Association and Homeowner Insurance: Who Pays in Oregon?

Last week we discussed disputes that can arise between insurance policies for homeowners and policies for the Association. This week we will turn the focus to the Oregon laws on this topic.

The Basic Requirements

For non-condominium owners’ associations, ORS 94.675 contains requirements for insuring common property. The Association is required to obtain insurance for all insurable improvements in common property against loss or damage by fire or other hazards that covers the full replacement costs. A public liability policy covering all common property and damage or injury caused by the Association’s negligence is also required. In addition, if the Association has sole authority to decide whether to repair or reconstruct any damage to a unit, then the board must obtain blanket all-risk insurance for the full replacement cost of all structures in the community (ORS 94.680).

For condominium associations, if the Bylaws give the Association sole authority to decide whether to repair or reconstruct any damage to a unit, the Association must obtain property insurance covering common elements and individual units. The Association is also required to obtain liability insurance covering the Association, its manager, and its members for acts incident to ownership or use of the property (ORS 100.435).

Answering the Tough Questions

Unfortunately, understanding those basic requirements does not address the disputes that commonly arise, such as:

Should the Association’s policy pay or should the Owner’s?
Who is responsible for paying the deductible?
Does the Association’s policy have to pay even if the Owner was negligent?

Unless your Association already has provisions in the Declaration or Bylaws answering these questions, you should take advantage of the specific resolution-making authority in the Oregon statutes to answer these questions before problems arise.

The Board of Directors has authority to adopt resolutions answering these questions (See ORS 94.676 for non-condominium associations and ORS 100.435(6) for condominium associations). Among other things, boards can adopt resolutions assigning responsibility for payment of the deductible; for determining which policy will be primary in case both the Association and the Owner have coverage for the same damage; requiring owners to obtain insurance coverage to cover the amount of the deductible on the Association’s policy; and providing a procedure for processing insurance claims.

All Associations should review their governing documents and make sure they have resolutions or other provisions addressing all of these topics. If the Board adopts new resolutions, they must be sent to all owners with a notice advising the owner that it is an important notice and that they should contact their insurance agent to determine the effect of the resolution on their individual insurance coverage.

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