Section 34.08.440. Insurance.

   (a) Commencing not later than the first conveyance of a unit to a person other than a declarant, the association shall maintain, to the extent reasonably available,
        (1) property insurance on the common elements and, in a planned community, on property that must become common elements, insuring against all risks of direct physical loss commonly insured against or, in the case of conversion property, against fire and extended coverage perils, and the total amount of insurance after application of any deductibles must be not less than 100 percent of the actual cash value of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations, and other items normally excluded from property policies; and
        (2) liability insurance, including medical payments insurance, in an amount determined by the executive board but not less than an amount specified in the declaration, covering all occurrences commonly insured against for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements and, in cooperatives, of each unit.
   (b) In the case of a building that is part of a cooperative or that contains a unit having horizontal boundaries described in the declaration, the insurance maintained under (a)(1) of this section, to the extent reasonably available, must include the unit, but need not include improvements and betterments installed by a unit owner.
   (c) If the insurance described in (a) and (b) of this section is not reasonably available, the association promptly shall cause notice of the fact to be hand-delivered or sent prepaid by United States mail to each unit owner.  The declaration may require the association to carry other insurance, and the association in any event may carry other insurance it considers appropriate to protect the association or the unit owners.
   (d) Insurance policies carried under (a) and (b) of this section must provide that
        (1) each unit owner is an insured person under the policy with respect to liability arising out of interest of the unit owner in the common elements or membership in the association;
        (2) the insurer waives the right to subrogation under the policy against a unit owner or member of the household of a unit owner;
        (3) an act or omission by a unit owner, unless acting within the scope of the unit owner's authority on behalf of the association, will not void the policy or be a condition to recovery under the policy; and
        (4) if, at the time of a loss under the policy, there is other insurance in the name of a unit owner covering the same risk covered by the policy, the policy of the association provides primary insurance.
   (e) A loss covered by the property policy under (a)(1) and (b) of this section must be adjusted with the association, but the insurance proceeds for the loss are payable to an insurance trustee designated for the purpose or to the association and not to a holder of a security interest.  The insurance trustee or the association shall hold insurance proceeds in trust for the association, unit owners, and lien holders as their interests may appear. Subject to the provisions of (h) of this section, the proceeds must be disbursed first for the repair or restoration of the damaged property, and the association, unit owners, and lien holders are not entitled to receive payment of a portion of the proceeds unless there is a surplus of proceeds after the property has been completely repaired or restored or unless the common interest community is terminated.
   (f) An insurance policy issued to the association does not prevent a unit owner from obtaining insurance for the benefit of the unit owner.
   (g) An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to the association and, upon written request, to a unit owner or holder of a security interest.  The insurer issuing the policy may not cancel or refuse to renew it until 30 days after notice of the proposed cancellation or nonrenewal has been mailed to the association, each unit owner, and each holder of a security interest to whom a certificate or memorandum of insurance has been issued at their last known addresses.
   (h) A portion of the common interest community for which insurance is required under this section that is damaged or destroyed must be repaired or replaced promptly by the association unless: the common interest community is terminated and AS 34.08.260 applies; repairs or replacement would be illegal under a state statute or municipal ordinance governing health or safety; or  80 percent of the unit owners, including each owner of a unit or assigned limited common element that will not be rebuilt, vote not to rebuild.  The cost of repair or replacement in excess of insurance proceeds and reserves is a common expense.  If the entire common interest community is not repaired or replaced, (1) the insurance proceeds attributable to the damaged common elements must be used to restore the damaged area to a condition compatible with the remainder of the common interest community, and (2) except to the extent that other persons will be distributees, (A) the insurance proceeds attributable to a unit and limited common elements that are not rebuilt must be distributed to the owner of the unit and the owner of the unit to which the limited common elements were allocated, or to lien holders, as their interests may appear, and (B) the remainder of the proceeds must be distributed to each unit owner or lien holder, as their interests may appear, as follows: (i) in a condominium, in proportion to the common element interest of all the units and (ii) in a cooperative or planned community, in proportion to the common expense liabilities of all the units.  If the unit owners vote not to rebuild a unit, the allocated interests of the unit are reallocated upon the vote as if the unit had been condemned under AS 34.08.740(a), and the association promptly shall prepare, execute, and record an amendment to the declaration reflecting the reallocations, and file and record a plat or plan that accompanies the amendment.
   (i) The provisions of this section may be varied or waived in a common interest community if all of the units are restricted to nonresidential use.

Authorities

34.08.270;34.08.380

Notes

References

AS 34.08.270 Rights of secured lenders.
AS 34.08.380 Upkeep of common interest community.

History

(Sec. 1 ch 95 SLA 1985; am Sec. 24 ch 161 SLA 1988)