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Reduce Financial Burden for Condominium Associations, SUPPORT HB449/SB446
The Maryland Legislative Action Committee (MD-LAC) is pleased to support HB449/SB446, which will help those condominiums who have been forced to accept increasingly higher deductibles, because of past losses, underwriting/carrier requirements, or to keep the premiums for property damage coverage under some degree of control.  Although many condominiums have increased their master policy deductibles—voluntarily or involuntarily—Maryland law limits the portion of the deductible that can be charged back to the owners in whose units the loss originates.  Currently, Section 11-114 of the Maryland Condominium Act limits that amount to $10,000.  Unfortunately, many condominiums have been forced to accept deductibles that are higher than that amount, and the difference between their actual deductible and the $10,000 they can charge to the unit owner must then be absorbed as a common expense.  The bills supported by CAI will increase the portion of the master policy deductible chargeable to a unit owner from $10,000 to $25,000 when the loss originates in the unit. The entire master policy deductible would remain a common expense for losses that originate from the common elements, or from an insurable event originating outside of the condominium units and common areas.

Although just five years have passed since the MD-LAC pursued, and the legislature approved, an increase of the deductible responsibility cap the insurance market has changed dramatically. The $10,000 deductible that insurance carriers commonly attached to condominiums' master policies just five years ago is being used far less frequently. Catastrophic losses (tornadoes, wildfires, hurricanes) have impacted the market significantly. While Maryland condominiums have largely escaped these types of losses, insurance carriers determine premiums and deductibles based upon a pool of risks.  Consequently, insurance carriers have consistently shifted risk back to condominiums in the form of increased deductibles in order to protect carrier reserves and maintain the viability of their insurance programs. More frequently, brokers and condominium associations are seeing a $25,000 deductible applied at renewal—or even higher deductibles of $50,000, $100,000, or more when a condominium association has a history of claims.

Increasing the maximum amount of the master policy deductible that unit owners may be charged when the incident originates in the owner's unit will not entirely stop insurance carriers from steadily increasing the deductibles. However, the changes in HB449/SB446 will help Maryland condominiums to keep up with escalating deductibles, protect association budgets and reserves, and encourage unit owners to promptly attend to in-unit maintenance. 

To protect unit owners further, MD-LAC will also be supporting a bill which is expected to be introduced later this session, which will require all condominium unit owners in the state to carry a condominium unit owners' HO-6 policy, no matter whether their condominium's bylaws impose that requirement. HO-6 policies currently in force for unit owners who elect to carry such coverage typically include coverage that will protect a unit owner who is charged for the master policy deductible, and we do not anticipate any change regarding the availability of that coverage.

For all of these reasons, MD-LAC urges you to lend your support to HB449 and SB446 by taking less than five minutes to email your legislator using the form to the right. 

A hearing on HB449 in the House Environment and Transportation Committee is scheduled for Tuesday, February 11, 2025.

Please contact Robin Manougian, MD-LAC Insurance Chair (Robin.Manougian@baldwin.com) if you have any questions.

Please be aware that this call to action is intended for constituents of certain legislators in your state. If you are not one of their constituents, then please keep an eye on your inbox for future calls to action!

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