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January/February 2017

Volume 35 • Issue 1

The Insurance Issue Protecting Your Home

Happy New Year By JoAnn Borden, CMCA, AMS, PCAM, Associa Minnesota

H appiness depends upon your outlook on life. Find the good in all situations. A ttitude is just as important as ability. Keep your attitude positive. P assion – find yours this year! Do what you love and you will never work. P ositive thoughts make everything easier. Stay focused and stay positive. Y ou are unique, with special gifts – use them. Never forget you have talent. N ew beginnings with a new year. E nthusiasm – a true secret of success. W ishes – may they turn into goals. Y ears go by too quickly, enjoy them. Wisdom from your elders, listen. E nergy – may you have lots of it. Take care of yourself. A ppreciation of life, don’t take it for granted. Live each day. R elax – take the time to relax in this coming year. Keep a balance in your life. By Catherine Pulsifer A new year is a time to get your options clear and to make a significant decision to do what it is that makes you really happy. The real issue here is that you must take each day as a new opportunity to keep moving toward what you want and take control of your life. Do not look at what will happen in a year but rather what will you do each day to change, to move forward, to put into action to achieve what it is that you want and become the person you were meant to be. Each day is a new beginning, the chance to do with it what should be done and not to be seen as simply another day to put in time. Don’t be a box checker, be an out of the box thinker. My hope for you in the coming year… may you find happiness, may you always have hope, never lose sight of your goals, and continue to focus on your dreams. By solving your problems and finding happiness, focusing on your goals, and always having hope, success will find you.

January | February 2017


Partners 2017 Annual Partners


Capital Construction Columbus Exteriors, Inc. Parsons Construction, Inc. PCS Residential Sela Roofing & Remodeling Xtreme Exteriors N.A., Inc.


Volunteers Committee Chairs

Board of Directors

Charitable Outreach Carla Gruenhagen

President JoAnn Borden, CMCA, AMS, PCAM Phone 763.746.1196

Community Association Volunteer Leaders (CAVL) Gene Sullivan Editorial Carin Garaghty

Advanced Irrigation, Inc. Benson, Kerrane, Storz & Nelson CertaPro Painters Community Advantage FirstService Residential Gassen Company, Inc. Hellmuth & Johnson, PLLC Mutual of Omaha/CA Banc NMC Exteriors Stinson Services, Inc.

Education Nigel Mendez


Social Mikalyn Kieffer

All Ways Drains American Family Insurance — Jeffrey Mayhew Agency, Inc. Asphalt Associates, Inc. Carlson & Associates, Ltd. New Concepts Management Group, Inc. Reserve Advisors


Allied Blacktop Company Allstar Construction & Maintenance, LLC Clean Response, Inc. Gates General Contractors, Inc. Hamernick Decorating Center Irrigation by Design


Golf Tournament Joel Starks Legislative Action (LAC) Joe Crawford Membership Paul Lawson

Trade Show Michele Ramler Tom Engblom Vision Awards Samantha Brown

President-Elect Matthew Drewes Phone 952.835.7000 Treasurer Joe Crawford, CMCA, AMS, PCAM, Broker Phone 952.236.9006 Secretary Michelle Stephans, RS Phone 763.226.7118 Directors Kris Birch Phone 651.481.9180 Herman J. Fasbender Phone 651.480.1739 Mary Felix, CMCA, AMS, PCAM, CIRMS Phone 763.231.9825 Chris Jones Crystal Pingel, CMCA, AMS, PCAM Phone 952.277.2700 Jim Stroebel Phone 952.921.0969 Larry Teien Phone 952.888.8093

Published by Community Associations Institute — Minnesota Chapter, copyright 2016-2017. All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Minnesota Community Living or CAI–Minnesota Chapter. The information contained within should not be construed as a recommendation for any course of action regarding financial, legal, accounting, or other professional services by the CAI–Minnesota Chapter, or by Minnesota Community Living, or its authors. Articles, letters to the editor, and advertising may be sent to Raymond Dickey at, or at CAI–MN Chapter, 1 Convention Blvd, Suite 2 #285, Atlantic City, NJ 08401.


Minnesota Communit y Living

Calendar Upcoming Events


Index 7

Tips for Keeping Your New Year’s Resolutions

January 26-27 M-204 Class

By Heidi Stinson, Stinson Services

April 20 Trade Show


May 20 Board Leadership Development Workshop

September 14 CAI-MN Vision Awards


Navigating Insurance Claims by Thinking Like a Lawyer


By JoAnn Borden, CMCA, AMS, PCAM, Associa Minnesota

By Christopher R. Jones, Esq., Hellmuth & Johnson, PLLC

25 Meet the Board Members

Jim Stroebel and Chris Jones

Insurance Definitions By Tony Ciro, Tony J. Ciro Insurance

32 Ask the Attorney


Happy New Year

14 Member Pulse

By Duncan Griffiths and Ross Hussey, Benson, Kerrane, Storz & Nelson


Choosing an Insurance Agent

By Nigel H. Mendez, Esq., Carlson & Associates, ltd.

