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Rich,

I want you on my team when we're discussing coverage. You go the extra mile. You even quoted legal precedent, which is impressive.  However, I have a couple questions.

1. "Water Damage" is a "specified cause of loss". But how is "water damage" defined as a "specified cause of loss"?  Look at the end of CP 10 30 04 02 under definitions.
2. Does the condo association have an insurable interest in the unit owner's A.L.E., and
3. Does the dec page show any coverage for time element exposures (assuming I gave you all the policy info you need in my set up)?
4. Is there any coverage for surface water under any of the policy forms listed above that might give coverage for surface water excluded under the CP 10 30 04 02?
5. To what elements of the loss does a $15,000 mold limit apply? Is it on a per occurrence or per annum basis (This second question is simply out of curiosity and has nothing to do with this claim)?

6.  Does the limitation on interior damage due to rain et. al. that Dave Marlin referenced above apply to this loss?  Why or why not?
7. What elements are paid under the Florida "drywall out" condo statute? (I think your answer applies a statute similar to Maryland or Virginia where only improvements and betterments added after the purchase of the unit are the unit owner's responsibility.)  Maybe one of our Florida Adjusters can weigh in on how the Florida law applies.  I admit that I have more experience with Florida condo law than that of any other state, so I know what it allows.  If this were say, Utah, I would have to download a copy of the law and read it.

BTW, for those who have only handled exterion hail claims and the like, lauan is an inderlayment board placed prior to placing vinyl or wood floor coverings to level the surface.

Steve: The Socratic method sure is a great teaching tool… really works in this case. Thanks for the clarifying questions:

1.) "Water Damage" is a "specified cause of loss". But how is "water damage" defined as a "specified cause of loss"? Look at the end of CP 10 30 04 02 under definitions.

Interesting…- last paragraph of the entire form CP 10 30 04 02…..
“Water damage means accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of a plumbing, heating, air conditioning or other system or appliance (other than a sump system including its related equipment and parts), that is located on the described premises and contains water or steam. “

So this water damage is not a cause of loss since it did not come from - let’s say - a broken pipe or a water heater. In short, a roof leak is not covered since it is not a listed “specified cause of loss”. Even though this damage may be from surface water and excluded by CP 10 30 04 02 B.1.g.1, the limits to the mechanisms (“Specified Causes of Loss”) for the water damage are key. It really does not matter where the water damage came from; it matters where it did not come from.

2) Does the condo association have an insurable interest in the unit owner's A.L.E.?

Good question that gets to the heart of the matter. No. The unit owner is not party to this contract. I wonder if the liability policy could cover this due to vicarious liability much like damage to an offsite bldg.

3) Does the dec page show any coverage for time element exposures (assuming I gave you all the policy info you need in my set up)?

The dec page states that the loss occurred during the policy period, but I do not see anything about an ongoing event (something other than a sudden and accidental cause of loss). The CP 10 65 10 00 Flood coverage endorsement (which I could not find) could cover seepage and surface water.

4) Is there any coverage for surface water under any of the policy forms listed above that might give coverage for surface water excluded under the CP 10 30 04 02?

The CP 10 65 10 00 Flood coverage endorsement ...
I was going back and forth on this. For a flood to be covered, there has to be more than 2 acres of water and more than one property damaged. So, assuming both conditions exist, then the first floor damage is clearly covered. I am not experienced enough to know if the surface water on the flat roof is also covered by the flood policy, and I could not find a policy on the net to look at. But this was one side of it that I thought about after writing up the summary last night.

The surface water on the roof would be covered if the flood waters do not have to be contiguous to the damage. Normally, that condition talks about run off and such away from the 2 acres that determine the flood, but I would venture that it could also mean a non-contiguous roof above the flood waters and the 8" water line.

I also was wondering if there has to be 2+ acres of water on the roof or roofs (probably not) or does it have to be that two buildings have similar roof damage (probably not also) to qualify this part of the building for a flood.

So on balance, I think this would be a good one for a question to a person above my pay grade. With greater reflection on your question, I think that the surface water on the roof could be covered by CP 10 54 06 95, but I could not find anything certain about this.

5. To what elements of the loss does a $15,000 mold limit apply? Is it on a per occurrence or per annum basis?

The scheduled properties are included in this limited coverage, and this an annual limit. No free ride on this one, so first in line gets the bacon.
As long as the mold is on the association owned items, coverage would be available so inside the drywall - demising wall structures - would be covered, but mold on the interior wall paint (owners side) would not be covered.   

6. What elements are paid under the Florida "drywall out" condo statute?

Here’s what one company states:
Dwelling - Our policy provides coverage for the costs to repair damages to your condominium unit that, by law, are your responsibility and not the responsibility of the condominium association. Examples are damages to flooring, wall and ceiling coverings, window treatments and fixtures such as cabinets, lighting, counter tops and built-in appliances contained within your condominium unit. http://www.securityfirstflorida.com...urance.asp

So these elements are the responsibility of the unit owner, regardless of betterment, and the hardwood floor replacement is off the list with the paint.

