Community Bulletin Board
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By Alan Dolge
Loss Assessment Endorsement to Homeowners’ Insurance Policies
All property owners in Traces of Lattimore are effected by a 1997 law that impacts Traces of Lattimore. The Pennsylvania Legislature passed the Uniform Planned Community Act, effective February 2, 1997. One significant section of the law requires that owners review the insurance coverage on their properties in Traces of Lattimore. The Association recommends that owners consider adding a “Loss Assessment Endorsement” to their homeowners’ insurance coverage in response to the passage of the new law. Here is what the law says:
(A) Judgment for money against the association if and when entered of record
Against the name of the association in the office of the Clerk of the Court
Of Common Pleas, of the county where the planned community is located shall also constitute a lien against each unit for a pro rata share of the amount of the judgment, including interest there based on the common expense liability associated with that unit under Section 5208. (Emphasis added.)
This part of the law creates a lien for any judgment filed against the Association on all units (or lots) in a planned community like Traces of Lattimore. In the worst case where the judgment is not covered by insurance, it is a lien on a pro rata basis on each owner’s lot for its share of the judgment. Property owners may attempt to insure against this type of claim by adding Loss Assessment Endorsement to their homeowner’s coverage. The endorsement is specifically intended to provide a fixed amount of insurance against this type of claim, for both improved and unimproved (vacant) lots. Owners, of course, must read the specific coverage and exclusions from coverage stated in the endorsement to have a clear picture of its effect.
Under the new law, the financial liability of a lot owner in a solvent community is almost identical with the owner’s liability before the passage of the new law. The law imposes a lien, which is new. If the Association has an uninsured or underinsured judgment entered against it, the Association might have to assess the lot owners to pay the claim. The new law imposes liens on units automatically until the judgment is released or satisfied. The Association recommends strongly, therefore, that every lot owner in Traces of Lattimore add a Loss Assessment Endorsement to the owner’s homeowner’s insurance coverage to help manage this risk.
The average yearly premium should be less than $25.00 for $40,000 worth of coverage.
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