Sen. William R. Haine

Filed: 3/18/2014

 

 


 

 


 
09800SB3014sam001LRB098 19731 HEP 56336 a

1
AMENDMENT TO SENATE BILL 3014

2    AMENDMENT NO. ______. Amend Senate Bill 3014 by replacing
3everything after the enacting clause with the following:
 
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,

 

 

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1    (ii) providing coverage for special form causes of loss,
2    and (iii) providing coverage, at the time the insurance is
3    purchased and at each renewal date, in a total amount of
4    not less than the full insurable replacement cost of the
5    insured property, less deductibles, but including coverage
6    sufficient to rebuild the insured property in compliance
7    with building code requirements subsequent to an insured
8    loss, including: Coverage A, loss to the undamaged portion
9    of the building up to the full insurable replacement cost
10    of the building; Coverage B, demolition costs of no less
11    than 10% of the insured building limit; and Coverage C,
12    increased cost of construction coverage of no less than 10%
13    of the insured building limit in a total amount of not less
14    than the full insurable replacement cost of the insured
15    property, less deductibles, but including coverage for the
16    increased costs of construction due to building code
17    requirements, at the time the insurance is purchased and at
18    each renewal date.
19        (2) General liability insurance. Commercial general
20    liability insurance against claims and liabilities arising
21    in connection with the ownership, existence, use, or
22    management of the property in a minimum amount of
23    $1,000,000, or a greater amount deemed sufficient in the
24    judgment of the board, insuring the board, the association,
25    the management agent, and their respective employees and
26    agents and all persons acting as agents. The developer must

 

 

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1    be included as an additional insured in its capacity as a
2    unit owner, manager, board member, or officer. The unit
3    owners must be included as additional insured parties but
4    only for claims and liabilities arising in connection with
5    the ownership, existence, use, or management of the common
6    elements. The insurance must cover claims of one or more
7    insured parties against other insured parties.
8        (3) Fidelity bond; directors and officers coverage;
9    workers' compensation.
10            (A) An association with 6 or more dwelling units
11        must obtain and maintain a fidelity bond covering
12        persons, including the managing agent and its
13        employees who control or disburse funds of the
14        association, for the maximum amount of coverage
15        available to protect funds in the custody or control of
16        the association, plus the association reserve fund.
17            (B) All management companies that are responsible
18        for the funds held or administered by the association
19        must be covered by a fidelity bond for the maximum
20        amount of coverage available to protect those funds.
21        The association has standing to make a loss claim
22        against the bond of the managing agent as a party
23        covered under the bond.
24            (C) For purposes of paragraphs (A) and (B), the
25        fidelity bond must be in the full amount of association
26        funds and reserves in the custody of the association or

 

 

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1        the management company.
2            (D) The board of directors must obtain directors
3        and officers liability coverage at a level deemed
4        reasonable by the board, if not otherwise established
5        by the declaration or bylaws. Directors and officers
6        liability coverage must extend to all contracts and
7        other actions taken by the board in their official
8        capacity as directors and officers, but this coverage
9        shall exclude actions for which the directors are not
10        entitled to indemnification under the General Not For
11        Profit Corporation Act of 1986 or the declaration and
12        bylaws of the association. The coverage required by
13        this subparagraph (D) shall include, but not be limited
14        to, coverage of: defense of non-monetary actions or
15        resulting damages; defense of breach of contract; and
16        decisions related to the placement or adequacy of
17        insurance. The coverage required by this subparagraph
18        (D) shall include as an insured: past and future board
19        members while acting in their capacity as members of
20        the board of directors; the managing agent; and
21        employees of the board of directors and the managing
22        agent.
23            (E) The board of directors must obtain workers'
24        compensation insurance, including coverage of the
25        employer's liability.
26    (b) Contiguous units; improvements and betterments. The

 

 

