Insurance Pitfalls

By Randall A. Pentiuk

        When purchasing insurance for single-family homes or apartment dwellings, consumers usually purchase very broad and inclusive policies that are relatively simple to shop for. Cooperative housing, in contrast, divides insurance risks among several individuals and entities through multiple insurance policies affording fairly specific coverages. Although the cooperative dweller likely has a fairly simple shopping experience, cooperative directors must consider coverages for the complex as a whole, individual dwellers and for the themselves in their capacities as directors, officers and employees.

        The cooperative is comprised, primarily, of the corporation-owned lands and buildings and of individuals spaces possessed by and containing property owned by private dwellers. Furthermore, the cooperative corporation itself is typically overseen by the private dwellers. Other actors in the cooperative are the property managers, employees and outside contractors. Each of these individuals or entities has liability exposures or property interests with respect to their relationships to the cooperative. As such, each has peculiar legal interest that must be protected. Many of these legal interests are properly served through insurance contracts.

        Nevertheless, because there are so many interested persons and entities, properly insuring the cooperative in this broadsense is a difficult task. It is generally expected that dwellers obtain their own insurance for their personal liability, but, if appropriate coverage is not acquired, the cooperative may become a party to tort actions. Obviously, damages incurred by the cooperative are transferred to the dwellers, which makes proper insurance a concern of the directors of the cooperative. The same principal holds true in the cases of outside contractors, property managers and even, in the case of directors themselves.

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