elements, and floor, wall, and ceiling

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coverings, electrical fixtures, appliances, water heaters, water

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filters, built-in cabinets and countertops, and window

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treatments, including curtains, drapes, blinds, hardware, and

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similar window treatment components, or replacements of any of

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the foregoing.

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(g) Every hazard insurance policy issued or renewed on or

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after January 1, 2009, to an individual unit owner must contain a

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provision stating that the coverage afforded by such policy is

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excess coverage over the amount recoverable under any other

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policy covering the same property. Such policies must include

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special assessment coverage of no less than $2,000 per

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occurrence. An insurance policy issued to an individual unit

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owner providing such coverage does not provide rights of

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subrogation against the condominium association operating the

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condominium in which such individual's unit is located.

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1. All improvements or additions to the condominium

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property that benefit fewer than all unit owners shall be insured

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by the unit owner or owners having the use thereof, or may be

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insured by the association at the cost and expense of the unit

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owners having the use thereof.

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2. The association shall require each owner to provide

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evidence of a currently effective policy of hazard and liability

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insurance upon request, but not more than once per year. Upon the

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failure of an owner to provide a certificate of insurance issued

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by an insurer approved to write such insurance in this state

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within 30 days after the date on which a written request is

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delivered, the association may purchase a policy of insurance on

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behalf of an owner. The cost of such a policy, together with

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reconstruction costs undertaken by the association but which are

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the responsibility of the unit owner, may be collected in the

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manner provided for the collection of assessments in s. 718.116.

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3. All reconstruction work after a casualty loss shall be

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undertaken by the association except as otherwise authorized in

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this section. A unit owner may undertake reconstruction work on

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portions of the unit with the prior written consent of the board

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of administration. However, such work may be conditioned upon the

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approval of the repair methods, the qualifications of the

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proposed contractor, or the contract that is used for that

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purpose. A unit owner shall obtain all required governmental

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permits and approvals prior to commencing reconstruction.

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4. Unit owners are responsible for the cost of

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reconstruction of any portions of the condominium property for

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which the unit owner is required to carry casualty insurance, and

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any such reconstruction work undertaken by the association shall

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be chargeable to the unit owner and enforceable as an assessment

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pursuant to s. 718.116. The association must be an additional

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named insured and loss payee on all casualty insurance policies

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issued to unit owners in the condominium operated by the

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association.

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5. A multicondominium association may elect, by a majority

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vote of the collective members of the condominiums operated by

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the association, to operate such condominiums as a single

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condominium for purposes of insurance matters, including, but not

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limited to, the purchase of the hazard insurance required by this

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section and the apportionment of deductibles and damages in

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excess of coverage. The election to aggregate the treatment of

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insurance premiums, deductibles, and excess damages constitutes

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an amendment to the declaration of all condominiums operated by

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the association, and the costs of insurance shall be stated in

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the association budget. The amendments shall be recorded as

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required by s. 718.110.

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(h) The association shall maintain insurance or fidelity

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bonding of all persons who control or disburse funds of the

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association. The insurance policy or fidelity bond must cover the

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maximum funds that will be in the custody of the association or

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its management agent at any one time. As used in this paragraph,

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the term "persons who control or disburse funds of the

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association" includes, but is not limited to, those individuals

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authorized to sign checks on behalf of the association, and the

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president, secretary, and treasurer of the association. The

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association shall bear the cost of any such bonding.

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(i) The association may amend the declaration of

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condominium without regard to any requirement for approval by

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mortgagees of amendments affecting insurance requirements for the

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purpose of conforming the declaration of condominium to the

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coverage requirements of this subsection.

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(j) Any portion of the condominium property required to be

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insured by the association against casualty loss pursuant to

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paragraph (f) which is damaged by casualty shall be

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reconstructed, repaired, or replaced as necessary by the

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association as a common expense. All hazard insurance

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deductibles, uninsured losses, and other damages in excess of

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hazard insurance coverage under the hazard insurance policies

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maintained by the association are a common expense of the

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condominium, except that:

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1. A unit owner is responsible for the costs of repair or

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replacement of any portion of the condominium property not paid

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by insurance proceeds, if such damage is caused by intentional

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conduct, negligence, or failure to comply with the terms of the

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declaration or the rules of the association by a unit owner, the

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members of his or her family, unit occupants, tenants, guests, or

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invitees, without compromise of the subrogation rights of any

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insurer as set forth in paragraph (g).

