101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB2598

 

Introduced , by Rep. Jim Durkin

 

SYNOPSIS AS INTRODUCED:
 
765 ILCS 605/12  from Ch. 30, par. 312

    Amends the Condominium Property Act. Provides that if a property manager has an insurance policy in the name of the management company for a property managed, the property manager shall, before termination of coverage, provide a 90-day notice to the condominium owners. Provides that if the property manager fails to do so, the property manager is liable for all claims on the building and guilty of a Class B misdemeanor. Effective immediately.


LRB101 10312 LNS 55418 b

CORRECTIONAL BUDGET AND IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB2598LRB101 10312 LNS 55418 b

1    AN ACT concerning civil law.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Condominium Property Act is amended by
5changing Section 12 as follows:
 
6    (765 ILCS 605/12)  (from Ch. 30, par. 312)
7    Sec. 12. Insurance.
8    (a) Required coverage. No policy of insurance shall be
9issued or delivered to a condominium association, and no policy
10of insurance issued to a condominium association shall be
11renewed, unless the insurance coverage under the policy
12includes the following:
13        (1) Property insurance. Property insurance (i) on the
14    common elements and the units, including the limited common
15    elements and except as otherwise determined by the board of
16    managers, the bare walls, floors, and ceilings of the unit,
17    (ii) providing coverage for special form causes of loss,
18    and (iii) providing coverage, at the time the insurance is
19    purchased and at each renewal date, in a total amount of
20    not less than the full insurable replacement cost of the
21    insured property, less deductibles, but including coverage
22    sufficient to rebuild the insured property in compliance
23    with building code requirements subsequent to an insured

 

 

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1    loss, including: Coverage B, demolition costs; and
2    Coverage C, increased cost of construction coverage. The
3    combined total of Coverage B and Coverage C shall be no
4    less than 10% of each insured building value, or $500,000,
5    whichever is less.
6        (2) General liability insurance. Commercial general
7    liability insurance against claims and liabilities arising
8    in connection with the ownership, existence, use, or
9    management of the property in a minimum amount of
10    $1,000,000, or a greater amount deemed sufficient in the
11    judgment of the board, insuring the board, the association,
12    the management agent, and their respective employees and
13    agents and all persons acting as agents. The developer must
14    be included as an additional insured in its capacity as a
15    unit owner, manager, board member, or officer. The unit
16    owners must be included as additional insured parties but
17    only for claims and liabilities arising in connection with
18    the ownership, existence, use, or management of the common
19    elements. The insurance must cover claims of one or more
20    insured parties against other insured parties.
21        (3) Fidelity bond; directors and officers coverage.
22            (A) An association with 6 or more dwelling units
23        must obtain and maintain a fidelity bond covering
24        persons, including the managing agent and its
25        employees who control or disburse funds of the
26        association, for the maximum amount of coverage

 

 

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1        available to protect funds in the custody or control of
2        the association, plus the association reserve fund.
3            (B) All management companies that are responsible
4        for the funds held or administered by the association
5        must be covered by a fidelity bond for the maximum
6        amount of coverage available to protect those funds.
7        The association has standing to make a loss claim
8        against the bond of the managing agent as a party
9        covered under the bond.
10            (C) For purposes of paragraphs (A) and (B), the
11        fidelity bond must be in the full amount of association
12        funds and reserves in the custody of the association or
13        the management company.
14            (D) The board of directors must obtain directors
15        and officers liability coverage at a level deemed
16        reasonable by the board, if not otherwise established
17        by the declaration or bylaws. Directors and officers
18        liability coverage must extend to all contracts and
19        other actions taken by the board in their official
20        capacity as directors and officers, but this coverage
21        shall exclude actions for which the directors are not
22        entitled to indemnification under the General Not For
23        Profit Corporation Act of 1986 or the declaration and
24        bylaws of the association. The coverage required by
25        this subparagraph (D) shall include, but not be limited
26        to, coverage of: defense of non-monetary actions;

 

 

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1        defense of breach of contract; and defense of decisions
2        related to the placement or adequacy of insurance. The
3        coverage required by this subparagraph (D) shall
4        include as an insured: past, present, and future board
5        members while acting in their capacity as members of
6        the board of directors; the managing agent; and
7        employees of the board of directors and the managing
8        agent.
9    (b) Contiguous units; improvements and betterments. The
10insurance maintained under subdivision (a)(1) must include the
11units, the limited common elements except as otherwise
12determined by the board of managers, and the common elements.
13The insurance need not cover improvements and betterments to
14the units installed by unit owners, but if improvements and
15betterments are covered, any increased cost may be assessed by
16the association against the units affected.
17    Common elements include fixtures located within the
18unfinished interior surfaces of the perimeter walls, floors,
19and ceilings of the individual units initially installed by the
20developer. Common elements exclude floor, wall, and ceiling
21coverings. "Improvements and betterments" means all
22decorating, fixtures, and furnishings installed or added to and
23located within the boundaries of the unit, including electrical
24fixtures, appliances, air conditioning and heating equipment,
25water heaters, built-in cabinets installed by unit owners, or
26any other additions, alterations, or upgrades installed or

