A question that has come up several times over the last few months is regarding the waiver of subrogation clause found in governing documents for most community associations. Most homeowners, and many managers, do not understand what it is and why it is so important. I think the best way to explain it is to give an example of how it comes into play.

A water pipe, which is maintained by the association, bursts at a condominium community and a unit is severely damaged. As required by the governing documents, the insurance for the HOA covers the interiors of the unit. However, the unit owner makes a claim against his own insurance policy (HO-6) for the damages to the floors, walls, cabinets and personal property. His insurance carrier pays for the damages, and then requests that the HOA carrier reimburse them for the cost of repairs. The HO-6 carrier has made a subrogation demand.

Due to the language in the CC&R’s, the unit owner has waived his right to subrogation, so the HO-6 carrier cannot collect on expenses paid, even if the damaged property is covered by the HOA carrier.

The unit owner is an insured under both the HOA’s policy AND under their own HO-6 policy. You cannot apply for coverage twice for the same loss, so if you are reimbursed through one policy, you cannot then try to get coverage through the second policy because that would be fraud.

If you, your board members or unit owners have questions regarding the waiver of subrogation, feel free to contact me to clarify your particular question.

Terri Guest, CIRMS, CMCA is the Northern California Sales & Marketing Representative for Berg Insurance Agency and can be reached at Terri@berginsurance.com. Have an insurance question? Ask Terri and your question may be the subject of next month’s edition of Coverage Corner! If your question is picked, you will win a gift card! Congratulations to Jenny at Cornerstone Management for being this month’s winner!