After nearly a year of negotiations by numerous interests, a bill clarifying insurance for condominiums in the state is ready to become law.

At press time, Gov. Martin O’Malley had not signed into law the bill (Senate Bill 201/House Bill 287), spelling out who is responsible for repair or replacement of damage in condo units. O’Malley’s signature is expected, making it law June 1.

Confusion arose out of a Maryland Court of Appeals decision in spring 2008. The decision ruled against a longstanding practice for insuring the units, indicating that the Maryland Condominium Act does not require the condo association’s master policy to cover damage to an individual unit.  Instead, the damage would be covered by an owner’s individual policy.

Responsibilities addressed

The new legislation clarifies that the council of unit owners of a condominium is responsible for the repair or replacement of condominium units, exclusive of improvements and betterments installed in units by the unit owners, other than the developer. It further requires a unit owner to pay the deductible of the condominium’s master insurance policy, up to $5,000, if the cause of the damage originated from the owner’s unit. Notice of an owner’s responsibility must be in both a sales contract and given annually by the condo association to each unit owner.

Brett Lininger

Brett Lininger, a lobbyist for the Independent Insurance Agents of Maryland, said while the bills achieved the goal of clarity, “the legislation went above and beyond the [appeals court] case” by eliminating the obligation by the condo association to address the deductible in its bylaws.

“The deductible should be left to the local condominium associations to decide, not mandated by statute,” Lininger said.

Bryson Popham, a lobbyist for agents and brokers in Maryland, said numerous points of view were expressed in the bills and after much discussion, “we were able to reach a consensus.”

“We got the clarity we needed following the [appeals court] decision which caused great confusion,” he said.

Jason Ernest, vice president of advocacy for the Insurance Agents & Brokers of Maryland, called the bill “an equitable solution to the problem.”

“There are some changes that agents, units owners, and carriers need to be aware of; however, condo insurance in Maryland stands to be clearer with the signing of this bill,” he said.

This story originally appeared in the May 2009 print edition of Insurance & Financial Advisor.