Assigned to GOV FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
FACT SHEET FOR H.B. 2251
condominiums; insurance coverage; claims
Purpose
Modifies the property insurance requirements for a unit owner's association (COA) by
allowing a unit owner to report a loss under the COA's property insurance policy and removing
the authority of the COA's board of directors (COA board) to determine that the property insurance
insure against fire and extended coverage perils.
Background
A common element is all portions of a condominium other than the units (A.R.S.
§ 33-1202). A COA must maintain property insurance on the common elements, insuring against
all risks of direct physical loss or as determined by the Board, against fire and extended coverage
perils. The COA must also maintain liability insurance covering all occurrences commonly insured
against for death, bodily injury and property damage arising out of or in connection with common
elements use, ownership or maintenance. If determined by the Board, the property insurance and
liability insurance maintained by the COA may include the units or any portion of the units. The
insurance policies maintained by the COA must provide that each unit owner is an insured person
under the policy with respect to liability arising out of the unit owners interest in the common
elements or membership in the COA. If, at the time of a loss under the policy, there is other
insurance in the name of a unit owner covering the same property covered by the COA's property
or liability insurance policy, then the COA's policy provides the primary insurance.
The COA must promptly repair or replace any insured portion of the condominium that is
damaged or destroyed unless: 1) the condominium is terminated; 2) repair or replacement would
be illegal under any statute or ordinance; or 3) 80 percent of the unit owners vote not to rebuild. If
the cost of repair or replacement exceeds the insurance proceeds and reserves, it is deemed as a
common expense (A.R.S. § 33-1253).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. States that each unit owner, as an insured person under the COA's policy, has the right to report
a loss under the COA's property insurance policy, with respect to the unit owner's interest in
the common elements.
2. Removes the authority of the Board to determine that the property insurance insure against fire
and extended coverage perils. FACT SHEET
H.B. 2251
Page 2
3. Requires, prior to reporting a loss under the COA's property insurance policy, the unit owner
to report the loss to the COA.
4. Requires the unit owner to allow the COA five business days to provide the unit owner with a
copy of its written decision stating whether the COA will be reporting a claim to the master
carrier or paying the COA's portion of the loss without reporting a claim.
5. Stipulates that if the COA decides not to report a claim to the master carrier, the COA, in the
written decision, must provide for how the portion of the repairs for which the COA is
responsible will be accomplished and funded.
6. Requires a COA to maintain property insurance that includes the units, if required by the
condominium documents.
7. Requires the COA to annually inform each unit owner in writing of both the unit owner's
responsibility for the COA's insurance deductible for all property and liability coverage and
the amount for each deductible.
8. Authorizes the COA to determine the amount of the liability insurance.
9. Makes technical and conforming changes.
10. Becomes effective on the general effective date.
House Action
COM 2/14/23 DPA 8-1-1-0
3
rd
Read 2/28/23 31-28-1
Prepared by Senate Research
March 27, 2023
AN/SB/slp