By National Association of Insurance Commissioners

When Mulitple Policies Overlap

By Jeff Mayhew, American Family Insurance — Jeffrey Mayhew Agency, Inc.


Register for events online at For more information regarding an event, visit


Resolving Disputes Regarding Value of the Loss through the Appraisal Process By J. Robert Keena, Esq., Hellmuth & Johnson, PLLC

Have Comments? Balancing Development with Green Outcomes

By Carin Garaghty, Keller Property Management


Weathering the Storm

Email your feedback on articles to ray@brainerdcommunications. com for a chance to be featured in Minnesota Community Living!

By Michelle Desnoyer, Trinity Exteriors, Inc.


HO-6 Basics

By Dash Leander, Farmers Insurance


2017 Legislative Outlook

By Troy Olsen, Ewald Consulting

Index of Advertisers Advanced Irrigation . . . . . . . . . . . . . . . . . . . . . . . . 21 All Ways Drains . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 American Family Insurance – Jeffrey Mayhew Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Asphalt Associates. . . . . . . . . . . . . . . . . . . . . . . . . 31 BEI Exterior Maintenance . . . . . . . . . . . . . . . . . . 27 Benson, Kerrane, Storz & Nelson, P.C. . . . . . . . . 9 Capital Construction. . . . . . . . . Inside Front Cover Carlson & Associates, Ltd . . . . . . . . . . . . . . . . . . . 21 CertaPro Painters . . . . . . . . . . . . . . . . . . . . . . . . . 22 Clean Response. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Columbus Exteriors, Inc.. . . . . . . . . . . . . . . . . . . .20 Community Advantage . . . . . . . . . . . . . . . . . . . . 29

Final Coat Painting . . . . . . . . . . . . . . . . . . . . . . . . 29 FirstService Residential. . . . . . . . . . . . . . . . . . . . . 17 Hellmuth & Johnson, PLLC.. . . . . . . . . . . . . . . . . . 15 Mutual of Omaha Bank. . . . . . . . . . . . . . . . . . . . . . 21 New Concepts Management Group, Inc. . . . . . 33 NMC Exteriors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Parsons Construction, Inc.. . . . . . . . . . . . . . . . . . . 6 PCS Residential. . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Plehal Blacktopping`, LLC. . . . . . . . . . . . . . . . . . . 21 Reserve Advisors. . . . . . . . . . . . . . . . . . . . . . . . . . 25 Sela Roofing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Stinson Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . 17 Xtreme Exteriors. . . . . . . . . . . . . . . . . . . . . . . . . . January | February 201735 5




Every year, we inspect, your properties to track the condition of the roofing system.


We document the inspection process with pictures, note any issues found, make any repair recommendations, and track the condition of the roofs from year to year.


We compile all of the data into a comprehensive, full color, bound report that is delivered to the Property Manager, annually.


We recommend any necessary repairs and provide a detailed repair cost estimate.


We monitor the roofing system throughout the year and will notify you if there are any issues that would support a mid-year inspection.


Data is archived and saved. You have access to all the information regarding your properties through our client portal. Print, review and schedule service, all online!

Call Justin 763-482-0488 or email:




Minnesota Communit y Living

Tips for Keeping Your New Year’s Resolutions By Heidi Stinson, Stinson Services, Inc.


nce again, at this time of year we pause to reflect upon our all-encompassing roles in our work life. We review our achievements as well as envision where we can make adjustments to further our business resolutions. What strategies do you employ to maintain your focus on what you need to do to keep effective in managing your property? In regards to setting new resolutions for the new year, here are a few ideas to stimulate your approaches: 1. Set Resolutions that Motivate You It is so vital that the goals you identify are vital to your company’s success and inspire you to achieve them. • Be more inspiring. As association staff, there are many opportunities to inspire board members, volunteers and homeowners. Be passionate about your organization’s mission and allow yourself to take risks to set your objectives in motion. • Improve your social media brand. Establish yourself as a thought leader or credible resource in a particular industry.

• Attainable: During the brainstorming stage, ask yourself and others involved: “Is this a realistic goal that we have the power and control to make happen?” • Relevant: Is this goal going to make a difference once achieved? • Time bound: Make certain the goal is realistic and relevant to the time frame identified based on what is occurring within your organization at that time. 3. Set Goals in Writing • Create a timeline and milestones along the way. This should be written down and clearly visible to all interested parties. • Create a vision board or post up little notes as constant reminders of your goal. Put these reminders in places you pass often. 4. Make an Action Plan

• Work on your weaknesses. In association management, wearing many hats is a prerequisite. Which one is your weakest point? Explore all the areas where you feel you are strong and identify those areas which you could use a little improvement.

• Identify the exact steps you will take in achieving your goal. Make certain the steps are specific and not vague. Clearly identify which tasks to delegate to others.

• Kick start a new initiative. Whether it’s a new program or committee you are passionate about, you can commit to developing something new and exciting for your organization.

• Celebrate successes. Everyone feels better when acknowledged for their efforts. Print out a simple award or certificate for accomplishments.

