HB 2251
Initials PRB Page 1 Commerce
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-sixth Legislature
First Regular Session
HB 2251: condominiums; insurance coverage; claims
Sponsor: Representative Wilmeth, LD 2
Committee on Commerce
Overview
Makes various changes to condominium insurance coverage laws.
History
In accordance with statute, a common expense is defined as expenditures made by financial
liabilities of the association, together with any allocations to reserves. Common elements are
defined as all portions of a condominium other than the units (A.R.S. 33-1202).
The unit owner's association (Association) must be formed by the date the first condominium is
conveyed. The Association may be a profit or nonprofit, corporation or unincorporated
organization. The membership of the association must be exclusively comprised of: 1) all the unit
owners; 2) all previous unit owners entitled to distributions of proceeds after termination; or 3)
their heirs, successors or assigns (A.R.S. 33-1241).
Historically, the Association must have property insurance on the common elements and liability
insurance that begins by the first conveyance of a unit to a person. The insurance policies require
the unit owner to be insured regarding liability that stems from interests in the common elements.
Additionally, if an insurance loss occurs and there is other existing coverage in the unit owner's
name of the same property, the Association's policy provides primary insurance. An insurer that
is issuing a policy regarding condominiums must issue certificates or memoranda of insurance to
the association and, with written request, to any mortgagee or beneficiary under a deed of trust.
In regard to insurance for condominiums, any damage or destruction will be repaired by the
Association unless: 1) the condominium is terminated; 2) the repair or replacement is statutorily
illegal; or 3) 80% of unit owners vote not to rebuild. The cost of repairs and replacements in excess
are considered a common expense. Lastly, the Board of Directors, may obtain additional or
greater amounts of insurance coverage if determined appropriate and a general requirement of
additional or greater amounts of insurance are permitted (A.R.S. 33-1253).
Provisions
1. Adds that the Association's property insurance must include the units. (Sec. 1)
2. Removes the requirement that the Association's property insurance insure against fire and
extended coverage perils, as determined by the board of directors. (Sec. 1)
3. Allows the Association to determine the liability insurance amount. (Sec. 1)
4. Specifies the Association's property insurance includes the units or any portion of the units,
rather than if determined by the board of directors. (Sec. 1)
5. Adds that each unit owner is an insured person under the policy with respect to property
damage arising out of the unit owner's interest in the unit. (Sec. 1)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note HB 2251
Initials PRB Page 2 Commerce
6. Requires the Association's insurance policies to provide that each unit owner has the right to
report a loss under the policy. (Sec. 1)
7. Stipulates that the insurance deductible is a common expense if the damage or destruction of
the condominium originated from common elements or an event outside the units and
common elements. (Sec. 1)
8. Stipulates that the unit owner is responsible for up to $10,000 of the insurance deductible, if
the cause of damage to or destruction of the condominium originates from the unit. (Sec. 1)
9. Requires an annual written notice to each unit owner from the Association that informs the
unit owners of their responsibility for the Association's property insurance deductible and the
amount of the deductible. (Sec. 1)
10. Specifies the association's property insurance deductible amount that exceeds the unit
owner's $10,000 responsibility is a common expense. (Sec. 1)
11. Allows the association to make an annual assessment against the unit owner who is
responsible for the damage to or destruction of the condominium. (Sec. 1)
12. Makes clarifying and technical changes. (Sec. 1)