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Article VII. Insurance, Destruction, Restoration, Condemnation,
The Board of Directors shall obtain and maintain casualty and liability insurance under such terms and for such amounts as shall be deemed necessary by the Board of Directors, but in no event less than the amount required by Section 2 of this Article VII. The insurance premiums paid by the Board of Directors shall be charged as items of Common Expense. Such insurance coverage shall provide for the issuance of certificates of insurance and mortgagee endorsements to all First Mortgagees of the Units, if requested. Such insurance coverage shall be written on the Condominium and shall provide for the insurance proceeds covering any loss to be payable to the Board of Directors as Insurance Trustee for the benefit of each Unit owner and his/her mortgagee according to his/her Percentage Interest.
A. The Condominium shall be insured, to the extent available, against casualty in a minimum amount equal to the maximum insurable replacement value (i.e., 100% of replacement cost based upon the cost of replacing the Building and all improvements of the Condominium utilizing contemporary building material and technology) thereof (exclusive of excavations and foundations) as determined annually by the Board of Directors with assistance from the insurance company affording such coverage. The policy shall cover all the improvements of the Condominium except those made by a Unit Owner at his/her expense and shall contain a "condominium replacement cost" endorsement. Such coverage shall afford protection against:
(i) loss or damage by fire, vandalism, malicious mischief, windstorm, and other hazards covered by the standard extended coverage endorsement; and
(ii) such other risks as shall customarily be covered with respect to projects similar in construction, construction, location, and use as the Board of Directors in their sound discretion may deem advisable.
Such coverage shall insure the Building (including all of the Units and the bathroom, laundry, and kitchen equipment, fixtures and cabinets, and electrical fixtures, together with all air conditioning, heating, and other equipment, but not including furniture, furnishings, or other personal property supplied or installed by Unit Owners) and other Condominium property including all personal property included in the Common Elements.
B. The Condominium shall be insured (including medical payments insurance) against liability for all occurrences commonly insured against for death, bodily injury or property damage arising out of or in connection with the use, ownership or maintenance of the Common Elements in such amount and in such forms as shall be required by the Board of Directors which, however, in no event shall be less than $5,000,000 with respect to any one occurrance. All liability insurance shall contain cross liability endorsements to cover liabilities of the Association as a group, the Board of Directors, and each individual Unit owner. The liability insurance should provide coverage for bodily injury and property damage that results from the operation, maintenance, or use of the Common Elements. The deductible, if any, on any policy of insurance purchased by the Board of Directors, shall be paid by the Association; the maximum deductible amount shall be the lesser of $10,000 or 1% of the policy face amount. Workmen's Compensation insurance shall be obtained where necessary to meet the requirements of law. In addition to the foregoing, the Board of Directors may obtain such additional insurance coverage as it may deem advisable and appropriate or as may be requested from time to time by a majority of the Unit Owners.
C. The Board of Directors shall not be obligated to obtain or maintain any specified insurance coverage, provision, or endorsement if such insurance coverage, provision, or endorsement is not available through normal and customary insurance industry sources or if such insurance coverage, provision, or endorsement is obtainable only at a demonstrably unreasonable cost. In such event, the Board of Directors shall promptly cause notice of the unavailability of insurance to be hand-delivered or sent prepaid by United States mail to all Unit Owners.
Insurance obtained pursuant to the requirements of this Article VII shall be subject to the following provisions:
A. Each policy shall be written with a company or companies which are licensed to do business in the District of Columbia and which fall into a financial category of Class XV or better, and policyholder rating of A- or better, or their equivalents, as designated in the Best's Key Rating Guide, or any successor rating schedule.
B. No insurance coverage obtained and maintained pursuant to the requirements of this Article VII shall be brought into contributions with insurance purchased individually by any of the Unit Owners or their First Mortgagees, as herein permitted, any no other insurance" or similar clause in any policy obtained by the Board of Directors pursuant to the requirements of the Article shall exclude such policies from consideration.
C. Each policy shall provide that it may not be canceled or substantially modified or reduced with out at least 30 days' prior notice to all insured named thereon, including all named First Mortgage, and should if practicable require 60 days' notice.
D. Each policy of casualty insurance shall provide that, notwithstanding any provisions thereof which give the carrier the right to elect to restore or repair damage or reconstruct in lieu of making a cash settlement, such option shall not be exercisable without the prior written approval of the Board of Directors.
E. Each policy shall contain a waiver of subrogation by the insurer as to any and all claims against the Unit Owners (and the members of their households), the Association, the Board of Directors, the Managing Agent, and their respective agents, and of any defenses based upon coinsurance or invalidity arising from the acts of the insured.
F. Each polity shall contain provisions (i) that its coverage shall not be prejudiced by any act or neglect of any occupants or Unit Owners of the Condominium when such act or neglect is not within the control of the insured, or the Unit Owners collectively, or (ii) that it shall not be prejudiced by failure of the insured, or the Unit Owners collectively, to comply with any warranty or condition with regards to any portion of the Condominium over which the insured, or the Unit Owners collectively, have no control.