2. Set SMART Goals (Specific, Measurable, Attainable, Relevant and Time Bound) • Begin by brainstorming to identify potential goals, then clearly identify the specific goal. • Specific: Clearly identify the goal; brainstorming should come before this step to wash out all ideas that will support or complicate the goal.

• Set dates for action items.

• Focus on the light at the end of the tunnel. How great is it going to feel once your goal has gained momentum and you can see the end result is near? 5. Stick with it! • There is no one more deserving than you and your organization. Shine like the star you are and make it happen in 2017.

• Measurable: Set milestones for your goal – perhaps by season or by month. When you establish your goal, set in place a reward that celebrates achievement of your objective.

January | February 2017


Navigating Insurance Claims by Thinking Like a Lawyer

By Duncan Griffiths and Ross Hussey, Benson, Kerrane, Storz & Nelson


omeowners and property managers often approach our firm asking whether an insurance company is acting in bad faith by delaying payment or refusing to pay on a property loss claim. Most of the time, the root cause of the problem is a communication break-down between the insured and the insurance carrier that is often misinterpreted as bad faith. While some insurance carriers do act unreasonably in delaying or denying claims, many issues can be resolved by employing simple techniques that lawyers use every day. By communicating effectively, property managers and board members can ensure that they have done their part to move the adjustment process along.

Why the Adjustment Process Gets Bogged Down — Miscommunication

Attorneys who represent insureds are typically called long after the property loss occurred and the claim is tendered to the insurance carrier. Most owners only call an attorney as a last resort after both sides have reached a stalemate or the process has dragged on with no end in sight. This gives attorneys a unique perspective to comment on how miscommunication hinders the adjustment process. Communication in the insurance context requires more than simply picking up the phone and notifying your insurance carrier. Effective communication requires that both sides provide each other with the information necessary to evaluate the loss and make an informed decision. Owners must make sure the insurance carrier has all of the information necessary to evaluate the loss. On the other hand, it is incumbent on the insurance company to take reasonable steps to investigate the loss and provide a reasonable explanation for its ultimate decision regarding coverage. While the need to communicate is a matter of common sense, it is also required by the insurance contracts and governed by Minnesota law.

Common Areas of Miscommunication in Insurance Claim Adjustment

The most common miscommunication issues relate to the scope of repairs and/or coverage as defined by the insurance contracts. With respect to scope of repairs, both sides often submit estimates from restoration contractors that provide little explanation of how the quantities and scope of repairs were estimated. For example, our firm has seen countless instances where each side submitted competing estimates for large multi-family communities that contain lump-sum bids without explaining how each side arrived at the respective number. If the insurance company cannot understand how the insured arrived at its proof of loss, most adjusters will simply ignore the bid and adjust the claim using its own adjuster’s bid. On the other hand, it is equally 8

Minnesota Communit y Living

difficult for an insured to evaluate whether an insurance company’s offer is fair without understanding how the insurance company arrived at its numbers. The lack of detail in the estimates also contributes to delay in the adjustment process and usually leads to the predictable situation where neither side actually understands what issues are disputed. To make matters more confusing, insurance companies often deny all or part of a claim based on coverage, meaning that the policy purchased does not provide coverage for the damage that the insured suffered. There are hundreds of reasons why an insurance company could deny coverage for all or part of a claim. Many of the reasons are dictated by the type of policies purchased and the endorsements accompanying those policies. The denial could be because a particular type of damage was excluded under the policy (flooding or mold for example). However, the denial could also be because the insurance company did not have sufficient information to evaluate the damage claim and simply denied it as a result. Without detailed information from both sides regarding the nature of the damage, it is difficult to understand whether a disagreement even exists. It is critical that both sides provide each other with the information necessary to make an informed decision. When the communication process fails, the adjustment process fails. When the adjustment process fails, everyone loses. The owners go months or years without money to repair the property; the restoration contractor loses out on the repair work; and the insurance carrier is often looking at the risk of a lawsuit.

Thinking and Communicating Like a Lawyer in the Adjustment Process

Thinking like a lawyer can help property managers and board members avoid many of the problems that plague the adjustment process. In the most basic sense, lawyers (1) investigate and gather evidence, (2) evaluate their client’s legal rights and obligations, and (3) communicate their client’s position with supporting evidence. However, good lawyers take it one step further by navigating the entire process with an eye toward the “end game,” whether that is settlement or trial. Good lawyers understand that all of the facts and circumstances of a case will be heard and scrutinized later by a judge or jury who were not present and who are hearing the evidence for the first time. This means being deliberate in our communications and memorializing all relevant information that may be useful later, even if a lawsuit is never filed. Similarly, communicating effectively and documenting your communications should be the goal throughout the insurance claim process. All parties to the adjustment process should be mindful of how your actions could be perceived by a third party in the future. This requires diligent investigation, copious documentation, and deliberate and clear communication with each other.

