Chapter 5 - § 5.13 • INSURANCE

• Jurisdiction: Colorado

§ 5.13 • INSURANCE

Insurance matters can take on great complexity in common interest communities.²³⁵ Individual unit owners have an interest in protecting their own property and defending against personal liability, but also in protecting any commonly owned or association owned property as well as in defending against association tort liability. The CCIOA addresses these concerns extensively and provides considerable protection to the unit owners. It states that the declaration may require the association to carry any insurance, and that the association may carry any insurance it considers appropriate, including insurance on units it is not obligated to insure, to protect the association or the unit owners.²³⁶ However, any policy issued to the association does not obviate the need for unit owners to obtain insurance for their own benefit.²³⁷

The CCIOA requires that the association obtain two forms of insurance, at least to the extent the coverage is "reasonably available." First, the association must obtain, to the extent it is reasonably available, property insurance on any common elements,²³⁸ for broad form covered causes of loss.²³⁹ That insurance must also provide coverage to units if a building is part of a cooperative or contains units with horizontal boundaries described in the declaration.²⁴⁰ A commentary to the substantially similar Uniform Act says that the requirement for coverage of units is a significant departure from the usual law on common interest communities.²⁴¹ That property insurance does not need to cover interior surfaces of the walls, floors, and ceilings of units nor improvements and betterments installed by unit owners, but if they are covered, any increased charge must be assessed by the association to those owners. Because unit owners may reasonably have questions about the coverage of the association's policy, Colorado law prohibits the insurer from taking into account any request by a unit owner for a clarification of coverage when it determines the premiums to be charged to the association.²⁴²

The association must also obtain commercial general liability insurance against claims and liabilities arising in connection with ownership, existence, use, or management of common elements — and, in a cooperative, of all units — in an amount, if any, specified by the community instruments or otherwise considered sufficient by the governing board, but not less than any amount specified in the association documents, insuring the board, the association, the management agent, and their respective employees, agents, and all persons acting as agents.²⁴³ Unit owners must be included as additional insureds, but only for claims and liabilities arising in connection with ownership, existence, use, or management of the common elements and, in a cooperative, of all units.²⁴⁴

An insurer who issues either the property or the commercial general liability policies required by statute must issue a certificate or memoranda of insurance to any unit owner on request, and the insurer is not permitted by the CCIOA to cancel or refuse to renew a policy until 30 days after notice has been mailed to the association and to each unit owner to whom a certificate or memorandum of insurance has been issued, at his or her last-known address.²⁴⁵

If either the property or commercial general liability insurance required by statute is not "reasonably available," or if any policy is canceled or not renewed without a replacement policy having been obtained, the association is required to promptly cause notice of that fact to be hand delivered or sent prepaid by mail to all unit owners.²⁴⁶

The required property or commercial general liability insurance policies have to address four matters. First the policies must provide that each unit owner is an insured person under the policy regarding liability arising out of a unit owner's interest in the common elements or membership in the association.²⁴⁷ Next, the policy...