Additional Named Insured in Condo Insurance: What It Means & Why It Matters
Condominium associations in Michigan are required to carry insurance that complies with Michigan Administrative Rule 550.208, which states:
The bylaws shall provide that the association of co-owners shall carry insurance for fire and extended coverage, vandalism and malicious mischief, and, if applicable, liability and workers’ disability compensation, pertinent to the ownership, use, and maintenance of the premises and that all premiums for insurance carried by the association shall be an expense of administration. The association may carry other insurance coverage, including cross-coverage for damages done by 1 co-owner to another.
Accordingly, a condominium association is required to obtain certain coverage for the condominium. The association’s and co-owners’ insurance obligations will be explicitly identified in the master deed and condominium bylaws. A condominium association will usually insure all common elements and, depending on the nature of the condominium, may insure certain items within a unit. On the other hand, the bylaws will usually require a co-owner to obtain insurance for their personal property within the unit and elsewhere on the condominium and personal liability for occurrences within the unit. The bylaws for each condominium association will identify the level of coverage that is allocated between the association and co-owners, and it is important to review the allocation and obtain the appropriate insurance policy.
Beyond the usual insurance allocation in the bylaws, there may be situations where a co-owner will need to obtain additional insurance. One common example is when a co-owner installs an alteration or modification to their unit or appurtenant limited common element. In that situation, the association may require that the co-owner add the addition or modification to their insurance policy and add the association as an additional named insured. But what exactly is an additional named insured, and why would the association require the co-owner to add it as an additional named insured?
Each insurance policy will have a named insured: the person who has taken out the policy and is responsible for paying the insurance premiums. The named insured is also the person who is protected by the terms of the policy and would benefit from any claims arising out of the policy. As the name implies, an additional named insured is a party that is specifically identified in an insurance policy and who receives certain benefits from the policy. The benefits may depend on the insurance policy, but an additional named insured is expected to benefit from coverage under the policy to the same or similar extent as the named insured.
As an example, a co-owner submits a modification request to the board of directors for permission to install an electric vehicle charger on the common elements. The board reviews the request and responds that it will approve the request if the co-owner insures the electric vehicle charger and includes the association as an additional named insured on the policy. The co-owner takes out an insurance policy on the electric vehicle charger with the condominium association as an additional named insured and the two sides enter into a modification agreement that contains the insurance requirement. As an additional named insured, the association would be informed of any changes to the insurance policy or if the policy is cancelled for the co-owner failing to pay the premium. The condominium association could then take appropriate action against the co-owner for failing to comply with the terms of the modification agreement. Additionally, if something happens with the electric vehicle charger that damages a common element that the association is responsible for repairing, the co-owner’s insurance policy may cover the damaged common elements.
In addition to co-owner alterations and modifications, a condominium association should also ensure that a contract with a vendor includes a requirement that the vendor will name the condominium association as an additional named insured. Because the association, as an additional named insured, would receive notice of any cancellation in the vendor’s insurance policy, the association can feel confident that the vendor has appropriate insurance. Further, being an additional named insured may require the vendor’s insurance company to defend the association. For example, if the association hires a contractor to replace the water pipes in a unit, and the pipes are defective and burst, that co-owner is likely going to pursue the association for the damage. Instead of turning to its own insurance carrier, the condominium association may be able to demand that the contractor’s insurance defend the association against the co-owner’s claim.
A condominium association should insist on being included as an additional named insured on a co-owner’s insurance policy for alterations or modifications that could affect the association’s liability for the common elements, as well as a contractor’s insurance policy for work authorized by the board of directors. Being included as an additional named insured on these types of insurance policies will not only provide notice to the association of any changes in the insurance policy, but also likely provide the association with a level of coverage that it would otherwise not have.
Michael T. Pereira, Esq., is an Attorney with Hirzel Law, PLC and focuses his practice on general counsel matters and document amendments. Mr. Pereira graduated from the University of Detroit Mercy School of Law in 2018, where he graduated magna cum laude and second in his class. Following graduation from Detroit Mercy, Mr. Pereira spent nearly three years with the Michigan Court of Appeals as a research attorney and as a law clerk to Judge Patrick M. Meter and Judge Anica Letica. Best Lawyers: “Ones to Watch” recognized Mr. Pereira in 2024 for professional excellence in real estate law. He may be reached at (248) 986-2290 or mpereira@hirzellaw.com.