G. Each policy should provide, if practicable, that it cannot be canceled, invalidated, or suspended on account of the conduct of any Unit Owner, occupant, or any member of the Board of Directors or employee of the Association or the Managing Agent, without a prior demand in writing that the Board of Directors or the Managing Agent cure the defect.
H. Each policy shall have the following endorsements: (i) Agreed Amount Endorsement, when it can be obtained; and (ii) Construction Code endorsements, if there is a construction code provision that requires changes to undamaged portions of the building even when only part of the Condominium is destroyed by an insured hazard. Typical endorsements include Demolition Cost Endorsements, Contingent Liability from Operation of Building Laws Endorsement, and Increased Cost of Construction Endorsement.
I. Each policy shall provide that a Unit Owner is an insured person under the policy with respect to liability that arises out of the Unit Owner's interest in the Common Elements or membership in the Unit Owners' Association.
J. Each policy shall provide that an act or omission by any Unit Owner, unless acting within the scope of his or her authority on behalf of the Unit Owners' Association, shall not void the policy or be a condition to recovery under the policy.
K. Each policy shall provide that if at the time of loss under the policy, there is other insurance in the name of a Unit Owner that covers the same risk covered by the policy, the Unit Owners' Association policy shall provide primary insurance.
4. Notice of Insurance Coverage
L. Each policy shall provide that if the Unit Owners' Association brings suit against a Unit Owner, or vice versa, with respect to any loss, the insurer shall provide for the defense of the defendant.
The Board of Directors shall promptly furnish to each Unit Owner written notice of the procurement, subsequent changes, or termination of each insurance policy obtained on behalf of the Association. Such notice shall be furnished by the Secretary in the same manner as a notice of a meeting of the Unit Owners' Association.
5. Individual Policies
Each Unit Owner and any mortgagee may obtain, in addition to the insurance hereinabove provided to be obtained by the Association, a "Tenant's Homeowner's Policy" or equivalent, to insure against loss or damage to personal property used in or incidental to the occupancy of the Unit, additional living expense, fire vandalism, malicious mischief, theft, personal liability and the like. Such policy should include a "condominium unit owner's endorsement" covering losses to improvements and betterments to the Unit or acquired at the expense of the Unit Owner. Such insurance should contain the same waiver of subrogation provision as that required by Section 3.E. of this Article VII. No Unit Owner shall maintain insurance coverage which will tend to decrease the amount which the Association may realize under any insurance policy which it may have in force at any particular time. The Board of Directors may require that each Unit Owner shall file with the Managing Agent proof of liability coverage and/ or a copy of each individual policy of insurance purchased by the Unit Owner shall notify the Board of Directors of all improvements made by him/her to his/her Unit having a value in excess of $10,000 and all damage to his/her Unit which costs in excess of $10.000 to repair.
6. Insurance Trustee
The Board of Directors shall serve as the Insurance Trustee. All insurance policies purchased by the Association shall be for the benefit of the Association, each Unit Owner, and his/her First Mortgagee, as their interests may appeal, and shall provide that proceeds payable pursuant to the policies shall be paid directly to the Board of Directors as the Insurance Trustee. All policies shall provide that adjustment of loss shall be made by the Board of Directors.
7. Covenants for Benefit of Mortgagees
Proceeds of insurance policies received by the Insurance Trustee shall be distributed to or for the benefit of the Unit Owner entitled thereto, after first paying or making provision for the payment of the expenses of the Insurance Trustee, in the following manner:
A. Proceeds are to be paid first to repair or restore damage or destruction, as elsewhere provided herein. After defraying the cost of the repair or restoration, all remaining proceeds shall be payable, subject to the rights and directions of any senior mortgagee, jointly to the Unit Owners and First Mortgagees, if any, entitled thereto. This covenant is for the benefit of the First Mortgagee and may be enforced by such First Mortgagee.
B. If it is determined in the manner elsewhere provided herein that the damage for which the proceeds are paid shall not be reconstructed or repair, then and in that event, the Condominium shall be deemed to be owner in common by the Unit owners and shall be subject to an action for partition upon the suit of any Unit Owner of mortgagee in which event the net proceeds of sale together with the net proceeds of any insurance shall be distributed pro rata to the Unit Owners, after first paying off, out of the share of each Unit Owner, to the extent sufficient for that purpose, all liens, including mortgage liens, on the Unit of such Unit Owner. This is a covenant for the benefit of any mortgagee and may be enforced by such mortgagee.
If any part of the Condominium shall be damaged by casualty, the determination of whether or not to reconstruct or repair the same shall be made as follows:
A. Where there is partial destruction, which shall be deemed to mean destruction which does not render two-thirds or more of the Units untenantable, there shall be compulsory reconstruction or repair.