How to Communicate More Effectively and Document

Owners can employ simple techniques to communicate more effectively. This starts with the investigation phase, where owners should hire competent contractors and professionals to diligently investigate, document and explain the basis for their findings. If the loss is limited to specific buildings or components, the loss estimate should contain more detail regarding locations of damage and quantities instead of broad lump-sum estimates. The insured should also obtain a copy of the insurance policy and consult a lawyer or insurance professional to understand the notification and disclosure obligations in the policy. In communicating with the insurance company, try to document most of the important interactions in writing. If you have an important telephone call or discussion on site, follow up with an email memorializing the conversation, especially verbal agreements. By following up with an email, you can confirm the agreement in writing just in case there is a dispute later. At some point after submitting the proof of loss, the insurance company is obligated to promptly conduct an investigation and provide a reasonable basis for its coverage position in response. In short, the insurance company must explain why it is denying all or part of the insurance claim. Here are some potential scenarios:

1. If the response from the insurance company is unclear or incomplete, respond in writing asking for more clarification. 2. If the insurance company is denying a portion of the claim based on lack of damage, ask your engineer or contractor to respond with a report explaining their position. 3. If the insurance carrier is denying a portion of the claim because it believes the cost of repair is lower than what the insured is stating it is, ask your contractor to explain in writing why their bid is coming in higher. 4. If the insurance carrier is denying a portion of the claim because the insurance policy does not cover the loss, consult an attorney to evaluate the denial and have them write a letter explaining exactly why the insurance policy does cover the loss. At the very least, communicating effectively and documenting your communications will help owners evaluate whether an insurance carrier is acting unreasonably. If you take the necessary steps to document the evidence and provide the necessary information, it is far more difficult for insurance companies to play games and exploit the process. On the other hand, if the entire process is rife with miscommunication, it is difficult to separate the good actors from the bad actors and virtually impossible to determine who acted unreasonably.

January | February 2017



Minnesota Communit y Living

Insurance Definitions By Tony Ciro, Tony J. Ciro Insurance


ere are some general definitions for commonly used terms relating to Townhome and Condominium Insurance.

Master Policy: This is a term used to refer to the insurance policy that covers an association as required by the association’s governing documents. Governing Documents: In general this refers to the association’s articles of incorporation, bylaws, and declarations. The insurance section under the declarations dictates how a Master Policy is to be set up and what coverages are to be provided. Three basic options are outlined below: Bare Walls: Coverage on a condo/townhome structure from the studs out. On this type any interior features/finishings would not be covered. Examples: floor coverings, wall coverings, counters, cabinets. Original Specifications: Coverage on a condo/townhome structure covering the interior to be built back to how it was originally constructed; no betterments or improvements made by any unit owner are included. Walls-In/All-In: Coverage on a condo/townhome structure covering the interior to be built back to the way it was immediately prior to a claim, this includes coverage for betterments and improvements. H06: This is a common term that refers to a unit owners policy. It stands for a Homeowners Form 6 which is used to insure a condominium or townhome unit. This is the policy where a unit owner covers their dwelling, personal property, personal liability, and loss assessment, among other things. Some coverages included are defined in more detail below: Dwelling Coverage: This is a limit added to the Unit Owner Policy to cover structural damage that is not insured by the Master Policy (Association Policy). Some common examples are: interior finishings and/or betterments and improvements. This coverage is also used to cover structural damage a unit may be responsible for, up to the Master Policy deductible. Personal Property: This is coverage for a unit owner’s belongings such as furniture, clothes, dishes, food, etc. This is needed on an H06 as these items are not insured by a Master Policy. Loss Assessment: An endorsement added to an H06 policy to provide payment for a covered claim expense that is assessed to individual unit owners. An example would be a unit owner’s portion of a deductible from a Master Policy.

Replacement Cost: The repair or replacement with new materials of comparable kind and quality. Actual Cash Value (ACV): This measure of value uses replacement cost as a base amount and then adjusts for depreciation due to age, condition, and obsolescence. Deductible: A specific amount of money that the insured must pay before a claim will be paid out. The Master Policy has a deductible as does an H06 policy.

January | February 2017


Choosing an Insurance Agent by the National Association of Insurance Commissioners

CAI-MN doesn’t endorse or advocate for people to rely on a single source of information when making insurance decisions. We encourage you to educate yourselves when making important decisions about issues such as insurance. Communities and property owners can and should employ concepts such as those raised in this article, and consider that there may be other groups or affiliations that also offer guidance, resources, or products they might also use to find the coverage that’s right for their needs and their budgets.


uying your first car, moving to a new state, losing or changing your job or starting a small business—just a few of the life changes that should trigger a review of your insurance. Picking the right insurance coverage for you and your family isn’t just about understanding your insurance choices and selecting the right policy—it’s also about finding the right insurance agent. So, when life throws major changes at you, the National Association of Insurance Commissioners (NAIC) offers these tips to help you find the right agent for your insurance needs.

Independent Agent, Captive Agent, Insurance Broker—What’s the Difference?