 

 

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1purchased by any unit owner.
2    (c) Deductibles. The board of directors of the association
3may, in the case of a claim for damage to a unit or the common
4elements, (i) pay the deductible amount as a common expense,
5(ii) after notice and an opportunity for a hearing, assess the
6deductible amount against the owners who caused the damage or
7from whose units the damage or cause of loss originated, or
8(iii) require the unit owners of the units affected to pay the
9deductible amount.
10    (d) Other coverages. The declaration may require the
11association to carry any other insurance, including workers
12compensation, employment practices, environmental hazards, and
13equipment breakdown, the board of directors considers
14appropriate to protect the association, the unit owners, or
15officers, directors, or agents of the association.
16    (e) Insured parties; waiver of subrogation. Insurance
17policies carried pursuant to subsections (a) and (b) must
18include each of the following provisions:
19        (1) Each unit owner and secured party is an insured
20    person under the policy with respect to liability arising
21    out of the unit owner's interest in the common elements or
22    membership in the association.
23        (2) The insurer waives its right to subrogation under
24    the policy against any unit owner of the condominium or
25    members of the unit owner's household and against the
26    association and members of the board of directors.

 

 

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1        (3) The unit owner waives his or her right to
2    subrogation under the association policy against the
3    association and the board of directors.
4    (f) Primary insurance. If at the time of a loss under the
5policy there is other insurance in the name of a unit owner
6covering the same property covered by the policy, the
7association's policy is primary insurance.
8    (g) Adjustment of losses; distribution of proceeds. Any
9loss covered by the property policy under subdivision (a)(1)
10must be adjusted by and with the association. The insurance
11proceeds for that loss must be payable to the association, or
12to an insurance trustee designated by the association for that
13purpose. The insurance trustee or the association must hold any
14insurance proceeds in trust for unit owners and secured parties
15as their interests may appear. The proceeds must be disbursed
16first for the repair or restoration of the damaged common
17elements, the bare walls, ceilings, and floors of the units,
18and then to any improvements and betterments the association
19may insure. Unit owners are not entitled to receive any portion
20of the proceeds unless there is a surplus of proceeds after the
21common elements and units have been completely repaired or
22restored or the association has been terminated as trustee.
23    (h) Mandatory unit owner coverage. The board of directors
24may, under the declaration and bylaws or by rule, require
25condominium unit owners to obtain insurance covering their
26personal liability and compensatory (but not consequential)

 

 

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1damages to another unit caused by the negligence of the owner
2or his or her guests, residents, or invitees, or regardless of
3any negligence originating from the unit. The personal
4liability of a unit owner or association member must include
5the deductible of the owner whose unit was damaged, any damage
6not covered by insurance required by this subsection, as well
7as the decorating, painting, wall and floor coverings, trim,
8appliances, equipment, and other furnishings.
9    (i) Certificates of insurance. Contractors and vendors
10(except public utilities) doing business with a condominium
11association under contracts exceeding $10,000 per year must
12provide certificates of insurance naming the association, its
13board of directors, and its managing agent as additional
14insured parties.
15    (j) Non-residential condominiums. The provisions of this
16Section may be varied or waived in the case of a condominium
17community in which all units are restricted to nonresidential
18use.
19    (k) Settlement of claims. Any insurer defending a liability
20claim against a condominium association must notify the
21association of the terms of the settlement no less than 10 days
22before settling the claim. The association may not veto the
23settlement unless otherwise provided by contract or statute.
24    (l) The changes to this Section made by this amendatory Act
25of the 98th General Assembly apply only to insurance policies
26issued or renewed on or after June 1, 2015.

 

 

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1    (m) Property managers. If a property manager has an
2insurance policy in the name of the management company for a
3property managed, the property manager shall, before
4termination of coverage, provide a 90-day notice to the
5condominium owners. If the property manager fails to do so, the
6property manager is liable for all claims on the building and
7guilty of a Class B misdemeanor.
8(Source: P.A. 98-762, eff. 6-1-15.)
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.