By Michael J. Gelfand, Esq. / Published August 2017
Everyone should be sympathetic to the difficulties facing mobility-handicapped persons when entering and exiting a building. However, can a Florida community association be held liable when entry doors are no longer in mechanical compliance with the applicable state and federal standards for handicap access?
Recently, a Florida appellate court ruled that a condominium association cannot be held liable for discriminatory housing practices where there is no evidence that the association modified the doors after ownership of the condominium was transferred to the association. In Harbor Pointe of Perdido Key Condominium Association Inc. v. Henkel, 42 Fla. L. Weekly D 873 (Fla. 1st DCA, April 13, 2017), the facts indicate that James Henkel, who was wheel-chair bound, filed a housing discrimination complaint with the Florida Commission on Human Relations pursuant to Florida’s Fair Housing Act. Henkel alleged the condominium association committed discriminatory housing practices by making modifications to the entry door, pool door, and dock door that impeded his access to public spaces.
Interestingly, at the first level of review in what may appear to be a convoluted process, the administrative law judge found that the doors did not comply with federal and state standards for handicap access! Nevertheless, that judge concluded that Henkel failed to establish that the association discriminated against him and recommended that the case be dismissed. On second review, the Commission disagreed with the judge’s recommendation and concluded that the association committed discriminatory housing practices by allegedly making modifications to the opening pressures of the entrance and exit doors of the condominium.
A Florida appellate court upon the third review reversed the order of the Commission, agreeing with the administrative law judge. The court ruled that Congress, when drafting the Fair Housing Act, did not provide that the owner of a condominium building which was not involved in the design or construction of the building was liable for the failure of the building to comply with federal or state standards.
The concurring judge wrote, “Because the association had nothing to do with the design and construction of the condominium’s lobby doors, the Act’s discrimination in §3604(f)(3)(C) does not apply to it, or require it to fix the non-conforming doors. . . .And this court is not at liberty under the statute to turn subsequent property owners into guarantors of noncompliant designs and construction. Congress could have done it, but not us.”
Even though this court did not find the association liable for discriminatory practices, another court may find an association liable if the association makes modifications to entry doors that result in non-compliance. Especially considering ongoing maintenance, to avoid claims, associations will want to include in the maintenance protocol to ensure compliance with the law.
So, you think your casualty insurance covers potential claims? Better think twice! Especially if you have not confirmed both the dollar value of your association’s insurance coverage and the property dollar value, if the policy has a “coinsurance” requirement, then the difference in the two values may lead to an unpleasant surprise. Actual coverage may be well below the stated policy coverage amount!
What could be worse than a coinsurance shortfall? Not discovering the shortfall until after your association suffers a casualty loss, such as a fire or storm, and the insurer refused to pay even the coverage amount.
This discovery after a loss is far too late to obtain proper coverage. If you are an association director, it only gets worse when you realize that many owners relied on you. The real meaning of becoming “toast” becomes increasingly obvious when everyone looks to the association’s insurance coverage and there is little, if any! Look around fast to see if there is anyone else that may be responsible and can pay for the loss.
The silent catastrophe of coinsurance shortfall was dramatically illustrated in a recent decision that could have arisen in many Florida community associations, Kendall South Medical Center Inc. v. Consolidated Insurance Nation, 42 Fla. L. Weekly D 1071 (Fla. 3rd DCA, May 10, 2017). Kendall South was operating a medical center in North Miami Beach when a sprinkler system undergoing maintenance leaked, causing significant water damage to the building and its contents. Kendall South had obtained an insurance policy from Consolidated Insurance Nation with $100,000 coverage. Although Kendall South’s property damage totaled $260,000, Kendall South received only $16,562.67!
Why was the payment less than 20 percent of the policy’s amount when the actual loss was more than 2.5 times the policy amount? The answer is that the policy contained a 90 percent coinsurance requirement.
What is coinsurance, you ask? A coinsurance requirement penalizes an insured who deliberately, in an effort to reduce premium payments, or innocently, purchases coverage that is less than the full value of the covered property. Yes, if the property is not insured for close to the property’s full value, or in the case of Kendall South, insured to 90 percent of value, then the insurer does not have to pay the full amount of the covered loss. The reduction in insurance payment is in direct proportion to the extent to which the property is underinsured!
