Insuring Amenities Don't Make Luxury a Liability

Like beauty, what constitutes an 'amenity'—particularly a 'luxury' amenity—may well be in the eye of the beholder. Young families may want indoor and outdoor play equipment, while professionals may appreciate a well-appointed gym, and seniors might gravitate towards card rooms and social halls. All of those and more are examples of what may be considered an amenity, and whether built-in from the beginning or retrofitted later to meet resident demand, they add value—both real and perceived—to the properties that have them. 

But with any amenity, be it something as simple as a basketball court or as complex as an indoor pool or rock climbing wall, comes potential liability. Making sure your building or association has enough of the right kind of insurance coverage for its amenities is a crucial part of your board/management team's job. 

Not Your Grandma's Amenities 

Swimming pools (indoors or out) well equipped gyms, recreation rooms and playgrounds are considered standard features by many. Hot tubs, saunas, roof decks, wine cellars, and concierge services are amenities with a definite lean toward luxury. Regardless of personal opinion on what is standard versus what's fancy, the first place to look for definition of an amenity is the association bylaws but you may not find one. “But don’t be surprised if you do not find a defined 'Building Amenities' description in the bylaws,” says Todd M. Ross, the managing director at One Point Brokerage, LLC in New York City. “Amenity space is really common space put to specific use for the benefit of the owners and residents of the building, and the term common space or common limited space is defined in the bylaws or proprietary lease. In today’s development terminology, amenities are meant to denote a special use of common space such as a pool, spa, wine room, movie room, or gym; it is more marketing terminology than insurance terminology,” he explains.

New and Improved Amenities

Generally, a condominium association provides insurance for the outside walls of habitational buildings, plus common areas (such as grass and walkways) surrounding the buildings. Brokers also note that coverage should also be included for the extras: things like a clubhouse, gazebo, swimming pool, storage areas, parking facilities, tennis courts, golf courses and any other areas owned by the association. The amenities, also known as the common elements, of a condo will be defined in the building or association's offering plan, condo declaration, and sales brochures. In a cooperative apartment, they're defined in the building's occupancy agreement or proprietary lease.  

“The building amenities are collectively owned by the unit owners, which is why they are referred to as common elements. A separate policy needs to be in force to cover this exposure,” says Joel A. Davis, regional marketing director at Community Association Underwriters of America, Inc., a nationwide insurer. “The coverage from an individual homeowner’s policy would be inadequate to cover all of the common elements. Ideally, the insurance agent for a homeowner should make certain that the homeowner’s policy only covers the unit owners’ property and that there are no gaps in coverage.”  

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