SB3014 EnrolledLRB098 19731 HEP 54944 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 in a total amount of not less than the
6    full insurable replacement cost of the insured property,
7    less deductibles, but including coverage for the increased
8    costs of construction due to building code requirements, at
9    the time the insurance is purchased and at each renewal
10    date.
11        (2) General liability insurance. Commercial general
12    liability insurance against claims and liabilities arising
13    in connection with the ownership, existence, use, or
14    management of the property in a minimum amount of
15    $1,000,000, or a greater amount deemed sufficient in the
16    judgment of the board, insuring the board, the association,
17    the management agent, and their respective employees and
18    agents and all persons acting as agents. The developer must
19    be included as an additional insured in its capacity as a
20    unit owner, manager, board member, or officer. The unit
21    owners must be included as additional insured parties but
22    only for claims and liabilities arising in connection with
23    the ownership, existence, use, or management of the common
24    elements. The insurance must cover claims of one or more
25    insured parties against other insured parties.
26        (3) Fidelity bond; directors and officers coverage.

 

 

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1            (A) An association with 6 or more dwelling units
2        must obtain and maintain a fidelity bond covering
3        persons, including the managing agent and its
4        employees who control or disburse funds of the
5        association, for the maximum amount of coverage
6        available to protect funds in the custody or control of
7        the association, plus the association reserve fund.
8            (B) All management companies that are responsible
9        for the funds held or administered by the association
10        must be covered by a fidelity bond for the maximum
11        amount of coverage available to protect those funds.
12        The association has standing to make a loss claim
13        against the bond of the managing agent as a party
14        covered under the bond.
15            (C) For purposes of paragraphs (A) and (B), the
16        fidelity bond must be in the full amount of association
17        funds and reserves in the custody of the association or
18        the management company.
19            (D) The board of directors must obtain directors
20        and officers liability coverage at a level deemed
21        reasonable by the board, if not otherwise established
22        by the declaration or bylaws. Directors and officers
23        liability coverage must extend to all contracts and
24        other actions taken by the board in their official
25        capacity as directors and officers, but this coverage
26        shall exclude actions for which the directors are not

 

 

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1        entitled to indemnification under the General Not For
2        Profit Corporation Act of 1986 or the declaration and
3        bylaws of the association. The coverage required by
4        this subparagraph (D) shall include, but not be limited
5        to, coverage of: defense of non-monetary actions;
6        defense of breach of contract; and defense of decisions
7        related to the placement or adequacy of insurance. The
8        coverage required by this subparagraph (D) shall
9        include as an insured: past, present, and future board
10        members while acting in their capacity as members of
11        the board of directors; the managing agent; and
12        employees of the board of directors and the managing
13        agent.
14    (b) Contiguous units; improvements and betterments. The
15insurance maintained under subdivision (a)(1) must include the
16units, the limited common elements except as otherwise
17determined by the board of managers, and the common elements.
18The insurance need not cover improvements and betterments to
19the units installed by unit owners, but if improvements and
20betterments are covered, any increased cost may be assessed by
21the association against the units affected.
22    Common elements include fixtures located within the
23unfinished interior surfaces of the perimeter walls, floors,
24and ceilings of the individual units initially installed by the
25developer. Common elements exclude floor, wall, and ceiling
26coverings. "Improvements and betterments" means all

 

 

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

 

 

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

 

 

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1restored or the association has been terminated as trustee.
2    (h) Mandatory unit owner coverage. The board of directors
3may, under the declaration and bylaws or by rule, require
4condominium unit owners to obtain insurance covering their
5personal liability and compensatory (but not consequential)
6damages to another unit caused by the negligence of the owner
7or his or her guests, residents, or invitees, or regardless of
8any negligence originating from the unit. The personal
9liability of a unit owner or association member must include
10the deductible of the owner whose unit was damaged, any damage
11not covered by insurance required by this subsection, as well
12as the decorating, painting, wall and floor coverings, trim,
13appliances, equipment, and other furnishings.
14    If the unit owner does not purchase or produce evidence of
15insurance requested by the board, the directors may purchase
16the insurance coverage and charge the premium cost back to the
17unit owner. In no event is the board liable to any person
18either with regard to its decision not to purchase the
19insurance, or with regard to the timing of its purchase of the
20insurance or the amounts or types of coverages obtained.
21    (i) Certificates of insurance. Contractors and vendors
22(except public utilities) doing business with a condominium
23association under contracts exceeding $10,000 per year must
24provide certificates of insurance naming the association, its
25board of directors, and its managing agent as additional
26insured parties.

 

 

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1    (j) Non-residential condominiums. The provisions of this
2Section may be varied or waived in the case of a condominium
3community in which all units are restricted to nonresidential
4use.
5    (k) Settlement of claims. Any insurer defending a liability
6claim against a condominium association must notify the
7association of the terms of the settlement no less than 10 days
8before settling the claim. The association may not veto the
9settlement unless otherwise provided by contract or statute.
10    (l) The changes to this Section made by this amendatory Act
11of the 98th General Assembly apply only to insurance policies
12issued or renewed on or after June 1, 2015.
13(Source: P.A. 92-518, eff. 6-1-02.)
 
14    Section 99. Effective date. This Act takes effect June 1,
152015.