I have read about a “Law of the Second Time”, and it basically says that it takes about ½ to 1/3 as much time to do something the second time as it does the first. This is very similar to policy questions like this, and it really shows how much more efficient an experienced adjuster is relative to one newer in the field. A good exercise to cut to the heart of the matter.
















 

A couple of clarifications, Rich. I'm not giving my answers quite yet. But I like your thought process.  To tell you the truth, some of my answers are going to be in the "grey" area on this one as well.

In # 3 above, when I used the term "time element exposures", that refers collectively to certain categories of indirect damage, namely A.L.E. or loss of rents on an HO or DP policy, or loss of business income or loss of rents under a commercial policy. The most typical Commercial property form that is used to add this coverage is the CP 00 30. Since the CP 00 10 states "we will pay for direct physical loss or damage", it requires a separate form to cover indirect loss such as "time element exposures" such as those already listed.

In # 5 above, what I was asking is whether testing is included in the $15,000 or is allowable on top of the $15,000.

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Go to proximate cause of water damage. Seepage around roof drain. Contributing factors. Ponding was probable caused by clogged drain pipe. All of the CP forms have the Cause of Loss Forms; none of the perils named includes this proximate cause. I.e.: fire, lightning etc. Windstorm is xxx out on this CP and this peril is in a wind pool. This was also turned down by the wind carrier as no opening on the roof or wall from wind damage was present.

Flooding can only start from ground level and rise up. And the water mark was 8 inches not 50 feet. 

Now this only leaves the CP 30, “risk of loss”. However the risk of loss does not cover any water leaks, unless a hostile opening is made. Any reference to water damage is in the 14 cause of loss named perils in the CP 20 and a clogged up roof drain line by “debris” is not one of the perils. The “risk of loss” (open peril) does not apply to “water” claims unless they are one of the 14 named in the CP-20, but is not a part of this instant policy as the CP-30 is special form. The CP’s have the 10. 20 and 30. You must first have a CP 10 or 20 before you can add the 30, but not both. The other forms in this example are basic to the entire CP except the 165 which is the flood cover. 

The whole loss is excluded as it’s a non specific water loss and not named as one of the perils in CP 10 namely   1. Fire, etc, etc

                                                2. Lightning

                                                3. Explosion

                                                4. Windstorm or Hail

                                                5. Smoke

                                                6. Aircraft or Vehicles

                                                7. Riot & Civil Commotion

                                                8. Vandalism

                                                9. Sprinkler Leakage

                                                10. Sinkhole Collapse

                                                11. Volcanic Action

The CP 10-30 is a broad commercial policy, but it does not cover leakers or wind driven rain. None of this damage is covered under the master policy or the Florida Unit owner laws on condo,s

Gents:

A few comments- Steve- about the CP 00 30 form (your point #3): I think Ray and Leland also agree this is not a covered loss, but even if it were, BI and Extra Expense do not appear to be relevant here. If this were an apartment building, I’d think about coverage for lost rents , but since it is an HOA, no BI to start with, and therefore no extra expense is available.

The mold testing (CP 10 30 04 02): If this were a covered loss, which I don’t think it is, the “cost of testing performed after removal, repair, replacement or restoration of the damage property is completed… “ is payable as part of the additional coverage for mold. So it seems that the policy is unclear about coverage for initial testing (even if the entire cost is under the $15K ded.) It is clear that testing after the above condition is mitigated is payable, and it is inside the $15K, not on top. I think Leland’s comments show great insight about risk management by the carriers to treat this as a claims expense and not on the SOL. Bottom line, I think the exploration for mold does not appear to be a covered expense, but mitigation and subsequent testing is covered.

About the luan, from the little I could read on this, I do not see that the law is clear about what part of the wood floor is unit owner owned vs. HOA owned. In other words, the luan could go both ways- be owned by the HOA since it is a substructure to the floor, or owned by the unit owner since it is part of the flooring. I’d like some clarification on this.

About the flood coverage: Thanks Ray for the clarification…and the concise analysis / summary. I sat through a one day NFIP class earlier this year, and not having done flood claims, I only got some of the rudimentary points. I though t I heard something about roofs, and I know I heard about offsite flooding, but the sequential damage aspect of flooding makes a lot of sense. How can you have flooding on the roof if the water line is only at the bottom of the first story?

About the drain, the debris and the repair- Leland’s questions are really informative as to where the claim could be headed. I was thinking about subrogation issues initially to see if the roof repairs (reported to be post storm but could they have been prior?) were the proximate cause. Also, the comments about absorbing the deductble and aportioning among other coverages / limits is important and shows good faith.

About the prior claims having been paid--- I’d venture that those were probably flood related, but they probably don’t have any bearing about the 5th floor damage, unless a central HVAC system next to the elevator went out and the mold came as a result. But that would not only be one unit on the 5th floor.  But, like the roof leak in general, I’d wonder if the unit owner has a liability claim against the HOA. Is there a way the unit owner would be made whole - they do not have a condo policy, though this is now required by FL law. 

