You asked if Connecticut law requires a condominium association to purchase flood insurance if the property is located in a flood prone area.

SUMMARY

Connecticut law requires condominium associations to maintain property and liability insurance, but does not explicitly require the purchase of flood insurance. However, one might argue that such a requirement is implied, according to Karen Romero at the Connecticut Insurance Department.

If the property is located in a flood zone, as determined by the Federal Emergency Management Agency (FEMA), federal law requires the purchase of flood insurance to obtain secured financing. The law requires federally-regulated or –insured lending institutions to determine if the structure is located in a flood area. If it is, the lending institution must provide the borrower written notice that flood insurance is required. It will not approve a mortgage unless the insurance is purchased.

The mandatory flood insurance purchase requirements apply to condominium, cooperative, and timeshare unit owners, but the practice of the lending industry is to defer to the association to ensure compliance. The association purchases the required flood insurance and assesses the unit owner's the premium through association dues.

Flood insurance is not provided by the private insurance industry, but through the National Flood Insurance Program (NFIP). (For more information, see FEMA's website at www. fema. gov/nfip/whonfip. shtm. )

CONDOMINIUM INSURANCE

Connecticut law requires condominium associations to maintain property insurance to protect against loss to the common elements of the property and liability insurance, including medical payments, to protect against death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements of the property (CGS § 47-255(a)).

State law does not explicitly require an association to purchase flood insurance on the property. However, it requires an association to have property insurance on the common elements for “all risks of direct physical loss commonly insured against. ” One might argue, therefore, that flood damage is commonly insured against when the property is in a flood zone, especially when mandated by lending institutions complying with federal law, according to Karen Romero, a property insurance expert at the Connecticut Insurance Department.

In the case of a building that contains units having horizontal boundaries (i. e. , units upstairs and downstairs), the condominium association's property insurance must include coverage for the units (CGS § 47-255(b)). However, this coverage extends to the building and to the common elements only and is meant to replace the building as it was originally built. It does not include coverage for any improvements made by the unit owners or unit owners' personal belongings.

The condominium association's insurance policy must designate each unit owner as an insured with respect to liability arising out of his interest in the common elements of the property and provide that the insurer waive its right to subrogate under the policy against any unit owner or member of his household (CGS § 47-255(d)(1) and (2)).

A unit owner is not prevented from insuring his unit for his own benefit (CGS § 47-255(f)). However, the law does not specifically require a unit owner to obtain insurance.

State law requires that if, at the time of loss under the condominium association's policy, there is other insurance in the unit owner's name covering the same risk, the association's policy provides primary coverage (i. e. , pays first) (CGS § 47-255(d)(4)).

Lastly, Connecticut law requires a condominium association to maintain, repair, and replace all common elements, and each unit owner to maintain, repair, or replace his unit, unless the condominium declaration provides otherwise (CGS § 47-249(a)).

The above discussion relates to condominiums created since January 1, 1984 or to condominiums created before that date that choose to come under the Common Interest Ownership Act (CIOA). The requirements for condominium associations created prior to January 1, 1984 and not under CIOA are substantially the same with respect to insurance (CGS § 47-83) and repairs (CGS § 47-84), with one exception. The horizontal boundary requirement is absent from the requirements for condominium associations created before January 1, 1984.

NATIONAL FLOOD INSURANCE PROGRAM

Congress established the National Flood Insurance Program (NFIP) through the National Flood Insurance Act of 1968 (44 CFR § 59 et seq. ) because it determined that it was uneconomical for the private insurance industry to make flood insurance available on reasonable terms and conditions. This federal program is designed to provide an insurance alternative to disaster assistance to meet the costs of repairing damage to buildings and their contents caused by floods.

The National Flood Insurance Reform Act of 1994 requires a person to purchase flood insurance to obtain secured financing to buy, build, or improve structures in Special Flood Hazard Areas (SFHAs). An SFHA is an area within a floodplain having a 1 percent or greater chance of flood occurrence in any given year. SFHAs are designated on flood maps issued by FEMA. Lending institutions that are federally regulated or federally insured must determine if the structure is located in a SFHA and must provide the lender written notice requiring flood insurance.

The law prohibits Federal agency lenders, such as the Small Business Administration (SBA) and United States Department of Agriculture's (USDA) Rural Housing Service, and Government-Sponsored Enterprises for Housing (such as Freddie Mac and Fannie Mae) from making, guaranteeing, or purchasing a loan secured by real estate or mobile homes in a SFHA, unless flood insurance has been purchased and is maintained during the term of the loan.

The mandatory flood insurance purchase requirements apply to condominium, cooperative, and timeshare units, but the practice of the lending industry is to defer to the association to ensure compliance. The premium for the policy is usually assessed as part of the unit owner's association dues.

JLK: ts