Part III: Who Pays When Causation, Claims and Coverage Cross?

Part III: Who Pays When Causation, Claims and Coverage Cross?

Part Three of a Three-Part series: The leak came from another unit, how is it my responsibility?

In week one of our three-part series, we learned that the association is generally not responsible for property damage in a unit barring some negligence on its part or available insurance coverage. Last week, we examined the types of property casualty insurance typically maintained by a condominium association. In this final week of our three-part series, “Who pays when causation, claims and coverage cross?” we will discuss damage caused by another unit owner or emanating from a problem in a unit.

Instead of that pesky roof leak causing damage to an oriental rug which we discussed in prior weeks, let’s say the owner’s floor was damaged as a result of a pipe burst and the pipe was a part of the unit. Worse, the owner is claiming that the pipe burst due to the vacant unit below failing to keep their unit properly heated in the winter months, causing the pipe to freeze. Is the association responsible? Should the association’s insurance cover the claim? Is the unit owner responsible because the pipe is part of the unit? Should the unit owner’s insurance cover the claim? How about the owner of the vacant unit? What is their responsibility?

In this scenario, it is clear that the leak emanates from the unit; so, unless the association was negligent in causing the pipe to freeze, the association would not be responsible for the damage. To be sure, the Condominium Act provides that a unit owner is “liable for injuries or damages resulting from an accident in his own unit in the same manner and to the same extent as the owner of any other real estate.”[1] But, you might recall from last week that the analysis does not end there. If the association has more than “bare walls” coverage, the association’s insurance may nonetheless cover the claim. If the claim is covered under the association’s policy, and is not excluded by any of the policy’s exclusions, then the association may have a responsibility to repair the unit damage to the extent of proceeds received. Keep in mind that the damage from the burst pipe may also: (1) have been caused by the negligence of the unit owner below in failing to winterize their unit and thus the responsibility of that owner and that owner’s insurance; and, (2) the responsibility of the affected unit owner, as unit owners are liable for injuries or damages resulting from an accident in their own units, and possibly covered by the affected unit owner’s HO-6 insurance policy. Thus, both unit owners may have their own insurance coverage available to them for any damage resulting from the burst pipe.

In summary, issues pertaining to responsibility or insurance coverage for property damage claims do not have a “one size fits all” answer. It is not as simple as “because the damage emanated from a common element, the association is responsible.” Indeed, in many circumstances, the association may have no responsibility at all. Thus, we strongly recommend that you consult with an attorney whenever dealing with issues pertaining to responsibility or insurance coverage for property damage claims. If you have any questions, or would like to speak with an attorney, please feel free to contact me.

[1] See N.J.S.A. 46:8B-16(c).