When you start your search for an agent, you’ll have a couple of different types to choose from. You can pick an independent agent or a captive (sometimes called direct) agent. An independent agent may have contracts with several different insurance companies. A captive agent writes exclusively with one company. Independent and captive agents represent the insurance company and receive a commission from the insurance company. For more complicated insurance transactions, such as those involving insurance coverage for a small business, owners may choose to utilize an insurance broker. An insurance broker represents your company in a search of the local insurance market to find the maximum coverage for the best possible cost. Because the broker represents you, brokers generally charge a fee for their services.

How to Start

Developing your knowledge of insurance will help you make informed decisions about the coverages you and your family need. Understanding the terms and coverages used in the different types of insurance will help you work with an agent or broker to select the most appropriate policy. Before searching for an agent, brush up on your insurance knowledge at the NAIC’s Insure U website (

Finding an Agent

So, how do you go about finding the right agent for your needs? Once you have a better understanding of your insurance needs, here are a few places to start:


Minnesota Communit y Living

• Referrals from Family, Friends, Neighbors, Colleagues — In a recent NAIC survey, 79% of consumers questioned indicated they asked family and friends for insurance advice; 65% said they also asked colleagues and social acquaintances. When you ask around, find out why they like the agent. Is it the customer service? Is the agent friendly and knowledgeable? Did the company they represent do a particularly good job handling a claim? Have their rates for a particular coverage increased or decreased over the past three years? Does the agent review their policy annually to make sure they’re getting the best coverage at the best price? • Internet — Search for the line of coverage on the internet. The largest companies writing that line will typically be the first listings you find. Many companies also post lists of licensed agents online. • Trade Associations or Other Business Owners — Small business owners can talk with local trade associations or other similar business owners, which might have related insurance needs. Not all insurance companies use agents to sell their products. You can choose to do business directly with many companies. Purchasing coverage directly online from the company, for instance, could be cheaper because the company doesn’t have to pay an agent a commission. If you choose to buy directly from the company, be sure to check that it is licensed in your state and research the financial stability of the company and complaints filed against it.

Selecting an Agent

Whether you’re looking for your first agent or thinking about switching agents or companies, it’s a good idea to have several to choose from. When evaluating your list, consider these things: • Personality –­— Have conversations with prospective agents. Explain your situation and ask for a quote. Simply asking does not mean you have to work with them. This is a chance for you to get a feel for how they work and if you’re comfortable with them. • Credentials — Many agents and brokers will have letters behind their names on their business cards. These represent designations or credentials they have earned from various insurance groups or associations. Ask them what these letters mean and what they had to accomplish to earn the credential. • Licensing — Make sure the agent and the company they are writing your policy with are licensed in your state. You can check company licensing information on the NAIC Consumer Information Source (CIS) web page ( or by calling your state insurance department. Find their contact details here:

• Complaints –­— While you’re checking whether the agent and the company are licensed, also check to see if they’ve had complaints filed against them. For the company, you can check the NAIC’s CIS or call your state insurance department. The insurance department can also tell you if any complaints have been filed against the agent. You also might check with the Better Business Bureau to see if any consumers have filed complaints – or compliments – about the agents you’re considering. • Financial Strength of the Company — When evaluating a company, you also want to check its company financial rating. There are five major rating services. Each has its own criteria for rating that uses a combination of qualitative and quantitative numbers to assess the company. Generally, a letter rating from A to F is assigned to the company. Be sure to review how the rating agency assesses the company and understand the rating system. • References — When you’re applying for a job, you provide references, so don’t be afraid to ask a prospective agent for the same. • Ask Questions — If you’ve had a particularly interesting insurance experience, or have heard of one, ask the agent how they and the company they represent would have dealt with the situation. • When in Doubt — If you’re not sure what questions to ask or you would like more guidance on how to evaluate a potential agent, contact your state insurance department.

What to Expect

Now that you have a short list of potential agents, what should you expect when you go to the office to purchase coverage? • Answers to Your Questions — If you have any questions about the quote or coverages you need, this is the time to ask. If the agent can’t answer the question, they should offer to find out the answer. An agent should never leave a question unanswered prior to your purchase.

• Choices — If you’re using an independent agent, you’ll have choices of companies and coverages. Evaluate the options with the agent to make sure you’re choosing the policy best suited to your situation. • Company Explanation — If the agent doesn’t tell you about the company he/she is placing your coverage with and why that company has the best coverage for you, ask why he/she chose that company. • Honest Sales — You shouldn’t feel pressured to choose an agent, a company or a quote. If an offer seems too good to be true, it probably is.

Protect Yourself

Insurance fraud can happen to anyone, anywhere. Protect yourself during the purchasing process. • Don’t give out any personal information like your Social Security Numbers or bank information over the phone until you have verified the legitimacy of the insurance company and agent with the state insurance department. • Ask for copies of all of the paperwork you sign and keep a copy of the payment receipt or check for the initial premium payment you gave the agent for the policy. • Call the insurance company if you don’t receive a copy of the insurance policy outlining your coverage and its limitations within 30 days of your purchase. The best way to protect yourself from insurance fraud is to research the agent and company you’re considering. Always: Stop before writing your check or signing the contract. Call your state insurance department. Confirm both the agent and company are licensed to write insurance in your state. This article was originally published by the National Association of Insurance Commissioners (NAIC) in October 2010. Reprinted with January | February 2017


member pulse


What types of big projects does your association have planned for 2017?

