Condo Insurance and Water Damage: What You Should Know

Water damage in condos can be confusing. Pipes in and around the walls of your unit can feed many areas of the building. If one of these breaks, determining ownership and liability can be a hassle. Fortunately, your insurance may be able to help you out.

Some states have laws that help determine financial accountability if water originating from your neighbor’s condo unit damages your place. But, generally, whoever is at fault will cover some of the costs to remedy the damage, whether that’s a unit owner or the condo association.

Condo ownership is complicated. Technically, you only own your unit, while the condo association owns the common areas and exteriors of the building. But, do the pipes that supply your unit fall under your ownership or the ownership of the association?

It depends. Before delving into who will pay for what, you should understand your condo association’s rules, often called the Covenants, Conditions and Restrictions (CC&R), and your condo’s master insurance policy.

These vary by association, and they will outline what your condo board owns and what the master insurance policy covers. For example, some associations say unit owners are responsible for the fixtures in their unit, while some associations will cover them under the master policy. 

The condo association is usually responsible for pipes in the wall that supply the common areas or are a major part of the structure of the building, like the water main line. But, if there’s a pipe in your unit’s walls that only serves your unit, like the drain lines from your kitchen or bathroom or a pipe that solely feeds a faucet in your bathroom, you’ll likely be held responsible if these leak or break.

Additionally, unit owners are typically liable if an appliance in their unit, like a water heater or dishwasher, springs a leak.

If something you’re responsible for in your unit causes water damage to other units, your insurance may cover the costs if the issue was not caused by negligence or wear and tear.

For example, if a pipe in your kitchen suddenly bursts and water finds its way through the walls and damages your downstairs neighbor’s ceiling, your insurance may cover the repair costs for your neighbor.

However, if the bath that you left running for hours eventually overflows your bathroom floor and damages the ceiling of your neighbor below you, you’ll have to shoulder the costs yourself since your negligence caused the damage.

If you’ve been affected by water damage originating from outside of your unit, it may not be a bad idea to file an insurance claim with your provider instead of waiting for a neighbor to file with theirs. You should also open a dialogue with your condo association immediately. If the board says the damage isn’t covered by the master policy, contact your insurance company.

An adjuster will come out to determine the cause and extent of the damage, and if your neighbor’s pipes are at fault, your insurance company could recoup the payment for the damages from your neighbor’s insurance company. This is why it’s important to have condo insurance. Your provider can look out for you.

If your insurance company does end up getting reimbursed by your neighbor’s insurer, you still may be on the hook for your deductible even though you didn’t cause the damage you filed for.

If your condo association agrees to cover the water damage in your unit because it was caused by something they’re responsible for, they may only cover enough of the costs to rebuild the condo as it was originally built. The master policy may not cover improvements you’ve made in your unit.

If this is the case, you can file a claim with your insurance to cover the difference, as long as improvements are covered in your plan. How much condo insurance you need largely depends on the master policy of your association. That’s why it’s crucial to understand the governing documents and HOA master policy of your residence.