448.3-113. Insurance.
Insurance.
448.3-113. 1. Commencing not later than the time of thefirst conveyance of a unit to a person other than a declarant,the association shall maintain, to the extent reasonablyavailable:
(1) Property insurance on the common elements, insuringagainst all risks of direct physical loss commonly insuredagainst or, in the case of a conversion building, against fireand extended coverage perils. The total amount of insuranceafter application of any deductibles shall be not less thaneighty percent of the actual cash value of the insured propertyat the time the insurance is purchased and at each renewal date,exclusive of land, excavations, foundations, and other itemsnormally excluded from property policies; and
(2) Liability insurance, including medical paymentsinsurance, in an amount determined by the executive board but notless than any amount specified in the declaration, covering alloccurrences commonly insured against for death, bodily injury,and property damage arising out of or in connection with the use,ownership, or maintenance of the common elements.
2. In the case of buildings containing units havinghorizontal boundaries described in the declaration, the insurancemaintained under subdivision (1) of subsection 1 of this section,to the extent reasonably available, shall include the units, butneed not include improvements and betterments installed by unitowners.
3. If the insurance described in subsections 1 and 2 of thissection is not reasonably available, the association shallpromptly cause notice of that fact to be hand-delivered or sentprepaid by United States mail to all unit owners. Thedeclaration may require the association to carry any otherinsurance, and the association in any event may carry any otherinsurance it deems appropriate to protect the association or theunit owners.
4. Insurance policies carried pursuant to subsection 1 ofthis section shall provide that:
(1) Each unit owner is an insured person under the policywith respect to liability arising out of his interest in thecommon elements or membership in the association;
(2) The insurer waives its rights to subrogation under thepolicy against any unit owner or members of his household;
(3) No act or omission by any unit owner, unless actingwithin the scope of his authority on behalf of the association,will void the policy or be a condition to recovery under thepolicy; and
(4) If, at the time of a loss under the policy, there isother insurance in the name of a unit owner covering the samerisk covered by the policy, the association's policy providesprimary insurance.
5. Any loss covered by the property policy under subdivision(1) of subsection 1 of this section and under subsection 2 ofthis section shall be adjusted with the association, but theinsurance proceeds for that loss shall be payable to anyinsurance trustee designated for that purpose, or otherwise tothe association, and not to any mortgagee or beneficiary under adeed of trust. The insurance trustee or the association shallhold any insurance proceeds in trust for unit owners andlienholders as their interests may appear. Subject to theprovisions of subsection 8 of this section, the proceeds shall bedisbursed first for the repair or restoration of the damagedproperty, and unit owners and lienholders are not entitled toreceive payment of any portion of the proceeds unless there is asurplus of proceeds after the property has been completelyrepaired or restored, or the condominium is terminated.
6. An insurance policy issued to the association does notprevent a unit owner from obtaining insurance for his ownbenefit.
7. An insurer that has issued an insurance policy under thissection shall issue certificates or memoranda of insurance to theassociation and, upon written request, to any unit owner,mortgagee, or beneficiary under a deed of trust. No insurerissuing the policy may cancel or refuse to renew it until thirtydays after notice of the proposed cancellation or nonrenewal hasbeen mailed to the association, each unit owner and eachmortgagee or beneficiary under a deed of trust to whom acertificate or memorandum of insurance has been issued at theirrespective last known addresses.
8. Any portion of the condominium for which insurance isrequired under this section which is damaged or destroyed shallbe repaired or replaced promptly by the association unless (1)the condominium is terminated, (2) repair or replacement would beillegal under any state or local health or safety statute orordinance, or (3) eighty percent of the unit owners, includingevery owner of a unit or assigned limited common element whichwill not be rebuilt, vote not to rebuild. The cost of repair orreplacement in excess of insurance proceeds and reserves is acommon expense. If the entire condominium is not repaired orreplaced, (1) the insurance proceeds attributable to the damagedcommon elements shall be used to restore the damaged area to acondition compatible with the remainder of the condominium, (2)the insurance proceeds attributable to units and limited commonelements which are not rebuilt shall be distributed to the ownersof those units and the owners of the units to which those limitedcommon elements were allocated, and (3) the remainder of theproceeds shall be distributed to all the unit owners orlienholders, as their interests may appear, in proportion to thecommon element interests of all units. If the unit owners votenot to rebuild any unit, that unit's allocated interests areautomatically reallocated upon the vote as if the unit had beencondemned under subsection 1 of section 448.1-107, and theassociation shall promptly prepare, execute, and record anamendment to the declaration reflecting the reallocations.Notwithstanding the provisions of this subsection, section448.2-118 governs the distribution of insurance proceeds if thecondominium is terminated.
9. The provisions of this section may be varied or waived inthe case of a condominium all of whose units are restricted tononresidential use.
(L. 1983 H.B. 177)