By Christopher R. Jones, Esq., Hellmuth & Johnson, PLLC

“Member Pulse” is your chance to comment on timely and relevant topics. Each issue will feature questions related to the topics or themes of the upcoming issue. Your responses will be published in the next issue. To respond to the question, or suggest a question for a future edition of “Member Pulse,” contact us at


“Last year we purchased a lot adjacent to our garages. We’ll be adding some additional parking and a barbecue pit with picnic tables and some play equipment for kids.” — Paula H. “We’re excited to be repaving all of our parking lots.” — Eric T. “Our board just approved a complete revamp of our HVAC system.” — Kayla M.

For the next issue...


What is the best part about “spring cleaning”? Send your responses to: 14

Minnesota Communit y Living

When Mulitple Policies Overlap By Jeff Mayhew, American Family Insurance — Jeffrey Mayhew Agency, Inc.


nsurance. It can be a daunting topic. We often hear from clients, “It’s too complicated!” or, “It’s so confusing!” It’s true that many people do not understand all the nuances of insurance; and, until they are forced to learn when they incur a loss, it’s one of the easiest things to just forget about. We find this is often the case with unit owners. After all, there’s a Master Policy carried by the Association, isn’t there? That policy should cover me and my unit, right? Does a unit owner really need to worry? Consider this scenario: Imagine that you come home from work one evening only to discover that water is leaking through your ceiling from the condo unit above you. It’s at this point you begin to wonder, “Is this really covered by the Association’s policy?” And the answer to that question is – MAYBE! The following is an explanation that just might help you know the answer!

What is a Master Policy? This Policy...

• Is purchased by the Association and is typically paid for through Association dues. • Provides building exterior and in some cases interior coverage for each unit. • Provides Liability coverage for common areas on Association property. • Has a deductible.

Are all Master Policies the Same?

No! Every Master Policy is written according to the guidelines specified in the Insurance section of the Association’s Declarations on file with the Department of Commerce. The Insurance Company does not determine the coverage included in your association’s Master Policy – this is dictated by the Board. To learn the specifications provided by your association’s policy, ask your board of directors, property manager or the insurance provider. This is the only way to know exactly what amount of personal insurance you need to purchase. The best situation is when the Board of Directors has made a definite coverage determination in the rules and regulations. Then, there is no question of what they are interpreting the Association documents to read. Here is a brief description of the most common requests we get for coverage from Boards. Bare Walls: This coverage includes the “common elements.” It does not include: wall finishing materials, floor coverings, cabinetry, finished millwork, electrical or plumbing fixtures serving a single unit, built-in appliances, any improvements or betterments. This is typical but not specific to brand new Associations just being built. (continued on page 31)

We’re the pillar of your association. Very few law firms in Minnesota even practice in this area of law, much less wield the talent we bring to it. In any measure of ability – from years of experience, to leadership in state and national organizations, to the size and diversity of our client portfolio – our attorneys’ knowledge of community association law places Hellmuth & Johnson in a community of one. Our clients benefit from our experience in the following areas: Collection of Association Fees • Judgment Collections • Construction Defects & Warranties Property Insurance Claims • Enforcement of Covenants and Rules • Foreclosure of Liens

On your side. At your side.

Contact us today. 952-941-4005

8050 West 78th Street Edina, MN 55439

January | February 2017


Resolving Disputes Regarding Value of the Loss through the Appraisal Process


By J. Robert Keena, Esq., Hellmuth & Johnson, PLLC


ith an increase in storm damage events throughout the Midwest, insurers are becoming increasingly frugal when adjusting storm damage losses. In the past, disputes regarding the value of the loss typically involved disagreements on pricing. Today more aggressive practice by insurers on even the most basic hailstorm can result in complex arguments regarding scope of repair, and cost of repair coverage. Under Minnesota law, a process exists to resolve disputes regarding the value of the loss which theoretically does not require Court involvement. This process is known as the “appraisal process.” The typical insurance appraisal provision can be found in Minnesota Statute §65A.01 et seq. or in the language of the insurance policy. Traditionally, disputes regarding coverage (i.e. whether or not a loss is covered or whether or not the insured has complied with the terms of the policy) are not resolved under the appraisal process. The appraisal process is not supposed to be complex. It is very much like an arbitration about the cost of repair. Each side (the insurer and the insured) appoint an appraiser to represent their interests. These two appraisers select a neutral umpire. If the two appraisers agree on the value, the umpire’s role is limited. If, however, the two appraisers do not agree on the value of the damage, the umpire acts as the tiebreaker. The insured and the insurer each pay for their own appraiser and one half of the cost of the umpire. Appraisals can sometimes be very informal whereby the appraisers meet to discuss the value of the damage and hopefully come to an agreement. If they cannot agree, they bring in an umpire to make a decision. The process can also be more formal whereby the panel hears evidence presented by the insured and the insurer regarding the value of the loss. This can sometimes involve lawyers presenting the evidence in a manner very similar to an arbitration and even involve testimony and cross-examination. There are several trends in first-party insurance claims which should concern individuals involved in the Community Association industry. One trend is an increase in outright denials of the right to appraisal wherein insurers argue that the issue is not one of value but of scope of damage. They then argue that scope is not the same as value and therefore appraisal is not appropriate. Often insurers will argue that they do not agree that some aspect of the property is damaged and, therefore, the dispute is not about value of the loss but instead is a question of coverage. Throughout the Midwest, insurers are taking this stand in an effort to limit the size of property insurance claims, presumably under the theory that only a limited percentage of insureds will commence a lawsuit in order to compel the appraisal process. 16

