4313 - Insurance.
§ 4313. Insurance. (a) Insurance to be carried by association.--Commencing not later than the time of the first conveyance of a cooperative interest to a person other than a declarant, the association shall maintain, to the extent reasonably available: (1) Property insurance on the common elements and units insuring against all risks of direct physical loss commonly insured against or, in the case of a conversion building, against fire and extended coverage perils. The total amount of insurance after application of any deductibles shall be not less than 80% of the actual cash value of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations and other items normally excluded from property policies. (2) Liability insurance, including medical payments insurance, in an amount determined by the executive board but not less than any amount specified in the declaration, covering all occurrences commonly insured against for death, bodily injury and property damage arising out of or in connection with the use, ownership or maintenance of the common elements and units. (3) Any property or comprehensive general liability insurance carried by the association may contain a deductible provision. (b) Other insurance carried by association.--If the insurance described in subsection (a) is not reasonably available, the association promptly shall cause notice of that fact to be hand delivered or sent prepaid by the United States mail to all proprietary lessees. The declaration may require the association to carry any other insurance, and the association in any event may carry any other insurance in such reasonable amounts and with such reasonable deductibles as the executive board may deem appropriate to protect the association or the proprietary lessees. (c) Contents of insurance policies.--Insurance policies carried pursuant to subsection (a) must provide that: (1) Each proprietary lessee is an insured person under the policy with respect to liability arising out of his interest in the common elements or membership in the association. (2) The insurer waives its right to subrogation under the policy against any proprietary lessee or member of his household. (3) No act or omission by any proprietary lessee, unless acting within the scope of his authority on behalf of the association, will void the policy or be a condition to recovery under the policy. (4) If, at the time of a loss under the policy, there is other insurance in the name of a proprietary lessee covering the same risk covered by the policy, the association's policy provides primary insurance. (d) Proceeds from property insurance.--Any loss covered by the property policy under subsection (a)(1) must be adjusted with the association, but the insurance proceeds for that loss are payable to any insurance trustee designated for that purpose or otherwise to the association and not to any mortgagee or beneficiary under a mortgage or deed of trust. The insurance trustee or the association shall hold any insurance proceeds in trust for the association, proprietary lessees and the lienholders as their interests may appear. Subject to the provisions of subsection (g), the proceeds must be disbursed first for the repair or restoration of the damaged property, and the association, proprietary lessees and lienholders are not entitled to receive payment of any portion of the proceeds unless there is a surplus of proceeds after the property has been completely repaired or restored or the cooperative is terminated. (e) Unit owner may obtain insurance.--A proprietary lessee may insure the lessee's unit for all losses to his unit, including losses not covered by the insurance maintained by the association, due to a deductible provision or otherwise. An insurance policy issued to the association shall not prevent a proprietary lessee from obtaining insurance for his own benefit, including insurance to cover any deductibles or losses not covered by the association's property or comprehensive general liability insurance. (f) Evidence and cancellation of insurance.--An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to the association and, upon written request, to any proprietary lessee or holder of a security interest. The insurer issuing the policy may not cancel or refuse to renew it until 30 days after notice of the proposed cancellation or nonrenewal has been mailed to the association, each proprietary lessee and each holder of a security interest to whom a certificate or memorandum of insurance has been issued at their respective last known addresses. (g) Disposition of insurance proceeds.-- (1) Any portion of the cooperative for which insurance is required under this section which is damaged or destroyed shall be repaired or replaced promptly by the association unless: (i) the cooperative is terminated; (ii) repair or replacement would be illegal under any State or local health or safety statute or ordinance; or (iii) 80% of the proprietary lessees, including every proprietary lessee of a unit or assigned limited common element which will not be rebuilt, vote not to rebuild. Except for the costs of repair or replacement which are not covered due to deductibles, the cost of repair or replacement in excess of insurance proceeds and reserves which have not been identified by the executive board to fund costs of capital expenditures for the current fiscal year of the association is a common expense. (2) If the entire cooperative is not repaired or replaced: (i) the insurance proceeds attributed to the damaged common elements must be used to restore the damaged area to a condition compatible with the remainder of the cooperative; and (ii) except to the extent that other persons will be distributees and except as is otherwise provided in section 4321(i) (relating to limited equity cooperatives): (A) the insurance proceeds attributable to units and limited common elements which are not rebuilt must be distributed to the proprietary lessees of those units and the proprietary lessees of the units to which those limited common elements were located or to lienholders, as their interests may appear; and (B) the remainder of the proceeds must be distributed to all the proprietary lessees or lienholders, as their interests may appear, in proportion to the common expense liabilities of all the cooperative interests. If the proprietary lessees vote not to rebuild any unit, the allocated interests of the cooperative interest of which that unit is a part are automatically reallocated upon the vote as if the unit had been condemned under section 4107(a) (relating to eminent domain), and the association promptly shall prepare, execute and record an amendment to the declaration reflecting the reallocations. (3) Notwithstanding the provisions of this subsection, section 4217 (relating to termination of cooperative ownership) governs the distribution of insurance proceeds if the cooperative is terminated. (h) Nonresidential cooperative.--The provisions of this section may be varied or waived in the case of a cooperative all of whose units are restricted to nonresidential use. (i) Recovery of deductibles.--If an insurance policy maintained by the association contains a deductible, then that portion of any loss or claim which is not covered by insurance due to the application of a deductible, as well as any claim or loss for which the association is self-insured, shall be levied by the executive board in accordance with section 4314(c) (relating to assessments for common expenses). (Nov. 30, 2004, P.L.1499, No.190, eff. 60 days) 2004 Amendment. Act 190 amended subsecs. (a), (b), (e) and (g) and added subsec. (i). Cross References. Section 4313 is referred to in sections 4218, 4307, 4318, 4321 of this title.