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2. The provisions of subparagraph 1. regarding the

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financial responsibility of a unit owner for the costs of

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repairing or replacing other portions of the condominium property

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also applies to the costs of repair or replacement of personal

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property of other unit owners or the association, as well as

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other property, whether real or personal, which the unit owners

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are required to insure under paragraph (g).

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3. To the extent the cost of repair or reconstruction for

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which the unit owner is responsible under this paragraph is

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reimbursed to the association by insurance proceeds, and, to the

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extent the association has collected the cost of such repair or

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reconstruction from the unit owner, the association shall

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reimburse the unit owner without the waiver of any rights of

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subrogation.

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4. The association is not obligated to pay for repair or

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reconstruction or repairs of casualty losses as a common expense

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if the casualty losses were known or should have been known to a

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unit owner and were not reported to the association until after

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the insurance claim of the association for that casualty was

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settled or resolved with finality, or denied on the basis that it

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was untimely filed.

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(k) An association may, upon the approval of a majority of

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the total voting interests in the association, opt out of the

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provisions of paragraph (j) for the allocation of repair or

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reconstruction expenses and allocate repair or reconstruction

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expenses in the manner provided in the declaration as originally

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recorded or as amended. Such vote may be approved by the voting

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interests of the association without regard to any mortgagee

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consent requirements.

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(l) In a multicondominium association that has not

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consolidated its financial operations under s. 718.111(6), any

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condominium operated by the association may opt out of the

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provisions of paragraph (j) with the approval of a majority of

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the total voting interests in that condominium. Such vote may be

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approved by the voting interests without regard to any mortgagee

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consent requirements.

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(m) Any association or condominium voting to opt out of the

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guidelines for repair or reconstruction expenses as described in

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paragraph (j) must record a notice setting forth the date of the

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opt-out vote and the page of the official records book on which

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the declaration is recorded. The decision to opt out is effective

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upon the date of recording of the notice in the public records by

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the association. An association that has voted to opt out of

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paragraph (j) may reverse that decision by the same vote required

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in paragraphs (k) and (l), and notice thereof shall be recorded

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in the official records.

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(n) The association is not obligated to pay for any

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reconstruction or repair expenses due to casualty loss to any

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improvements installed by a current or former owner of the unit

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or by the developer if the improvement benefits only the unit for

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which it was installed and is not part of the standard

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improvements installed by the developer on all units as part of

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original construction, whether or not such improvement is located

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within the unit. This paragraph does not relieve any party of its

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obligations regarding recovery due under any insurance

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implemented specifically for any such improvements.

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(o) The provisions of this subsection shall not apply to

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timeshare condominium associations. Insurance for timeshare

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condominium associations shall be maintained pursuant to s.

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721.165. Therefore, the Legislature requires a report to be

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prepared by the Office of Insurance Regulation of the Department

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of Financial Services for publication 18 months from the

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effective date of this act, evaluating premium increases or

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decreases for associations, unit owner premium increases or

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decreases, recommended changes to better define common areas, or

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any other information the Office of Insurance Regulation deems

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appropriate.

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(a) A unit-owner controlled association operating a

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residential condominium shall use its best efforts to obtain and

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maintain adequate insurance to protect the association, the

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association property, the common elements, and the condominium

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property required to be insured by the association pursuant to

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paragraph (b). If the association is developer controlled, the

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association shall exercise due diligence to obtain and maintain

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such insurance. Failure to obtain and maintain adequate insurance

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during any period of developer control shall constitute a breach

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of fiduciary responsibility by the developer-appointed members of

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the board of directors of the association, unless said members

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can show that despite such failure, they have exercised due

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diligence. The declaration of condominium as originally recorded,

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or amended pursuant to procedures provided therein, may require

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that condominium property consisting of freestanding buildings

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where there is no more than one building in or on such unit need

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not be insured by the association if the declaration requires the

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unit owner to obtain adequate insurance for the condominium

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property. An association may also obtain and maintain liability

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insurance for directors and officers, insurance for the benefit

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of association employees, and flood insurance for common

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elements, association property, and units. Adequate insurance,

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regardless of any requirement in the declaration of condominium

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for coverage by the association for "full insurable value,"

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"replacement cost," or the like, may include reasonable

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deductibles as determined by the board based upon available funds

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or predetermined assessment authority at the time that the

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insurance is obtained.

