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Your $64,000 question is, are you ready for Senate Bill 3014? Beginning with policies renewing after June 1, 2015, this law changes the insurance requirements that condominium associations are required to carry. These revisions were formulated with the purpose of bringing greater protection to those who live in condominium associations. Many of the revisions made to the Illinois Condominium Property Act tackle updates that had not been addressed for many years.


First, property insurance must now provide coverage “at the time the insurance is purchased and at each renewal date, in a total amount of not less than the full insurable replacement costs of the insured property, less deductibles…” This means if your association has an Actual Cash Value (or “ACV”) policy, it will need to be changed. Keep in mind that Replacement Cost (“RC”) has nothing to do with what the property originally cost or its market value. Rather, RC means what it would cost to actually replace your property on the day the loss occurs. Obtaining a professional insurance appraisal from time to time in order to have an up-to-date understanding of that cost would be ideal.


The second area that is impacted is the “Ordinance & Law” coverage. With the passage of time, building codes and ordinances change to reflect new standards in construction. These changes generally relate to fire safety, structural integrity, and energy efficiency of buildings. Although buildings are constructed to meet or exceed the building codes in effect at the time of their construction; as the buildings age, they eventually grow outdated and non-compliant with current codes.


After a disaster, associations often face questions such as:


                


 


          


      


SB3014 states Ordinance & Law coverage must be “sufficient to rebuild the insured property in compliance with building code requirements subsequent to an insured loss, including: Coverage B, demolition costs; and Coverage C, increased costs of construction coverage. The combined total of Coverage B and Coverage C shall be no less than 10% of each insured building value, or $500,000, whichever is less.”


It is important to realize that once the Ordinance & Law limit is exhausted, the regular policy limits do NOT kick in – it is up to the association to pay the extra costs.


 | 


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