Illinois Condo Act Amended

SB 3014 has been signed into law by Illinois Governor Pat Quinn.  This bill amends the Illinois Condominium Property Act (Act) to change the insurance requirements that condo associations are required to carry.  The law take effect on policies renewing after June 1st, 2015.

These changes are meant to bring greater protection to those who live in condo buildings.  The areas SB 3014 updates in the Act have not been changed for many years.  This also means that many policies and insurance companies are not compliant with the new law and will have to adjust their policies.  This will most likely impact premium and it is important to work with an insurance broker who can access multiple markets on your behalf.

The first area that the law impacts is “Ordinance & Law” coverage.  Ordinance & Law coverage refers to the extra expense associated with rebuilding a damaged building up to code.  Most condo buildings were built before many new city and state codes have been enacted.  Ordinance & Law coverage provided money to the association to meet those new codes.  It is important to realize that once this Ordinance & Law limit is exhausted, the regular policy limits do NOT Kick in – it is up to the association to pay the extra costs.  SB 3014 increased the required minimum to 10% of the building value, to a maximum of $500,000.

The second area the bill changes is Directors and Officers insurance.  Condo associations are required by the Act to maintain Directors and Officers insurance.  This insurance protects the condo board members from lawsuits against actions they take and decisions they make while on the board.  While prudent and necessary, all directors and officers policies contain different policy language and exclusions.  Actions covered under one policy may not be covered under another.  SB 3014 makes it clear by stating that all Directors and Officers policies need to have coverage for the following:

  • Defense of non-monetary actions
  • Defense of breach of contract
  • Defense of decisions related to the placement or adequacy of insurance
  • Defines who is to be covered under the policy as all past, present and future board members as well as a third party building manager and their employees

The final insurance-related section the law changes is that of condo unit insurance.  The HO-6 insurance policy is the standard homeowners insurance purchased by a condo owner.  The bill removes the ability of the condo association to purchase an HO-6 policy on a unit whose owner refuses to buy themselves.  This means that the board will need to convince the unit owner to purchase this coverage or else have the interior of the unit uninsured.

These changes impact whether the insurance a condo association carries is adequate or not.  It is important to work with a broker who is knowledgeable about the policies and also able to work with multiple insurance companies on your behalf.

Contact us today for a complimentary review of your association’s insurance.