B. Where there is total destruction, which shall be deemed to mean destruction which does render two-thirds or more of the Units untenantable, reconstruction or repair shall not be compulsory if at a meeting which shall be called within ninety (90) days after the occurrence of the casualty, or if by such date the insurance loss has not been finally adjusted, then within thirty (30) days thereafter, 89% if the Unit Owners, including every Owner of a Unit or assigned Limited Common Element which will not be rebuilt, vote not to rebuild.
C. If any Building or improvement standing or erected upon the Condominium shall be destroyed or damaged by some casualty and such destroyed or damaged property is to be reconstructed or repaired, the reconstruction or repair thereof shall, at least, be to the extent of the replacement value of the property destroyed or damaged, and as nearly as practicable to the character of the Building or improvement existing immediately prior to such casualty. Any reconstruction or repair shall be done in accordance with the outstanding building code requirements of the District of Columbia and may be done with contemporary building materials, and achieved by utilizing updated construction systems and technology.
If the damage is only to those parts of one Unit for which the responsibility of maintenance and repair is borne by the Unit Owner, then the Unit Owner shall be responsible for reconstruction and repair after casualty and shall be entitled to apply, with the assistance of the Board of Directors, for the applicable insurance proceeds. In all other instances the responsibility of reconstruction and repair after casualty shall be that of the Board of Directors.
D. The proceeds of insurance collected on account of casualty and funds received by the Board of Directors from collections of assessments against Unit Owners on account of such casualty shall constitute a construction fund which shall be disbursed in payment of the costs of reconstruction and repair in the following manner:
(i) If the amount of the estimated cost of reconstruction and repair is $25,000 or less (estimated by the Board of Directors), then the construction fund shall be disbursed in payment of such costs upon order of the Board of Directors, provided, however, that upon request of a mortgagee which is a beneficiary of an insurance policy, the proceeds of which are included in the construction fund, such fund shall be disbursed in the manner hereinafter provide in Subparagraph (2);
(ii) If the estimated cost of reconstruction and repair of the building or other improvement is more than $25,000 then the construction fund shall be disbursed in payment of such costs upon approval of an architect, or other qualified independent professional, qualified to practice in the District of Columbia and employed by the Board of Directors to supervise such work, payment to be made from time to time as the work progresses. The architect, or other professional, shall be required to furnish a certificate giving a brief description of the services rendered and materials furnished by various contractors, subcontractors, material persons, the architect, the professional, or other persons who have rendered services or furnished materials in connection with the work, and stating that:
(a) the sums requested by them in payment are justly due and owing and that said sums do not exceed the value of the services and materials furnished; and
(b) there is no other outstanding indebtedness known to the said architect, or other professional, for the services and material described.
A taking of, injury to, or destruction of part or all of the property by the exercise of the power of eminent domain shall be considered to be included in the term damage or destruction as provided in Section 7.A. and B. and in Section 12 for purposes of this Article VII and the award, settlement, or any other compensation arising out of any such taking or condemnation shall be treated in the same manner as insurance proceeds arising from a casualty loss.
10. Assessments, If Insurance is Inadequate
Immediately after a casualty causing damage to property for which the Board of Directors has the responsibility of maintenance or repair, the Board of Directors shall obtain reliable and detailed estimates of the cost to replace the damaged property in as good a condition as it was before the casualty. Such costs may include professional fees and premiums for such bonds as the Board of Directors desires. If the proceeds of insurance are not sufficient to defray such estimated costs, a special Assessment shall be made against all the Units in proportion to their Percentage Interest in sufficient amounts to provide funds to pay the estimated costs. If at any time during reconstruction and repair, or upon completion of reconstruction or repair, the funds for the payment of the costs thereof are insufficient, Assessments shall be made against all the Units in proportion to their Percentage Interest in sufficient amounts to provide funds for the payment of such costs. Such Assessments shall constitute Assessments for Common Expenses.
Any and all disbursements of funds, whether such funds consist of insurance proceeds, special Assessments, sales proceeds, or any combination thereof, to be made by the Insurance Trustee for any purpose whatsoever shall be made pursuant to and in accordance with a certificate of the Association or the Board of Directors.
A. The Board of Directors shall notify in writing:
(a) the First Mortgagee of a Unit whenever damage to the Unit by the mortgage is reported to the Board and exceeds $10,000; and
(b) all First mortgagees whenever damage to the Common Elements exceeds $25,000.
13. Premiums and Deductibles
B. The holder of the mortgage on any Unit in the Condominium is entitle, upon written request to the Association, to timely written notice of a lapse, cancellation, or material modification of any insurance policy or fidelity bond maintained by the Association.
Premiums and deductibles upon all insurance policies purchased by the Board of Directors shall be deemed to be a Common Expense.
14. Secondary Market Entities
The Condominium shall at all times to the extent feasible comply with the insurance requirements of the Federal National Mortgage Association, in Federal Home Loan Mortgage Corporation, or like entities whose requirements govern the availability of mortgage financing for Units. Such compliance shall take precedence over any other provision of this Article.