Risk Alert: Key Concerns for Condo & Townhouse Owners

This is happening in Florida due to misunderstanding of how insurance works. I As a public adjuster with over 40 years of experience, question the condo board’s decision to bypass insurance and levy a special assessment of $4,500 per owner to cover $180,000 in hurricane damage repairs. Let’s break this down based on general principles of condominium governance in Florida, as well as the practical and logical flaws in their approach. Since you’re in the insurance business, I’ll tailor this to your perspective and lean into why their reasoning doesn’t hold water.

Are They Within Their Rights?

In Florida, condo boards operate under the Florida Condominium Act (Chapter 718, Florida Statutes), and their authority to levy special assessments is typically outlined in the association’s governing documents—specifically the declaration of condominium and bylaws. Generally, boards have the right to impose special assessments for necessary repairs or maintenance of common elements (like the exterior of a townhouse development) if the funds aren’t available in the operating budget or reserves. So, yes, they likely have the legal authority to assess owners for hurricane damage repairs, provided they follow proper procedure (e.g., board vote, notice to owners, etc.). However, just because they can doesn’t mean it’s the smart or intended course of action—especially when insurance exists for this exact purpose. The Florida Condominium Act (Fla. Stat. § 718.111(11)) mandates that associations maintain adequate property insurance for common elements and condominium property (like exteriors) to cover insurable events such as hurricanes. The fact that your mother-in-law’s maintenance dues explicitly cover exterior hurricane damage strongly suggests the association collects funds to pay insurance premiums for this purpose. Bypassing that insurance could arguably violate the spirit of the statute and the implied contract with owners, though it’s not explicitly illegal unless the governing documents require insurance use for such claims.

Why Their Logic Is Flawed

The condo board’s decision to avoid an insurance claim out of fear of rate increases is, frankly, shortsighted and misunderstands how insurance works—especially in a state like Florida, where hurricanes are a systemic risk. Here’s why their reasoning is shaky:

1. Insurance Exists for Catastrophic Events Like This Hurricanes are precisely the kind of high-cost, unpredictable event that insurance is designed to handle. The association pays premiums (via maintenance dues) to transfer that risk to the insurer. By choosing to self-fund $180,000 in repairs, they’re effectively acting as their own insurance company—without the capital reserves or risk-spreading capacity of an actual insurer. That’s not prudent; it’s reckless. Owners shouldn’t be hit with a $4,500 bill when they’ve already paid for coverage through dues.

2. Rate Increases Aren’t a Given—or Unique to Them Their fear of a rate hike assumes filing a claim would single them out for a punitive increase. As a public adjuster, you know that’s not how it works in Florida’s hurricane-prone market. Insurance rates are driven by statewide loss trends, not just individual claims. After a major hurricane, insurers adjust premiums across the board based on aggregate claims data, not because one condo association filed for $180,000. If anything, not filing a claim won’t shield them—they’ll still face rate hikes if the broader region was hit hard, which is likely given the extensive damage you mentioned.

3. They’re Ignoring Deductibles, Not Avoiding Them Even with insurance, there’s a deductible—say, $10,000 or $20,000 for a hurricane claim on a policy covering multiple units. That’s a fraction of $180,000. The board could assess owners to cover the deductible (a common expense under Fla. Stat. § 718.111(11)(j)), splitting it across all owners (e.g., $250–$500 each for 40 owners). Instead, they’re asking for $4,500 per owner—9 to 18 times more—because they’re covering the entire cost. That’s not saving money; it’s shifting the full burden onto owners unnecessarily.

4. They’re Wasting Premiums Already Paid Owners have been paying into insurance via dues, likely for years, to mitigate exactly this scenario. By not filing a claim, the board is throwing that investment out the window. If they’re so worried about rates, why not negotiate a higher deductible next renewal to lower premiums after using the current policy they’ve already paid for? Their approach screws over owners now and leaves them exposed later.

5. Cash Flow vs. Insurance Liquidity Associations rarely have $180,000 sitting in reserves for unplanned repairs—reserves are typically for predictable maintenance (e.g., roof replacement in 10 years), not sudden disasters. Forcing owners to cough up $4,500 each assumes everyone has that cash on hand, which is unrealistic for many, especially retirees or fixed-income residents common in Florida townhouses. Insurance provides liquidity; their plan creates financial hardship.

6. Moronic Risk Management By avoiding a claim now, they set a precedent for self-funding future losses. What happens with the next hurricane? Another $4,500 assessment? Owners will revolt, and the board will exhaust goodwill and reserves. Insurance spreads risk over time and across events—opting out of it for a one-time “savings” on rates is like refusing to use your car insurance after a crash because you’re scared of a premium bump. It’s illogical and defeats the purpose of having coverage.

What They Should’ve Done

A competent board would:

• File the insurance claim for $180,000.

• Pay the deductible (e.g., $20,000) via reserves or a modest assessment (e.g., $500 per owner for 40 units).

• Let the insurer cover the remaining $160,000.

• Adjust future budgets or dues if rates rise, spreading any increase over time rather than dumping it on owners now.

Can You Fight It?

Your mother-in-law could challenge this by:

• Reviewing the governing documents to see if insurance use is mandated for covered losses.

• Demanding the board justify bypassing insurance (they’ll struggle to defend it rationally).

• Rallying other owners—$4,500 is a big hit, and collective pressure might force a vote or reconsideration.

• Consulting a Florida condo law attorney if the board digs in, especially if their process (e.g., notice, voting) was sloppy.

From your perspective as a public adjuster, this is a textbook case of a board misunderstanding risk and screwing over owners out of ignorance. Their fear of a rate hike is speculative and ignores the bigger picture: they’re paying for insurance anyway, and not using it here is like buying a fire extinguisher and letting the house burn down to avoid replacing it. Absolute stupidity, as you put it—and I’d wager you could make that case to the board in your sleep.