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1. Windstorm insurance coverage for a group of no fewer

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than three communities created and operating under this chapter,

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chapter 719, chapter 720, or chapter 721 may be obtained and

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maintained for the communities if the insurance coverage is

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sufficient to cover an amount equal to the probable maximum loss

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for the communities for a 250-year windstorm event. Such probable

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maximum loss must be determined through the use of a competent

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model that has been accepted by the Florida Commission on

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Hurricane Loss Projection Methodology. Such insurance coverage is

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deemed adequate windstorm insurance for the purposes of this

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section.

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2. An association or group of associations may self-insure

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against claims against the association, the association property,

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and the condominium property required to be insured by an

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association, upon compliance with the applicable provisions of

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ss. 624.460-624.488, which shall be considered adequate insurance

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for the purposes of this section. A copy of each policy of

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insurance in effect shall be made available for inspection by

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unit owners at reasonable times.

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(b) Every hazard insurance policy issued or renewed on or

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after January 1, 2004, to protect the condominium shall provide

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primary coverage for:

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1. All portions of the condominium property located outside

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the units;

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2. The condominium property located inside the units as

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such property was initially installed, or replacements thereof of

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like kind and quality and in accordance with the original plans

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and specifications or, if the original plans and specifications

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are not available, as they existed at the time the unit was

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initially conveyed; and

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3. All portions of the condominium property for which the

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declaration of condominium requires coverage by the association.

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Anything to the contrary notwithstanding, the terms "condominium

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property," "building," "improvements," "insurable improvements,"

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"common elements," "association property," or any other term

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found in the declaration of condominium which defines the scope

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of property or casualty insurance that a condominium association

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must obtain shall exclude all floor, wall, and ceiling coverings,

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electrical fixtures, appliances, air conditioner or heating

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equipment, water heaters, water filters, built-in cabinets and

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countertops, and window treatments, including curtains, drapes,

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blinds, hardware, and similar window treatment components, or

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replacements of any of the foregoing which are located within the

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boundaries of a unit and serve only one unit and all air

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conditioning compressors that service only an individual unit,

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whether or not located within the unit boundaries. The foregoing

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is intended to establish the property or casualty insuring

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responsibilities of the association and those of the individual

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unit owner and do not serve to broaden or extend the perils of

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coverage afforded by any insurance contract provided to the

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individual unit owner. Beginning January 1, 2004, the association

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shall have the authority to amend the declaration of condominium,

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without regard to any requirement for mortgagee approval of

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amendments affecting insurance requirements, to conform the

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declaration of condominium to the coverage requirements of this

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section.

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after January 1, 2004, to an individual unit owner shall provide

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that the coverage afforded by such policy is excess over the

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amount recoverable under any other policy covering the same

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property. Each insurance policy issued to an individual unit

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owner providing such coverage shall be without rights of

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subrogation against the condominium association that operates the

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condominium in which such unit owner's unit is located. All real

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or personal property located within the boundaries of the unit

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owner's unit which is excluded from the coverage to be provided

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by the association as set forth in paragraph (b) shall be insured

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by the individual unit owner.

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(d) The association shall obtain and maintain adequate

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insurance or fidelity bonding of all persons who control or

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disburse funds of the association. The insurance policy or

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fidelity bond must cover the maximum funds that will be in the

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custody of the association or its management agent at any one

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time. As used in this paragraph, the term "persons who control or

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disburse funds of the association" includes, but is not limited

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to, those individuals authorized to sign checks and the

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president, secretary, and treasurer of the association. The

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association shall bear the cost of bonding.

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Section 2. Paragraph (a) of subsection (2) of section

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718.113, Florida Statutes, is amended to read:

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718.113 Maintenance; limitation upon improvement; display

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of flag; hurricane shutters.--

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(2)(a) Except as otherwise provided in this section, there

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shall be no material alteration or substantial additions to the

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common elements or to real property which is association

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property, except in a manner provided in the declaration as

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originally recorded or as amended under the procedures provided

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therein. If the declaration as originally recorded or as amended

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under the procedures provided therein does not specify the

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procedure for approval of material alterations or substantial

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additions, 75 percent of the total voting interests of the

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association must approve the alterations or additions. This

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paragraph is intended to clarify existing law and applies to

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associations existing on the effective date of this act.

