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If you live in a condominium or manage a condominum Illinois law specifies minimum amounts of insurance the condominium association must carry.
As you probably know, in Illinois, most aspects concerning a condominium are governed by statute in 765 ILCS 605, commonly known as the Illinois Condominium Property Act(the “Act”). Specifically, Section 12 of the Act discusses the insurance requirements for a condominium. As a condominium you are required to maintain property insurance, general liability insurance, a fidelity bond (if you have more six or more units), and directors and officer’s coverage.
Section 12(a)(1) discusses the requirements for property insurance. The property insurance must cover the common elements, the units, and limited common elements. The individual units should be covered to the extent of the bare walls, floors, and ceilings. It is the individual unit owner’s responsibility to purchase insurance for the personal contents of the unit. You must provide coverage for special form causes of loss and increased costs of construction due to building code requirements at the time the insurance is purchased and at each renewal date. Lastly, the total amount of the coverage can be no less than the full insurable replacement cost of the insured property less the deductibles.
Section 12(b)(2) covers the general liability requirement. You must have coverage for claims and liabilities arising in connection with the ownership, existence, use, or management of the property. The amount of the policy has to be a minimum of $1,000,000, however, given the size of your condominium you may want to discuss a larger coverage amount with your insurance agent. You must include as additional insureds: the board, the association, the manager and their respective agents and employees, and the unit owners to the extent of claims arising out of their use of the common elements.
Section 12(3)(A-C) discusses the fidelity bond. All condominiums with six or more units are required to obtain one. The bond must cover both the management company and the individual manager, their employees or agents who have access or control over association funds. The amount of the bond for both the company and individuals must be in the full amount of the association funds and reserves that are in the custody of the association or management company.
Section 12(3)(D) covers the director’s and officer’s liability coverage. This needs to cover all contracts or actions taken by the board in their official capacity as directors and officers, excluding actions for which directors or officers are not entitled to indemnification by law. You may decide the amount of coverage to carry if it is not already established in the declaration or bylaws.
These are the minimium amounts required by Illinois law. Like the mininium required amounts of automobile coverage, your situation might warrant having more coverage than the legally required minimum amount.
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