§ 47C-3-113. Insurance.
§ 47C‑3‑113. Insurance.
(a)Â Â Â Â Â Â Â Commencing not later than the time of the first conveyanceof a unit to a person other than a declarant, the association shall maintain,to the extent available:
(1)Â Â Â Â Â Â Â Property insurance on the common elements insuring againstall risks of direct physical loss commonly insured against including fire andextended coverage perils. The total amount of insurance after application ofany deductibles shall be not less than eighty percent (80%) of the replacementcost of the insured property at the time the insurance is purchased and at eachrenewal date, exclusive of land, excavations, foundations and other itemsnormally excluded from property policies; and
(2)Â Â Â Â Â Â Â Liability insurance in reasonable amounts, covering alloccurrences commonly insured against death, bodily injury and property damagearising out of or in connection with the use, ownership, or maintenance of thecommon elements.
(b)Â Â Â Â Â Â Â In the case of a building containing units having horizontalboundaries described in the declaration, the insurance maintained undersubdivision (a)(1), to the extent reasonably available, shall include theunits, but need not include improvements and betterments installed by unitowners.
(c)Â Â Â Â Â Â Â If the insurance described in subsection (a) or (b) of this sectionis not reasonably available, the association promptly shall cause notice ofthat fact to be hand‑delivered or sent prepaid by United States mail toall unit owners. The declaration may require the association to carry any otherinsurance, and the association in any event may carry any other insurance itdeems appropriate to protect the association or the unit owners.
(d)Â Â Â Â Â Â Â Insurance policies carried pursuant to subsection (a) mustprovide that:
(1)Â Â Â Â Â Â Â Each unit owner is an insured person under the policy withrespect to liability arising out of his interest in the common elements ormembership in the association;
(2)Â Â Â Â Â Â Â The insurer waives its right to subrogation under the policyagainst any unit owner or members of his household;
(3)Â Â Â Â Â Â Â No act or omission by any unit owner, unless acting withinthe scope of his authority on behalf of the association, will preclude recoveryunder the policy; and
(4)Â Â Â Â Â Â Â If, at the time of a loss under the policy, there is otherinsurance in the name of a unit owner covering the same risk covered by thepolicy, the association's policy provides primary insurance.
(e)Â Â Â Â Â Â Â Any loss covered by the property policy under subsections(a)(1) and (b) shall be adjusted with the association, but the insuranceproceeds for that loss shall be payable to any insurance trustee designated forthat purpose, or otherwise to the association, and not to any mortgagee orbeneficiary under a deed of trust. The insurance trustee or the associationshall hold any insurance proceeds in trust for unit owners and lienholders astheir interests may appear. Subject to the provisions of subsection (h), theproceeds shall be disbursed first for the repair or restoration of the damagedproperty, and unit owners and lienholders are not entitled to receive paymentof any portion of the proceeds unless there is a surplus of proceeds after theproperty has been completely repaired or restored, or the condominium isterminated.
(f)Â Â Â Â Â Â Â Â An insurance policy issued to the association does notprevent a unit owner from obtaining insurance for his own benefit.
(g)Â Â Â Â Â Â Â An insurer that has issued an insurance policy under thissection shall issue certificates or memoranda of insurance to the associationand, upon written request, to any unit owner, mortgagee, or beneficiary under adeed of trust. The insurer issuing the policy may not cancel or refuse to renewit until 30 days after notice of the proposed cancellation or nonrenewal hasbeen mailed to the association, each unit owner and each mortgagee orbeneficiary under a deed of trust to whom certificates or memoranda ofinsurance have been issued at their respective last known addresses.
(h)Â Â Â Â Â Â Â Any portion of the condominium for which insurance isrequired under this section which is damaged or destroyed shall be repaired orreplaced promptly by the association unless (1) the condominium is terminated,(2) repair or replacement would be illegal under any State or local health orsafety statute or ordinance, or (3) the unit owners decide not to rebuild by aneighty percent (80%) vote, including one hundred percent (100%) approval ofowners of units not to be rebuilt or owners assigned to limited common elementsnot to be rebuilt. The cost of repair or replacement in excess of insuranceproceeds and reserves is a common expense. If the entire condominium is notrepaired or replaced, (1) the insurance proceeds attributable to the damagedcommon elements shall be used to restore the damaged area to a conditioncompatible with the remainder of the condominium, (2) the insurance proceedsattributable to units and limited common elements which are not rebuilt shallbe distributed to the owners of those units and the owners of the units towhich those limited common elements were allocated or to lienholders, as theirinterest may appear, and (3) the remainder of the proceeds shall be distributedto all the unit owners or lienholders, as their interest may appear, inproportion to their common element interest. If the unit owners vote not torebuild any unit, that unit's allocated interests are automatically reallocatedupon the vote as if the unit had been condemned under G.S. 47C‑1‑107(a),and the association promptly shall prepare, execute, and record an amendment tothe declaration reflecting the reallocations. Notwithstanding the provisions ofthis subsection, G.S. 47C‑2‑118 governs the distribution ofinsurance proceeds if the condominium is terminated.
(i)Â Â Â Â Â Â Â Â The provisions of this section may be varied or waived inthe case of a condominium all of whose units are restricted to nonresidentialuse. (1985 (Reg. Sess., 1986),c. 877, s. 1; 1998‑211, s. 8(a)‑(c).)