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Master Insurance Policy-backup

I. Master Policy Property Insurance Coverage- (Request Full Policy HERE)

The Master Policy provides financial protection against the loss of, or damage to real and personal property of the Mutual Associations.  The Master Policy provides coverage for all buildings, structures, and contents owned by the association against loss or damage by any peril, except those specifically excluded within the policy.  Furthermore, the Master Policy is written on ‘all-in' coverage, which means coverage does extend within individual units to fixtures, appliances, walls, floor coverings and cabinetry including any individual unit improvements, betterments, additions or alterations made by unit owners, except patio covers.

Coverage under the Master Policy is subject to a $5,000 deductible per occurrence.  This means that the Master Policy will cover claims only when the damage caused by any one occurrence exceeds $5,000.  There will be no coverage when the cost of damage from one occurrence is $5,000 or less.


Question ?     Who pays for damages that are $5,000.00 or less?

Answer -  The responsible party can vary.

 Why ?            Because the by-laws of the Mutual's vary, and there may be the potential for negligence on the part of the resident as determined by their Board of Directors.

Example, - Water overflows from the operation of the dishwasher and causes $4999.00 in damages.

Scenario I – Assuming that the Mutual by-laws provide for collecting the deductible from the unit owner, $4999.00 would be the unit owner's to pay.  The Maryland Condominium Act states that if the by-laws provide for collecting the deductible of the Master policy from the unit owner, the maximum that can be collected is $5000.00.

Responsibility – Unit owner $4999.00        Mutual $0.00

Scenario II – Mutual by-laws do not have a provision allowing the Mutual to collect the deductible from the unit owner.

Responsibility – Mutual $4999.00

Scenario III – The Board determines that the unit owner was negligent, and damage results from that negligence and the Mutual by-laws do not have a provision allowing the Mutual to collect the deductible from the unit owner.

Responsibility – A literal reading of the Maryland Condominium Act leads to the conclusion that the Mutual cannot collect any of the expense from the Unit owner and the Mutual must bear the entire $4999.00 expense.  The relevant language in the Maryland Condominium Act is very restrictive and, probably, should be given the narrow reading, which precludes the Mutual from recovering anything from the unit owner.  Note, the Board might be in a different position if they make the decision not to make a claim against the Mutual's insurance coverage. 

You can clearly see that an incident involving damage to a unit, when the source of the damage originates in the unit, may be adjudicated differently in each Mutual.  Unit owners should be aware of their respective Mutual's by-laws as they relate to insurance deductibles.

Note:   The Master Policy does not provide coverage for losses to your personal property (such as furniture, window treatments, clothing, jewelry, silverware, lamps, pictures, arts etc.), personal liability, or additional living expenses (expenses incurred if you cannot occupy your unit after severe damage to your unit).


II. Master Policy General Liability Insurance Coverage

The Master Policy General Liability Insurance will indemnify and defend the association against claims alleging negligence resulting in bodily injury, property damage, and personal injury or advertising injury.  Coverage is afforded to protect unit owners against liability claims arising out of membership in the association.  For example, if somebody slips and falls on the common elements, the Master Policy will indemnify and defend all unit owners against a liability claim for bodily injury that might result.  However, if anybody slips and falls or otherwise sustains bodily injury arising out of or within an individual unit, the Master Policy liability coverage will not apply.


III. Unit Owners Personal Insurance Responsibilities

As a resident, you should be aware that the Master Insurance Policy clearly does not eliminate the need for individual unit owners to purchase Personal Insurance.

To be adequately insured for damage within your unit, you should make sure that your personal homeowners (HO-6) insurance policy includes what is generally referred to as “Building” or “Dwelling” coverage.  This will cover the cost of repairing damage to your unit as the Association's Master Policy does not.

Since the Master Policy deductible is $5,000, it is important for unit owners to have their own individual “Building” or “Dwelling” coverage for damage to their unit.

Many personal homeowners' policies automatically include this coverage, but some do not, so you should check with your insurance agent.  Your “Building” or “Dwelling” coverage currently should have a minimum limit of $5,000.00, to help cover any “gap” resulting from the Master Policy deductible.  Normally, the annual premium charge to purchase this coverage is relatively minimal.



Information is available on the Community web-site, www.lwmc.com or by contacting the broker, USI Insurance (703)-698-0788.

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