Question. I own a unit in a condominium with 180 units. Recently, my apartment was damaged as a result of an overflowing humidifier in a unit several floors above me. The unit owner whose humidifier overflowed and caused the damage reported it to his insurance company, which denied payment. Apparently, the insurance company took the position that their insured was not negligent since there was a maintenance contract on the equipment and it had been properly serviced. The Condominium insurance company would not take care of it because there was a deductible of $1,000 and the damage to my apartment was only $480.00. Unfortunately, my own insurance company would not cover the loss because I have a $500.00 deductible. I am an innocent victim of a circumstance over which I have no control. Who should bear the risk of this loss?
Answer. You have touched on perhaps one of the most complicated areas of condominium law.
Before addressing your question, however, I want to highlight a very important issue, namely the absolute need for every unit owner to obtain his or her own insurance policy covering loss or damage to the individual condominium unit itself. In the insurance trade, this condominpolicy is referred to as an HO-6 policy.
I would rather have two or three insurance companies fighting out the question of liability rather than be uninsured for my own unit. Fortunately, your loss (albeit significant to you) was rather minimal. Had the loss been greater, at least your insurance company would have picked up the bulk of the damages.
Every analysis of condominium issues must start with a careful reading of the condominium documents relating to your particular association. Most condominium Bylaws contain provisions specifically addressing these issues. A common provision in Bylaws is that any deductible is a common expense, and should be borne by the association itself, unless it can be proven that a unit owner was negligent. In such a case, that unit owner will be held responsible for the damage.
In your situation, there are basically three potential players: you, the unit owner whose humidifier caused the damage in the first place, and your condominium association.
You are absolutely right it is not fair to be stuck with a loss for a problem caused by someone else -- even if that problem was not caused by negligence. The general rule of law is that when one person innocently suffers harm at the expense of another, as between those two parties, the person causing the expense (even though innocent) should be responsible for the damage. In legal terms, it could be argued that "but for" the problem in the unit owner's apartment, you would not have suffered any damages.
However, your condominium documents may very well pass the liability back to the association, and it seems to me that even though the association's deductible is $1,000, you may have a decent argument that the association should bear the risk. After all, it was the association that opted for a $1,000 deductible, and it had the opportunity to select a different deductible if it so desired.
From the condominium association's point of view, however, this also is not fair. Why should 160 unit owners pay for a problem that stemmed from only one of those units?
Many condominium associations are presently in the process of reevaluating their Bylaws, with a view toward trying to amend them so as to specifically address this insurance issue. Many of my association clients have amended their legal documents so that if a problem occurs in a unit -- regardless of fault –that unit owner is responsible for paying the deductible. And if that's the case, the owner's HO-6 will pick up the great majority of the deductible.
In my opinion, the association may very well be responsible in your case. However, the association should also seriously consider changing its Bylaws so as to adopt a form of "strict liability." Under these circumstances, the Bylaws would read that if a problem arises from the common elements, the association will be liable. However, if the problem arises from an indi unit, regardless of whether that unit owner was negligent or not, that unit owner will be responsible for paying the deductible.
You have stated that the problem started from the unit above you. If your association adopts such a proposal, that owner would pay the deductible, and any damages above that would be paid by the association or the association's insurance carrier.
In my opinion, this is a fair and equitable way to resolve this very thorny issue.
Written by Benny L. Kass
Nancy M. Alexander - Stone Harbor and Avalon NJ Real Estate NancyAlexander.com