Good exercise, I’d like to hear what the final verdict is, but it seems that there are some central tendencies here already.


 

I'm not going to give my answer yet, but I don't fully agree or disagree with any of you.  Of course, there are several grey areas in this scenario, and I am not going to claim I have the definitive answer either.

Leland gets kudos for noting that the deductible can be absorbed to extend a special limits coverage. I actually had a file earlier this year that reopened for consideration of mold bills. This file had been closed by my predecessor over a year earlier (and I almost never find a mistake in her files). She had already paid the mold limits and explained this to the insured in writing before closing the file. But she had forgotten to absorb the deductible.  Since the excess mold expense was well in excess of the deductible, we paid an amount equal to the deductible.  By the way, I had to walk my boss through this and explain why we owed additonal money.  He is one of the best casualty adjusters and litigation specialists I have encountered, but he leaves the property claims to me. 

Rich, one of the reasons I included lauan (also spelled luan or lavan) in the scenario is exactly what you point out. The floor covering is part of the unit owner responsibility under Florida condo law. But whose responsibility is the lauan? It is not technically a subflooring, but an underlayment. But it can function as a subflooring. That makes it one of the grey areas in this scenario. As such, if I am covering the loss, I would include it as association property. It is serving the same function with regard to the floor as the drywall is serving with regard to the wall -- as a surface on which to apply the covering.  Especially with an unisured unit owner, it is important to give the insured the benefit of the doubt as to what we owe.

Ray, I do agree with you that this is not a flood loss. I don't think that would fly in court. The definiton of "Flood" in the CP 10 65 10 00 is: "Flood, meaning a general and temporary condition of partial or complete inundation of normally dry land areas due to:
1. The overflow of inland or tidal waters;
2. The unusual or rapid accumulation or runoff of surfaces waters from any source;
3. Mudslides or mudflows which are caused by flooding as defined in C.2. above. For the purpose of this Covered Cause of Loss, a mudslide or mudflow involves a river of liquid and flowing mud on the surface of normally dry land areas as when earth is carried by a current of water and deposited along the path of the current."

Where I do not believe this fits the description is in that it must be an inundation of normally dry LAND areas.  I don't think a roof qualifies.  Nor is it overflow of inland or tidal water, runoff from anywhere else, or Mudslide or Mudflow. 

To expand on Ray's discussion about the CP 10 10 (Basic Causes of Loss), CP 10 20 (Broad Form Causes of Loss), and CP 10 30 (Special Form Causes of Loss): The first two of these puts the burden of proof on the insured to prove that they have a loss caused by one of the causes of loss insured against. The Special Form (CP 10 30) shifts the burden of proof to the insurer. Basically, if it is "direct physical damage to covered property" (insuring agreement of CP 00 10), and no policy conditions are violated, then the CP 10 30 04 02 states:

"When Special is shown in the Declarations, Covered Causes of Loss means Risks Of Direct Physical Loss unless the loss is:
1. Excluded in Section B., Exclusions; or
2. Limited in Section C., Limitations;"

The burden of proof shifts to the insurer to show that it is either Excluded in Section B or Limited in Section C. Backup through a sewer or drain is excluded under Section B.(g.)3. But this exclusion is specifically deleted under the Property Enhancement Endorsement. So, what is the proximate cause of this loss? Is it rain, or is it backup through a sewer or drain? Or is it a windstorm?  Or is it faulty maintenance of the roof?  Or is it something else?  Is a roof drain what was intended by the drafters of the exclusion and/or exception concerning sewers and drains?  We have the burden of proof to show how it is excluded (if it is excluded) since this policy has the CP 10 30 attached.

I'm not going to give my answers yet.  I'm waiting for some of the other coverage gurus to jump in.  I'd also like to see some other up and coming adjusters take a stab at it.  I want people like Rich, Leland, and Ray in the coverage conference with me.  I also hope that folks like Steve Beaumont will weigh in.

"I’d wonder if the unit owner has a liability claim against the HOA"

This is a tricky issue- you might be adjusting the 1st party claim but that same carrier you represent also carries the liability coverage. This is an additional reason why looking at subro potential can be a good idea.

Let me give you an example.

I had a 2 story building fire with a lot of smoke throughout. The cause was might have been a tenant smoking in bed. The smoked material may have been something other than cigarettes (very common causation in Los Angeles motels at 2 Am)

I was handling the building damage, but I noted on the dec sheet that the carrier had liability exposure. Since the roommate of the tenant was taken to the hospital for smoke inhalation I called the carrier ans asked if they wanted a cause and origin investigation. They really didn't need one for the building loss, but they wanted it for the liability exposure due to someone being injured.

So yes, the condo owner may have a claim against the association. Especially if they have no insurance of their own. So if you see any evidence that the associations unlicensed roofer caused the loss by leaving roof scraps in the drain it would be a good idea to notify your carrier especially if they also have the liability exposure. Because maybe the loss isn't covered on the first party claim but it would be on the liability claim.