Minnesota Communit y Living

Another disturbing trend that insurers are pursuing more regularly is an insistence that a non-neutral umpire be appointed. Historically, the two appraisers could easily select a neutral umpire and move forward. Today, insurers are increasingly suggesting a non-neutral umpire to act as the tiebreaker and forcing insureds to commence a lawsuit seeking court appointment of a neutral umpire. Presumably, the insurers are hoping that the additional cost of commencing a lawsuit to petition the court to appoint an umpire will weed out some insureds who need to maximize their funds in order to repair damages. These trends are troubling for insureds in that many claims which would have been easily resolved in the past are now requiring Petitions for Appointment of Umpires or lawsuits seeking to compel appraisal. In the past few years, there have also been more disputes regarding the scope of the appraisal panels’ role. Insurers have argued that appraisal panels cannot decide issues such as whether or not policies require them to provide matching materials for a damaged building. Insurers have also argued that causation of the damage is not a proper consideration for an appraisal panel either. Courts are generally coming down in favor of an expanded role for appraisers. They are finding that appraisers can make decisions regarding the reasonableness of product matches for materials to be installed and acknowledging that at least some limited causation analysis is needed by an appraisal panel to properly evaluate a claim. When deciding whether a demand for appraisal is proper, insureds can ask themselves one simple question. Has the insurance company offered to pay an amount sufficient to repair the damage? If they have not offered a sufficient amount to repair damage but instead are simply seeking to find arguments to diminish the adjusted total, the appraisal process is likely quite ripe. The difficulty for property owners occurs when the dispute is smaller than the cost of paying for an appraiser and half of the umpire. Very often insurers are gaining the benefit of this apprehension against tacking costs upon an already diminished adjustment amount. It is important to remember when information is presented to an appraisal panel that it should be clear, concise and descriptive. If the insurance company claims that the damage does not include damage to features on the building such as soft metal, gutters, downspouts, or window frames, photographic evidence and an opportunity to inspect the property by the appraisal panel can be an asset for the insured. It is equally important that the insured acquires estimates which plainly include the full scale of the damage rather than the scale of the damage claimed by the insurance company. (continued on page 33)

January | February 2017


Balancing Development with Green Outcomes Urban association reclaims stormwater and enjoys rewards

By Carin Garaghty, Keller Property Management


ith raindrops streaming from rooftops, parking lots and driveways, the volume of stormwater collected in a planned development builds quickly. After a healthy rain, water flows in torrents through gutters and sewers; within the rushing water is the sound of association money going down the drain. The amount of non-permeable surfaces on a property relates directly to the size of its fees for stormwater management. The fees may be assessed by the city, county or local watershed district — or a combination of these. Like every necessary utility, stormwater collection does not come freely. The good news is that it can be mitigated. A Minneapolis association is seeing results of its recent and considerable mitigation efforts now, with 2016 as its first full summer after completion of a stormwater reclamation project. Its members looked at little-used parking areas and sidewalks, plus a reserve fund dedicated to asphalt replacement, and asked, “Could there be a new purpose?”

Converging Water, Flowing Ideas

At the Parkway Place association, roof peaks from its 22 units converge and collect a tremendous amount of rainwater that must be managed. Adding to that, the area’s stormwater runoff is watched closely by the Minnehaha Watershed District, which monitors

Terry Hammink stands in the new Parkway Place stormwater garden 18

Minnesota Communit y Living

erosion and other impacts on the nearby Minnehaha Creek. Boosting the watershed district’s efforts, around 15 years ago the City of Minneapolis measured the non-permeable surfaces of properties all around the watershed, and began charging fees according to the volume of stormwater runoff. In 2012, the association paid $8,800 in stormwater runoff fees, helping bring the issue into sharp focus for the board. At the time, Terry Hammink was treasurer of the association as he learned about the Freshwater Society, a nonprofit association that aims to conserve, restore and protect freshwater resources and their surrounding watersheds. Hammink completed the society’s Master Water Stewards program and became a certified community leader with a mission to educate community members, reduce pollutants from urban runoff, and allow more water to soak into the ground before running into storm sewer systems. With newfound knowledge, Hammink helped launch a project at his homeowners association to reduce costs and use the common spaces in a better and more beautiful way. As he learned about options and expenses for reducing impermeable surfaces and reducing stormwater runoff, he shared them with other board members and with association members. (continued on page 28)

Construction took place in Fall 2015 January | February 2017



Minnesota Communit y Living

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January | February 2017



Minnesota Communit y Living

Weathering the Storm By Michelle Desnoyer, Trinity Exteriors, Inc.


evere weather can strike at any time, and there’s no predicting it. The good news is, you don’t have to be caught off-guard or go through a panicked race to get your insurance company to help repair any damage.

a laborious claims experience. Before your claim is filed, contact a trusted contractor (your agent may have a preferred vendor list, or you may have a professional referred to you by someone you trust) to get a good inspection and assessment of your property’s damage.

