ISO CONDOMINIUM COVERAGE FORMS OVERVIEW

(June 2022)

INTRODUCTION

Condominiums do not come in one size or shape. Residential condominiums can be apartment buildings, multi-unit dwellings, or even single-family dwellings. Commercial condominiums may house offices, warehouses, or even manufacturing operations. Some condominiums may include both residential and commercial unit-owners. The key is shared ownership of the building and common areas by the individual unit-owners and the condominium agreement and bylaws that contractually bind the unit-owners.

The agreement and bylaws establish the condominium association’s relationships in addition to how some coverages apply. As a result, these documents are important to underwriting the association and any unit-owner. Every condominium must have an agreement and bylaws that clearly state the ownership and responsibility for property. Such documents also define the relationship between the unit-owners and the association. The insurance requirements cannot be determined until these documents are examined carefully. Treating all condominium arrangements the same invariably causes problems, such as under-insurance, over-insurance, lawsuits, unhappy customers, and errors or omissions claims.

ISO developed coverage forms that are available to insure condominiums. One is for Associations. The other is for commercial unit-owners. In addition, the HO-6 policy is used to protect residential condominium unit-owners.

This section examines and analyzes the commercial coverage forms and exposures. This analysis also examines the Insurance Services Office’s (ISO) two commercial property coverage forms available for condominiums, CP 00 17–Condominium Association Coverage Form and CP 00 18– Condominium Commercial Unit-owners Coverage Form.

POLICY MAKE-UP

A Commercial Property Condominium Policy consists of seven basic parts or forms:

IL DS 00–Common Policy Declarations
IL 00 17–Common Policy Conditions

This contains the conditions common to all commercial lines of insurance. It is a mandatory form for all simplified monoline or package policies.

Commercial Property Declarations

CP 00 90–Commercial Property Conditions

One of the following Commercial Property Condominium Coverage Forms:

CP 00 17–Condominium Association Coverage Form
CP 00 18–Condominium Commercial Unit-owners Coverage Form

One or more of the Causes of Loss Forms

These forms describe the types of losses insured and the exclusions that apply.

Policy Cover or Policy Jacket developed by individual insurance companies

These may also include an index or a table of contents to meet requirements that some states impose.

CP 00 17–CONDOMINIUM ASSOCIATION COVERAGE FORM CONSIDERATIONS

Coverage is provided based on the association agreement and bylaws and the property ownership. Most of a single unit-owner’s property is not eligible for coverage. The following property located within a unit is covered, without regard to ownership:

Fixtures
Improvements
Alterations that are part of the building or structure
Any appliances for refrigerating, ventilating, cooking, dishwashing, laundering, security, or housekeeping. However, this property is covered only if the Condominium Agreement states that the Association’s insurance must cover them.

If a unit-owner has other insurance on property this coverage form insures, this coverage is primary, and the unit-owner’s other insurance is excess. All rights to recover (subrogate) from unit-owners are waived.

CP 00 18–CONDOMINIUM COMMERCIAL UNIT-OWNERS COVERAGE FORM CONSIDERATIONS

Buildings are not eligible because this coverage form insures the condominium’s interior portion.

The description of covered property includes the unit-owner’s owned fixtures and structural changes. Any property that the association is required to insure because of the agreement and bylaws is excluded. This includes fixtures, improvements, appliances, and similar property.

The unit-owner coverage form is always excess over the condominium association coverage form that insures the same property.

There is no Mortgageholders Additional Condition. This could be significant if there is a mortgage on the property.

CAUSES OF LOSS FORMS

The Cause of Loss Forms are intended to identify eligible sources of loss, describe relevant exclusions, and provide essentially the same package of perils, regardless of the breadth of coverage selected.

One of the following causes of loss forms must be attached in order to complete a policy:

CP 10 10–Causes of Loss–Basic Form provides coverage against fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicles, riot or civil commotion, sprinkler leakage, vandalism, sinkhole collapse, and volcanic action.
CP 10 20–Causes of Loss–Broad Form is an intermediate-level causes of loss form. It includes the basic causes of loss plus breakage of glass, falling objects, weight of snow, ice, or sleet, and water damage.
CP 10 30–Causes of Loss–Special Form covers direct physical loss or damage caused by all types and causes of loss not specifically excluded or limited.

AVAILABLE ENDORSEMENTS

There are many endorsements available to tailor the Property Coverage Forms. Some are mandatory for all policies, while others are mandatory for specific classifications and types of business. Others are optional and permit a standard form to be customized to meet a specific risk's coverage needs. Endorsements broaden, restrict, delete, modify, or add coverage.

UNDERWRITING

Condominium underwriting always begins by evaluating the association agreement and bylaws. This is followed by evaluating Construction, Occupancy, Protection and Exposure (COPE). After evaluating the tangibles, the important intangibles of moral and morale risk must then be evaluated.

RATING

Condominium rating is similar to other commercial property rating. While it is very specific, some of the details can be very confusing.