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1insurance maintained under subdivision (a)(1) must include the
2units, the limited common elements except as otherwise
3determined by the board of managers, and the common elements.
4The insurance need not cover improvements and betterments to
5the units installed by unit owners, but if improvements and
6betterments are covered, any increased cost may be assessed by
7the association against the units affected.
8    Common elements include fixtures located within the
9unfinished interior surfaces of the perimeter walls, floors,
10and ceilings of the individual units initially installed by the
11developer. Common elements exclude floor, wall, and ceiling
12coverings. "Improvements and betterments" means all
13decorating, fixtures, and furnishings installed or added to and
14located within the boundaries of the unit, including electrical
15fixtures, appliances, air conditioning and heating equipment,
16water heaters, or built-in cabinets installed by unit owners,
17or any other additions, alterations, or upgrades installed or
18purchased by any unit owner.
19    (c) Deductibles. The board of directors of the association
20may, in the case of a claim for damage to a unit or the common
21elements, (i) pay the deductible amount as a common expense,
22(ii) after notice and an opportunity for a hearing, assess the
23deductible amount against the owners who caused the damage or
24from whose units the damage or cause of loss originated, or
25(iii) require the unit owners of the units affected to pay the
26deductible amount.

 

 

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1    (d) Other coverages. The declaration may require the
2association to carry any other insurance, including workers
3compensation, employment practices, environmental hazards, and
4equipment breakdown, the board of directors considers
5appropriate to protect the association, the unit owners, or
6officers, directors, or agents of the association.
7    (e) Insured parties; waiver of subrogation. Insurance
8policies carried pursuant to subsections (a) and (b) must
9include each of the following provisions:
10        (1) Each unit owner and secured party is an insured
11    person under the policy with respect to liability arising
12    out of the unit owner's interest in the common elements or
13    membership in the association.
14        (2) The insurer waives its right to subrogation under
15    the policy against any unit owner of the condominium or
16    members of the unit owner's household and against the
17    association and members of the board of directors.
18        (3) The unit owner waives his or her right to
19    subrogation under the association policy against the
20    association and the board of directors.
21    (f) Primary insurance. If at the time of a loss under the
22policy there is other insurance in the name of a unit owner
23covering the same property covered by the policy, the
24association's policy is primary insurance.
25    (g) Adjustment of losses; distribution of proceeds. Any
26loss covered by the property policy under subdivision (a)(1)

 

 

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1must be adjusted by and with the association. The insurance
2proceeds for that loss must be payable to the association, or
3to an insurance trustee designated by the association for that
4purpose. The insurance trustee or the association must hold any
5insurance proceeds in trust for unit owners and secured parties
6as their interests may appear. The proceeds must be disbursed
7first for the repair or restoration of the damaged common
8elements, the bare walls, ceilings, and floors of the units,
9and then to any improvements and betterments the association
10may insure. Unit owners are not entitled to receive any portion
11of the proceeds unless there is a surplus of proceeds after the
12common elements and units have been completely repaired or
13restored or the association has been terminated as trustee.
14    (h) Mandatory unit owner coverage. The board of directors
15may, under the declaration and bylaws or by rule, require
16condominium unit owners to obtain insurance covering their
17personal liability and compensatory (but not consequential)
18damages to another unit caused by the negligence of the owner
19or his or her guests, residents, or invitees, or regardless of
20any negligence originating from the unit. The personal
21liability of a unit owner or association member must include
22the deductible of the owner whose unit was damaged, any damage
23not covered by insurance required by this subsection, as well
24as the decorating, painting, wall and floor coverings, trim,
25appliances, equipment, and other furnishings.
26    If the unit owner does not purchase or produce evidence of

 

 

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1insurance requested by the board, the directors may purchase
2the insurance coverage and charge the premium cost back to the
3unit owner. In no event is the board liable to any person
4either with regard to its decision not to purchase the
5insurance, or with regard to the timing of its purchase of the
6insurance or the amounts or types of coverages obtained.
7    (i) Certificates of insurance. Contractors and vendors
8(except public utilities) doing business with a condominium
9association under contracts exceeding $10,000 per year must
10provide certificates of insurance naming the association, its
11board of directors, and its managing agent as additional
12insured parties.
13    (j) Non-residential condominiums. The provisions of this
14Section may be varied or waived in the case of a condominium
15community in which all units are restricted to nonresidential
16use.
17    (k) Settlement of claims. Any insurer defending a liability
18claim against a condominium association must notify the
19association of the terms of the settlement no less than 10 days
20before settling the claim. The association may not veto the
21settlement unless otherwise provided by contract or statute.
22(Source: P.A. 92-518, eff. 6-1-02.)".