Insurance Company Affected By Court
Maryland Condo Insurance Strongly Affected By Court
An unexpected court decision has been made in Maryland regarding a disputed $6,400 in damages over a Maryland townhouse that has reversed 26 years of normal industry practice, and that has left agents, insurers, lawmakers and condominium associations confused as who is liable when individual units in a complex are damaged.
For over 26 years Maryland insurance agents have used a basic concept to write condo and condo-association policies, the standard being that when there is a loss, association policies are to pay to restore damaged condo units to their original state. This meant that unit owners would then have to purchase additional coverage to cover any improvements that had been made to the condo, examples being more expensive countertops. Since Maryland revised its condo act in 198, this has been the standard employed.
This April however, this was all changed when Maryland Court of Appeals ruled that the insurance policy held by a condo association is not obliged to pay for damages to individual units. The standard set 26 years ago was established as the bases for the insurance industry practice in the state. Insurers say that this decision has a massive implication.
This is not a simple matter. What insurers and lawmakers specifically want is gain a legislative solution that more concretely defines what gets covered by a condo association and what by individual unit owners. This however, will not be possible until early 2009, which is the next time the General Assembly will be meeting.
Until this occurs, condo insurers have all agreed to continue operating in accordance with the old rules.
To work out what is in essence a gentleman's agreement as to how condo insurance will operate until the legislature reconvenes, insurers, agents, lawmakers and condo groups have begun holding town hall type meetings.
Until that time, it will be a wait-and-see situation for the insurance industry and condo interests, what Jason Ernest, who is the vice president of the Insurance Agents and Brokers of Maryland, calls a long summer.
This is also referred to as the Tuckerman case based on a decision by the Court of Special Appeals that concentrates on two separate claims made under two different policies that were issued by the Pennsylvania-base Erie Insurance Exchange.