(765 ILCS 605/12)
(from Ch. 30, par. 312)
(a) Required coverage. No policy of insurance shall be issued or
delivered to a condominium association, and no policy of insurance issued to a
condominium association shall be renewed, unless the insurance coverage under
the policy includes the following:
(1) Property insurance. Property insurance (i) on the
common elements and the units, including the limited common elements and except as otherwise determined by the board of managers, the bare walls, floors, and ceilings of the unit, (ii) providing coverage for special form causes of loss, and (iii) in a total amount of not less than the full insurable replacement cost of the insured property, less deductibles, but including coverage for the increased costs of construction due to building code requirements, at the time the insurance is purchased and at each renewal date.
(2) General liability insurance. Commercial general
liability insurance against claims and liabilities arising in connection with the ownership, existence, use, or management of the property in a minimum amount of $1,000,000, or a greater amount deemed sufficient in the judgment of the board, insuring the board, the association, the management agent, and their respective employees and agents and all persons acting as agents. The developer must be included as an additional insured in its capacity as a unit owner, manager, board member, or officer. The unit owners must be included as additional insured parties but only for claims and liabilities arising in connection with the ownership, existence, use, or management of the common elements. The insurance must cover claims of one or more insured parties against other insured parties.
(3) Fidelity bond; directors and officers coverage.
(A) An association with 6 or more dwelling units
must obtain and maintain a fidelity bond covering persons, including the managing agent and its employees who control or disburse funds of the association, for the maximum amount of coverage available to protect funds in the custody or control of the association, plus the association reserve fund.
(B) All management companies that are responsible
for the funds held or administered by the association must be covered by a fidelity bond for the maximum amount of coverage available to protect those funds. The association has standing to make a loss claim against the bond of the managing agent as a party covered under the bond.
(C) For purposes of paragraphs (A) and (B), the
fidelity bond must be in the full amount of association funds and reserves in the custody of the association or the management company.
(D) The board of directors must obtain directors
and officers liability coverage at a level deemed reasonable by the board, if not otherwise established by the declaration or bylaws. Directors and officers liability coverage must extend to all contracts and other actions taken by the board in their official capacity as directors and officers, but this coverage shall exclude actions for which the directors are not entitled to indemnification under the General Not For Profit Corporation Act of 1986 or the declaration and bylaws of the association.
(b) Contiguous units; improvements and betterments. The insurance
maintained under subdivision (a)(1) must include the units, the limited
common elements except as otherwise determined by the board of managers,
and the common elements. The insurance need not cover improvements and
betterments to the units installed by unit owners, but if improvements
and betterments are covered, any increased cost may be assessed by the
association against the units affected.
Common elements include fixtures located within the unfinished
interior surfaces of the perimeter walls, floors, and ceilings of the
individual units initially installed by the developer. Common elements
exclude floor, wall, and ceiling coverings. "Improvements and
betterments" means all decorating, fixtures, and furnishings installed
or added to and located within the boundaries of the unit, including
electrical fixtures, appliances, air conditioning and heating
equipment, water heaters, or built-in cabinets installed by unit owners.
(c) Deductibles. The board of directors of the association may,
in the case of a claim for damage to a unit or the common elements, (i)
pay the deductible amount as a common expense, (ii) after notice and an
opportunity for a hearing, assess the deductible amount against the
owners who caused the damage or from whose units the damage or cause of
loss originated, or (iii) require the unit owners of the units affected
to pay the deductible amount.
(d) Other coverages. The declaration may require the association
to carry any other insurance, including workers compensation,
employment practices, environmental hazards, and equipment breakdown,
the board of directors considers appropriate to protect the
association, the unit owners, or officers, directors, or agents of the
(e) Insured parties; waiver of subrogation. Insurance policies
carried pursuant to subsections (a) and (b) must include each of the
(1) Each unit owner and secured party is an insured
person under the policy with respect to liability arising out of the unit owner's interest in the common elements or membership in the association.
(2) The insurer waives its right to subrogation under
the policy against any unit owner of the condominium or members of the unit owner's household and against the association and members of the board of directors.
(3) The unit owner waives his or her right to
subrogation under the association policy against the association and the board of directors.
(f) Primary insurance. If at the time of a loss under the policy
there is other insurance in the name of a unit owner covering the same
property covered by the policy, the association's policy is primary
(g) Adjustment of losses; distribution of proceeds. Any loss
covered by the property policy under subdivision (a)(1) must be
adjusted by and with the association. The insurance proceeds for that
loss must be payable to the association, or to an insurance trustee
designated by the association for that purpose. The insurance trustee
or the association must hold any insurance proceeds in trust for unit
owners and secured parties as their interests may appear. The proceeds
must be disbursed first for the repair or restoration of the damaged
common elements, the bare walls, ceilings, and floors of the units, and
then to any improvements and betterments the association may insure.
Unit owners are not entitled to receive any portion of the proceeds
unless there is a surplus of proceeds after the common elements and
units have been completely repaired or restored or the association has
been terminated as trustee.
(h) Mandatory unit owner coverage. The board of directors may,
under the declaration and bylaws or by rule, require condominium unit
owners to obtain insurance covering their personal liability and
compensatory (but not consequential) damages to another unit caused by
the negligence of the owner or his or her guests, residents, or invitees,
or regardless of any negligence originating from the unit. The personal
liability of a unit owner or association member must include the
deductible of the owner whose unit was damaged, any damage not covered
by insurance required by this subsection, as well as the decorating,
painting, wall and floor coverings, trim, appliances, equipment, and
If the unit owner does not purchase or produce evidence of
insurance requested by the board, the directors may purchase the
insurance coverage and charge the premium cost back to the unit owner.
In no event is the board liable to any person either with regard
to its decision not to purchase the insurance, or with regard to the timing of
its purchase of the insurance or the amounts or types of coverages
(i) Certificates of insurance. Contractors and vendors (except public
utilities) doing business
with a condominium association under contracts exceeding $10,000 per
year must provide certificates of insurance naming the association, its
board of directors, and its managing agent as additional insured parties.
(j) Non-residential condominiums. The provisions of this Section
may be varied or waived in the case of a condominium community in which
all units are restricted to nonresidential use.
(k) Settlement of claims. Any insurer defending a liability claim
against a condominium association must notify the association of the
terms of the settlement no less than 10 days before settling the claim.
The association may not veto the settlement unless otherwise provided
by contract or statute.
(Source: P.A. 92-518, eff. 6-1-02.)