Individual Insurance Won’t Cover Pandemic-Related Assessments

There are few soft spots in today’s hard insurance market. First, it came to light that co-ops and condos that suffer lost income from shuttered businesses in their commercial spaces or from monthly maintenance arrears will not be covered by the lost-income protections in their insurance policies. Carriers contend that losses due to a virus are not protected and, furthermore, that a successful claim requires physical damage to the property, such as a flood or fire.

Now comes the equally harsh news that co-op shareholders or condo unit-owners who are hit with an assessment due to coronavirus-related loss of income to the building will not be covered by their personal insurance policies, Brick Underground reports. Once again, loss assessment coverage protects the policyholder from unexpected expenses resulting from physical damage to the building. This does not include claims related to the pandemic or resulting job loss, such as an assessment on individual shareholders or unit-owners to make up for lost building income.

"The loss assessment coverage under your individual co-op or condo insurance policy will typically only pick up charges exceeding the building's master coverage for claims that would be covered under your own policy – fire, water damage from broken pipes, accidents due to negligence," explains Jeffrey Schneider of Gotham Brokerage. "Covid claims or income shortfall claims like this would not be picked up as a peril under your individual policy, and are unlikely to be covered if presented as a loss assessment claim under your individual policy."

Another issue is that insurance covers losses that affect the shareholder, rather than losses that affect the co-op overall. Assessment fees generally support projects the board finds necessary to make improvements to the building; in this case, it's to make up for lost funds as a result of the pandemic and unemployment.

"An assessment imposed by the co-op board to pay for losses suffered by the co-op arising from the pandemic would typically not be covered by a shareholder’s apartment insurance, since the assessment is contract-based between the co-op and the shareholder, and not casualty-based," says Aaron Shmulewitz, an attorney at Belkin Burden Wenig & Goldman.