April Showers bring May Claims

The Chicago area has seen the second “rare” flood in two years. Many condominium owners in the city are facing the prospect of an expensive cleanup and painful insurance claims. This is an important time to take a look at the key water related coverages in association policies.

Water can enter buildings through two main sources, a ground water flood or through sewer backup. While the impact can often be the same, determining the source is key to determining coverage.

Condo Association Flood Insurance

Flood is generally defined as the “rising, outflow, and/or overflow or water from a water course or body or water (natural and/or man-made), including but not limited to waves, tidal water, tidal waves or spray from any of these, regardless of whether driven by wind or due to other causes”. Flood insurance is backstopped by the federal government through the National Flood Insurance Program (NFIP). The program sets maps of flood prone areas, and condo associations who find themselves in one will find their mortgage company will generally require the purchase flood insurance. If not in a flood zone, most insurance buyers will likely not be offered the coverage unless they ask.

The many flood prone rivers of northern Illinois are surrounded by flood zones but several areas of the city are not. Most people forget that Chicago was originally a marshland and has been built on what is, in essence, a drained swamp. Because of the flat geography and abundance of concrete that prevents adequate run off, flooding does happen well away from rivers.

This means that a condominium association should carefully assess whether they should carry flood insurance for their property, even if they live outside a mandatory flood zone.

Sewer Backup

Sewer backup is often defined as resulting from “water or sewage that backs up or overflows from a sewer, drain or sump”. Many condo association insurance companies either exclude or sublimit this coverage. Even a small amount of water can necessitate massive remediation costs since damage to wood, drywall and carpet is expensive to repair when the threat of mold or fungus is imminent.

Chicago’s sewer woes are an interesting history lesson. The city streets, sidewalks and many building were raised several feet in the 1850s and 1860s to install modern sewer pipes. The Chicago River, where untreated sewage is dumped to this day, was reversed in 1900 to improve the water quality in Lake Michigan. Later in the mid-1970s the Metropolitan Water Reclamation District began what is commonly referred to as the “Deep Tunnel Project” to divert overflow water into a series of tunnels and reservoirs during storms. The tunnel projected is not projected to be completed until 2029. The challenge of dealing with water during storms has not been solved and will continue to be a problem.

Knowing how your association’s insurance is worded and whether any sublimits are adequate can end up saving thousands of dollars in the event of water damage from a sewer backup.

Other Condominium Water Issues

Another point to note, although it is not a common occurrence, is that several smaller insurance carriers exclude coverage for water damage from frozen pipes and many others exclude damage from the mold that often follows. Many condominium associations have found their water damage claims initially covered only to later face later bills for uncovered mold cleanup.

Contact AssociationProtection.com today to discuss how to improve your current coverage and protect your association against the costs of floods, sewer backups and other issues that torment the greater Chicago area.