Litigation arose when Kendall South sued the management company for negligent repairs to the sprinkler system. Interestingly, the management company defended, relying on a provision that required Kendall South to have adequate insurance coverage.
Seemingly in response to the defense, Kendall South then added a claim against Consolidated Insurance for negligent procurement of insurance, alleging that Kendall South requested a $100,000 policy. Kendall South claimed that the insurer breached the insurer’s duty when the insurer’s agent failed to inform Kendall South that the policy with the 90 percent coinsurance clause would not cover the property as Kendall South had requested. The trial court dismissed the complaint against Consolidated Insurance.
The Florida appellate court reversed the decision of the trial court, reinstating the lawsuit against Consolidated Insurance. The appellate court explained that an insurance agent is required to use “reasonable skill and diligence” and may be liable for negligence by failing to obtain coverage sought by the insured. The court stated, “When an insured alleges that it specifically communicated its insurance needs to an agent who then undertook to procure a policy addressing such needs, the insured states a cause of action for negligent procurement where it also alleges that, without providing an explanation that different coverage was required, the agent procured a policy not meeting those express needs.”
The importance of this decision is potentially far reaching, impacting owners and managers of property. Associations must carefully review the status of insurance with their agents, including coinsurance requirements and valuations. Associations need to also confirm that the policies are for the correct value. Being “penny wise” may definitely lead to being “pound foolish” when skimping on required insurance!
The decision also shows the potential value of owner/member insurance requirements. An association may be able to defend itself against a negligence action for claims such as water leaks if the association has valid restrictions requiring owners to obtain insurance. If an owner sues the association for property damage and the owner does not have insurance, then the association may be able to use the insurance requirement as a defense to a lawsuit.
In summary, this decision reinforces advice the firm has been constantly providing associations at annual board of directors’ organizational meetings, that insurance status be reviewed!
Speaking of insurance, Citizens Property Insurance Corporation’s Board of Governors recently approved a recommended 5.3 percent statewide increase for personal policyholders, homeowners, condominium unit owners, and renters. However, the highest increases are reported in southeast Florida counties: Miami-Dade (10.5 percent), Broward (10.4 percent), and of course, Palm Beach County (9.3 percent). A stated basis for these increases is that in these counties water losses, assignment of benefits abuse, and litigation are higher than the rest of Florida.
Citizens’ board members approved other policy chan-ges, including a $10,000 cap on water loss repairs for customers who do not participate in the Citizens’ Managed Repair Program, and expanding obligations to third parties that accept an assignment of benefits. The proposed rates and policy changes must still be approved by the Florida Office of Insurance Regulation.
These changes may propel associations to consider alternative insurance companies. If so, then carefully evaluate the companies’ ability to pay claims. Also, take care in contracting for repairs to avoid a denial of a claim, avoiding signing a contract until coverage for the work is confirmed by the insurer.
Not to brag, but we told you so! As outlined in our Memorandum to Clients series, literally for months, we identified proposed legislation to amend estoppel certificates requirements for Florida community associations. As anticipated, the Governor recently signed the bill into law. New estoppel certificate requirements were made effective as of July 1, 2017.
As we have advised, the amended Florida Condominium, Cooperative, and Homeowners Acts now require that associations establish by a written resolution adopted by the board of directors or provided by a written management contract the authority to charge a fee for the preparation and delivery of estoppel certificates.
For more information regarding a resolution identifying estoppel certificate parameters, contact your association’s counsel immediately, because by the time you read this, the law will be in effect.
Speaking of Florida legislation and its status, 2017 legislation and the bills that became law are posted on the firm’s website resources tab under Statutory Update 2017: www.gelfandarpe.com/resources/statutory-update-2017/.
Michael J. Gelfand, Esq.
Senior Partner of Gelfand & ARPE, P.A.
Michael J. Gelfand, Esq., the Senior Partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a Florida Bar Board-Certified Real Estate Lawyer, Certified Circuit and County Civil Court Mediator, Homeowners Association Mediator, an Arbitrator, and Parliamentarian. He is the Chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at firstname.lastname@example.org or (561) 655-6224.