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Section 3. Section 718.1265, Florida Statutes, is created

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to read:

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718.1265 Association emergency powers.--

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(1) To the extent allowed by law and unless specifically

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prohibited by the declaration of condominium, the articles, or

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the bylaws of an association, and consistent with the provisions

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of s. 617.0830, the board of administration, in response to

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damage caused by an event for which a state of emergency is

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declared pursuant to s. 252.36 in the locale in which the

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condominium is located, may, but is not required to, exercise the

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following powers:

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(a) Conduct board meetings and membership meetings with

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notice given as is practicable. Such notice may be given in any

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practicable manner, including publication, radio, United States

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mail, the Internet, public service announcements, and conspicuous

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posting on the condominium property or any other means the board

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deems reasonable under the circumstances. Notice of board

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decisions may be communicated as provided in this paragraph.

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(b) Cancel and reschedule any association meeting.

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directors, which assistant officers shall have the same authority

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as the executive officers to whom they are assistants during the

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state of emergency to accommodate the incapacity or

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unavailability of any officer of the association.

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(d) Relocate the association's principal office or

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designate alternative principal offices.

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(e) Enter into agreements with local counties and

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municipalities to assist counties and municipalities with debris

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removal.

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(f) Implement a disaster plan before or immediately

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following the event for which a state of emergency is declared

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that may include, but is not limited to, shutting down or off

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elevators; electricity; water, sewer, or security systems; or air

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conditioners.

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(g) Declare any portion of the condominium property

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unavailable for entry or occupancy by unit owners, family

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members, tenants, guests, agents, or invitees to protect the

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health, safety, or welfare of such persons.

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(h) Require the evacuation of the condominium property in

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the event of a mandatory evacuation order in the locale in which

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the condominium is located. Should any unit owner or other

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occupant of a condominium fail or refuse to evacuate the

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condominium property where the board has required evacuation, the

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association shall be immune from liability or injury to persons

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or property arising from such failure or refusal.

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(i) Determine whether the condominium property can be

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safely inhabited or occupied. However, such determination is not

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conclusive as to any determination of habitability pursuant to

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the declaration.

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(j) Mitigate further damage, including taking action to

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contract for the removal of debris; and prevent or mitigate the

534

spread of fungus, including, but not limited to, mold or mildew,

535

by removing and disposing of wet drywall, insulation, carpet,

536

cabinetry, or other fixtures, on or within the condominium

537

property, even if the unit owner is obligated by the declaration

538

or law to insure or replace those fixtures and to remove personal

539

property from a unit.

540

(k) Contract, on behalf of any unit owner or owners, for

541

items or services for which the owners are otherwise individually

542

responsible for, but which are necessary to prevent further

543

damage to the condominium property. In such event, the unit owner

544

or owners on whose behalf the board has contracted are

545

responsible for reimbursing the association for the actual costs

546

of the items or services, and the association may use its lien

547

authority provided by s. 718.116 to enforce collection of the

548

charges. Without limitation, such items or services may include

549

the drying of units, the boarding of broken windows or doors, and

550

the replacement of damaged air conditioners or air handlers to

551

provide climate control in the units or other portions of the

552

property.

553

(l) Regardless of any provision to the contrary and even if

554

such authority does not specifically appear in the declaration of

555

condominium, articles, or bylaws of the association, levy special

556

assessments without a vote of the owners.

557

(m) Without unit owner approval, borrow money and pledge

558

association assets as collateral to fund emergency repairs and

559

carry out the duties of the association when operating funds are

560

insufficient. This paragraph does not limit the general authority

561

of the association to borrow money, subject to such restrictions

562

as are contained in the declaration of condominium, articles, or

563

bylaws of the association.

564

(2) The special powers authorized under subsection (1)

565

shall be limited to that time reasonably necessary to protect the

566

health, safety, and welfare of the association, the unit owners,

567

their family members, tenants, guests, agents, or invitees and

568

shall be reasonably necessary to mitigate further damage and make

569

emergency repairs.

570

Section 4. This act shall take effect July 1, 2008.

CODING: Words stricken are deletions; words underlined are additions.