Author: Bill Wilson

Many homeowners were not assessed by their homeowner or condo associations until 2006 for losses that occurred in 2005 due to master policy exclusions, deductibles, or inadequate limits. Some insurers claim that the policy that responds is the one in force at the time of the hurricane damage. Under the ISO HO 00 03 10 00, that's wrong and here's why.... 

"We have companies applying different occurence dates to loss assessment claims resulting from hurricane assessments by condo associations.  My contention (supported by FC&S) is that the actual loss to the unit owner is a 'piece of paper coming in the mail' telling them to pony up. Those assessments are coming in today for storms back in 2005. The policy (see attached) says that the loss is covered if it is 'charged during the policy period' so to me the date of loss is the date of the assessment, not the date of the hurricane. The assessment is not a hurricane; it’s a bill to pay. Some companies are saying loss assessment coverage is triggered by the date of damage. Thoughts?"

I'll never ceased to be amazed at how some adjusters cannot read and understand their own company's policy language. Here's the policy provision you cite (straight from the current ISO HO-3 form):

7. Loss Assessment

   a. We will pay up to $1,000 for your share of
      loss assessment charged during the policy
      period against you, as owner or tenant of
      the "residence premises", by a corporation
      or association of property owners. The
      assessment must be made as a result of
      direct loss to property, owned by all
      members collectively, of the type that
      would be covered by this policy if owned
      by you, caused by a Peril Insured Against
      under Coverage A, other than:

      (1) Earthquake; or

      (2) Land shock waves or tremors before,
          during or after a volcanic eruption.

   The limit of $1,000 is the most we will pay
   with respect to any one loss, regardless of
   the number of assessments. We will only apply
   one deductible, per unit, to the total amount
   of any one loss to the property described
   above, regardless of the number of assessments.

I've always interpreted the "charged during the policy period against you" the same way as you...the policy in force when the assessment is made is the one that responds, regardless of when the loss actually incurred. The contract language puts no time frame at all on the loss occurrence.

If an adjuster is claiming the loss must occur during the policy period too, perhaps s/he is referring to "...of the type that would be covered by this policy if owned by you...." The policy only covers direct loss to property that occurs during the policy period. I can see how it could be interpreted this way, though clearly improperly.

However, from a practical sense, what if a loss occurred on the last day of the policy period, the insured changes HO insurers, then the association makes the assessment three months later. According to the interpretation immediately above, the old HO policy won't cover it because the assessment wasn't charged during that policy period and the new HO policy won't cover it because the loss occurred prior to inception.

Even a claims-made CGL has a 60-day grace period following policy expiration in which to report claims arising from occurrences during the policy period or since the retroactive date. Obviously, an assessment could take a lot longer than 60 days to make. So, I can understand the interpretation, but from a realistic standpoint, it doesn't make sense. At best, it's ambiguous and we know who wins ambiguity contests.

For an example of a more detailed article from our Florida state association, check out "Loss Assessment Coverage."