August 24, 2004
SUBROGATION FOR CONDOMINIUM DAMAGE
By: Janet L. Kaminski, Associate Legislative Attorney
You asked if a condominium association, or its insurer, has a right of subrogation against a unit owner or tenant if such person caused a fire in his condominium that damaged a common area.
The Office of Legislative Research is not authorized to provide legal advice and this report should not be taken as such.
A condominium association's insurance policy must, by statute, include a subrogation waiver. As a result, the insurance company cannot seek reimbursement of amounts paid under the policy from the unit owner or tenant who caused the damage covered by the policy.
The association may bill the unit owner or tenant for any uninsured loss or deductible cost. The owner or tenant commonly submits these charges to his own insurance carrier.
The association might be able to sue the condominium owner or tenant directly for damage done to the common areas. The association and the unit owner should contact their respective insurance carriers for guidance. They may also want to contact attorneys for legal advice.
Subrogation is a legal concept that permits an insurance company to “stand in the shoes of” its insured and seek recovery for losses paid under the insurance policy from the third party that caused the damage.
For example, a person in an automobile accident that is caused by another person submits a claim to his insurance company. The insurance company pays the claim according to the terms of the insurance policy. The insurance company, which assumes the legal rights of its insured, then seeks reimbursement for the amount paid to the insured from the person that caused the accident.
Subrogation rights may be contractual (explicit in a contract) or legal (permitted under theories of equity). Statutes may determine whether or not subrogation is permitted.
When someone waives a right, they surrender or relinquish that right. Therefore, a subrogation waiver is an intentional relinquishing of any right to recover damages from another party who may be responsible for a loss. If an insurance company waives the right of subrogation, it cannot seek reimbursement for the amount paid to its insured from another person, even if that person caused the loss.
COMMON INTEREST OWNERSHIP ACT
Under the Common Interest Ownership Act, condominium association insurance policies must provide that: (1) each unit owner 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 unit owner or member of his household; (3) no act or omission by any unit owner, unless acting in the scope of his authority on behalf of the association, will void the policy or be a condition to recovery under the policy; and (4) if, at the same time of a loss under the policy, there is other insurance in the unit owner's name covering the same risk covered by the policy, the association's policy is primary (i.e., pays first) (CGS § 47-255(d)).
Because the condominium association's insurance policy must, by statute, include a subrogation waiver, the insurance company cannot seek reimbursement of amounts paid under the policy from the unit owner or tenant who caused the damage covered by the policy.
According to Matthew Perlstein, a condominium law expert, the association may bill the unit owner or tenant for any uninsured loss or covered expenses not paid by the insurer because of a deductible. The unit owner or tenant commonly submits these charges to his own insurance carrier for coverage consideration.
In the absence of subrogation, the association might be able to sue the unit owner or tenant directly for damage done to the condominium common areas.
The association and unit owner or tenant should contact their respective insurance carriers for guidance. They may also want to contact attorneys for legal advice.