In a recent Massachusetts federal court decision, the Court held that two loss assessments related to the same fire loss, under a condominium unit policy covered only one loss assessment, even though the second loss assessment occurred during a subsequent policy period.  The association’s master insurance policy provides coverage for incidents that occur to the building; however, if the amount of the damages exceeds the master policy’s limits, the residents of the condo may end up having to contribute financially.  Loss assessment coverage provides coverage for the excess amount of damages and the master insurance policy deductible.

I agree with the Magistrate decision in holding that the policyholder’s coverage for loss assessment is limited to $50,000. The policy makes clear that the $50,000 “is the most we will pay with respect to any one loss.”  There was only one “loss”. When the loss assessment is charged, is significant to determine the amount of available coverage. So, if the limits of coverage for policy year 1 is $1,000 and the charge was made during policy year 1, the coverage is limited to $1,000. However, query whether the policyholder could have bought a unit owner policy with another insurance company for policy year 2 and receive loss assessment coverage for the second loss assessment charge. Obviously, if the policyholder had actual knowledge that there will be a second loss assessment when he buys another policy, the known loss doctrine may preclude coverage.  This case demonstrates that it is difficult to anticipate contingencies and plan appropriately for sufficient insurance coverage.

I am quoted in Massachusetts Lawyers Weekly’s’ June 6, 2022, edition.  Our firm was subrogation counsel for the master policy insurer on this catastrophic fire.