New York's Cooperative and Condominium Community

Habitat Magazine Insider Guide



Matthew J. Leeds, Ganfer and Shore

Ganfer and Shore, Partner

J. Leeds



The client’s tale. Boards should seriously consider whether to require that unit-owners or tenant-shareholders carry their own insurance covering their own installations and liability. This issue is so common that it is not one story. It is, as the voiceover announcer says in the 1960s TV series The Naked City, one of “eight million stories.”

One of those tales involves a bathtub that overflowed on the 13th floor. It damaged the building and leaked down through the floor to damage the personal property of the unit-owner on the 12th floor. The 13th-floor unit-owner did not carry her own insurance policy on the unit. Normally, that would cover her liability to third parties for her negligence. The 12th-floor unit-owner did not have his own insurance. Normally, that would also cover damage to the 12th-floor unit-owner’s personal property.

Because neither unit-owner had insurance, the 12th-floor unit-owner looked to the building insurance policy and the building’s insurer for relief while the board had to proceed separately against the 13th-floor unit- owner and sue. Also, the building’s insurance carrier began looking at the declaration of condominium and the bylaws to figure out who was responsible for what and whether the board was responsible for any repairs at all, and even if it was, then perhaps only to restore to building standard.

It was a mess, and involved too much time fighting insurance companies and engaging in lawsuits, which are expensive and eat into the net recovery. Often, it could be much simpler if all three parties – the board, the 12th-floor unit-owner, and the 13th-floor unit-owner – could line up all three of their insurance companies and say, “Look, we don’t know which one of you is responsible for various parts of this, but at least one of you is responsible for a given part of it. Go figure it out among yourselves, pay us, and leave us alone.”


The lawyer’s take. It is true that there are arguments against deciding to adopt such a policy. For one thing, it can create an administrative burden on management to attempt to make sure that all policies are current. Some buildings prefer to rely on their conventional remedies against unit-owners such as litigation. In some buildings, unit-owners might not want to impose the expense of insurance on unit-owners. Of course, if a building does not have a requirement in place and wants to consider one, the board will have to talk to counsel to review the constituent documentation to see whether the requirements are within the power of the board to enact unilaterally. Or do the declaration and bylaws in a condominium – or the proprietary lease and bylaws in a cooperative – need to be amended to create an enforceable obligation on unit-owners in this regard?


Case closed. Given how common claims are, boards should at least consider whether it is wise and appropriate to require that unit-owners carry their own insurance.


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