Condominium insurance policies can be incredibly confusing to the average board member. Even though there may be no “fine print” and everything is typed the same size, the many definitions, endorsements, and cross references can create a forest of exceptions that make it difficult to know exactly what you’re paying for or getting.
Sometimes, even judges don’t agree on what an insurance policy covers, as evidenced by the recent Michigan Court of Appeals decision that reversed the trial court’s decision for summary judgment in the case of Walters Beach Condominium Association v. Home-Owners Insurance Company, Not Reported in N.W.2d, 2017 WL 5503789.
The parties both agreed on the underlying facts of the matter. After a heavy storm, the condominium experienced water intrusion, and a contributing factor which led to the water intrusion was the existence of construction defects in the building, as confirmed by an expert. In court, the parties wrangled over the dense language of the insurance policy and whether the policy provided an exception to coverage that applied given the facts in question. (The policy language was quoted in the decision here.)
The Court of Appeals found that summary judgment was not proper because the trial court did not properly interpret the contract language, and further, a pertinent question remained unanswered, particularly with respect to whether certain defects could be categorized as “latent” or “hidden”, which according to the Court of Appeals will determine to what extent coverage should apply under the policy. The lower court was instructed to try that question.
Even though it appears in this case that the association has a good chance of prevailing in the end, the moral of the story is to consult with your condominium association attorney if you are not sure what the terms of your insurance policy mean. You should also be sure to get an insurance agent who is experienced with condo association policies and can help you make apples-to-apples comparisons when making a purchase decision. Otherwise, you may be paying for something that doesn’t really exist and may get stuck holding the bag, which we have witnessed many times over the decades of our representation of Michigan condominium associations.