55-470 - Insurance.
§ 55-470. Insurance.
A. Commencing not later than the time of the first conveyance of acooperative interest to a person other than a declarant, the associationshall maintain to the extent reasonably available:
1. Property insurance on the common elements and units insuring against allrisks of direct physical loss commonly insured against or, in the case of aconversion building, against fire and extended coverage perils. The totalamount of insurance after application of any deductibles shall be not lessthan eighty percent of the actual cash value of the insured property at thetime the insurance is purchased and at each renewal date, exclusive of land,excavations, foundations and other items normally excluded from propertypolicies; and
2. Liability insurance, including medical payments insurance, in an amountdetermined by the executive board but not less than any amount specified inthe declaration, covering all occurrences commonly insured against for death,bodily injury and property damage arising out of or in connection with theuse, ownership or maintenance of the common elements and units.
B. If the insurance described in subsection A is not reasonably available,the association shall cause notice of that fact to be hand delivered or sentprepaid by United States mail to all proprietary lessees. The declaration mayrequire the association to carry any other insurance, and the association inany event may carry any other insurance it deems appropriate to protect theassociation or the proprietary lessees.
C. Insurance policies carried pursuant to subsection A must provide that:
1. Each proprietary lessee is an insured person under the policy with respectto liability arising out of his interest in the common elements or membershipin the association;
2. The insurer waives its right to subrogation under the policy against anyproprietary lessee or member of his household;
3. No act or omission by any proprietary lessee, unless acting within thescope of his authority on behalf of the association, will void the policy orbe a condition to recovery under the policy; and
4. If, at the time of a loss under the policy, there is other insurance inthe name of a proprietary lessee covering the same risk covered by thepolicy, the association's policy provides primary insurance.
D. Any loss covered by the property policy under subsection A 1 of thissection must be adjusted with the association, but the insurance proceeds forthat loss are payable to any insurance trustee designated for that purpose,or otherwise to the association, and not to any mortgagee or beneficiaryunder a deed of trust. The insurance trustee or the association shall holdany insurance proceeds in trust for the association, proprietary lessees andlien holders as their interests may appear. Subject to the provisions ofsubsection G, the proceeds must be disbursed first for the repair orrestoration of the damaged property. The association, proprietary lessees andlien holders are not entitled to receive payment of any portion of theproceeds unless there is a surplus of proceeds after the property has beencompletely repaired or restored, or the cooperative is terminated.
E. An insurance policy issued to the association does not prevent aproprietary lessee from obtaining insurance for his own benefit.
F. An insurer that has issued an insurance policy under this section shallissue certificates or memoranda of insurance to the association and, uponwritten request, to any proprietary lessee or holder of a security interest.The insurer issuing the policy may not cancel or refuse to renew it untilthirty days after notice of the proposed cancellation or nonrenewal has beenmailed to the association, each proprietary lessee and each holder of asecurity interest to whom a certificate or memorandum of insurance has beenissued at their respective last known address.
G. Any portion of the cooperative for which insurance is required under thissection which is damaged or destroyed shall be repaired or replaced promptlyby the association unless: (i) the cooperative is terminated; (ii) repair orreplacement would be illegal under any state or local health or safetystatute or ordinance; or (iii) eighty percent of the proprietary lessees,including every proprietary lessee of a unit or assigned limited commonelement which will not be rebuilt, vote not to rebuild. The cost of repair orreplacement in excess of insurance proceeds and reserves is a common expense.If the entire cooperative is not repaired or replaced: (i) the insuranceproceeds attributable to the damaged common elements must be used to restorethe damaged area to a condition compatible with the remainder of thecooperative; and (ii) except to the extent that other persons will bedistributees, the insurance proceeds attributable to units and limited commonelements which are not rebuilt must be distributed to the proprietary lesseesof those units and the proprietary lessees of the units to which thoselimited common elements were allocated, or to lien holders, as theirinterests may appear, and the remainder of the proceeds must be distributedto all the proprietary lessees or lien holders, as their interests mayappear, in proportion to the common expense liabilities of all thecooperative interests. If the proprietary lessees vote not to rebuild anyunit, the allocated interests of the cooperative interest of which that unitis a part are automatically reallocated upon the vote as if the unit had beencondemned under subsection A of § 55-430, and the association promptly shallprepare, execute and record an amendment to the declaration reflecting thereallocations. Notwithstanding the provisions of this subsection, § 55-454governs the distribution of insurance proceeds if the cooperative isterminated.
H. The provisions of this section may be varied or waived in the case of acooperative whose units are all restricted to nonresidential use.
(1982, c. 277.)