The absolute priority for weather emergencies such as hail storms, ice damming, and lightning strikes is to go over your insurance policy and be crystal clear on your coverage. Did you try to save a few bucks a month by cutting corners on coverage that seemed inconsequential when the sun was shining? Walk through the policy with your agent prior to any emergencies to make sure you fully understand the extent of your coverage, and how it applies to common weather emergencies that happen in our area: hail storms, blizzards, lightning strikes, fallen tree branches, ice dams, flooding, etc.

Once your property is inspected and the contractor has found damage, then begin your claims process and schedule an appointment with an insurance adjuster. You must be present for this adjustment, and it’s a good idea to have your contractor there as well; after a big storm, insurance adjusters work hard, long days and may miss some details about your damage. A contractor can be there to save them time and hassle by pointing out damaged areas directly.

Then, take precautions for emergency situations before they hit. Make sure large tree branches are trimmed so they’re less likely to crash down on your property during a storm. If you have a history of icicles, get your attic evaluated for proper ventilation to prevent ice dams that rip off your shingles and gutters. For lightning strikes…well, there’s not much you prep for there. Just make sure you have great coverage. Once the storm hits, always call your agent before calling the 800 claims number. If there is no obvious damage, this can help avoid

It’s also smart to have your insurance policy paperwork on hand when the adjuster is present, so any misunderstandings can be cleared up immediately by working through the policy. Keep any and all paperwork you receive during the inspection and adjustment for your records. After the damage adjustment appointment, remember to follow up and follow through. Your insurance agent is your advocate, so keep an open line of communication with them, as well as your contractor and your adjuster. Repairs after an emergency will take time, but with preparation and patience, you can make it through with minimal worries.

January | February 2017


HO-6 Basics By Dash Leander, Farmers Insurance


he HO-6 policy, also known as the condominium/ townhome unit owner’s policy, is the crucial coverage piece that supplements the overarching master insurance policy for the condo or townhome association. Knowing what is and what is not covered in the HO-6, and how to pick your coverage limits goes a long way in making sure there are no gaps in coverage that could result in nasty and sometimes catastrophic out-of-pocket costs for the unit owner. Half of the battle when determining the appropriate coverage limits for the underlying HO-6 policy is knowing how the condo association’s policy works. Generally speaking, the Master Policy will pay to rebuild the condo/townhome units to their “bare walls” state. The Master Policy will also cover damage to and the cost to rebuild all exterior features of the condo/townhome unit including framing, siding, roofing and other exterior features like decks. The catch here is that the Master Policies will have a deductible before any coverage applies, and it’s commonly quite high, sometimes up to $10,000 or even 1% of the total condo/townhome association building coverage. When building damage doesn’t reach the Master Deductible, the unit owner is on the hook for repairs. This is where coverage from the HO-6 policy kicks in. To start, the HO-6 offers building coverage for your condo/ townhome unit up to a specified limit on your policy. Building coverage in this case includes but is not limited to: • All electrical finish including light fixtures, outlet, and switchplate covers. • All floor coverings, including but not limited to carpet, wood, vinyl, tile, and underlayment.

When trying to determine the appropriate building coverage limit for the HO-6, the limit should be at least as high as the Master Policy’s deductible and ideally equal to the approximate cost of the aforementioned finishings. A decent rule of thumb is to carry between 10-20% of the unit’s value in building coverage. The next piece of the HO-6 coverage is the personal property. This limit should represent the approximate cost of replacing everything in the unit that is not permanently installed. If one were to take the unit and shake it upside down, everything that falls out should be accounted for in this personal property limit, also known as “coverage C”. Arguably the most important coverage part of the HO-6 is the liability limit. Like most other home policy liability coverage, this limit allows the unit owner to be represented in the event of legal action against them arising from events in the insured unit, even if such claims are frivolous. It’s hard to argue that one can have “too much” liability coverage in today’s litigious society. When the difference between $300,000 in coverage and $1 million in coverage is often only several dollars per year, the decision to take higher liability coverages for most insurance professionals is a no brainer. Closely related to the liability concern is a coverage part available on the HO-6 called Loss Assessment. When a unit owner opts in to a homeowner’s association with their condo or townhome purchase, they are also opting in to a shared community responsibility if something happens on the grounds, even the public areas. If an association assesses a huge loss on its unit owners from say, a huge liability claim from the public area pool, the loss assessment coverage of the underlying HO-6 can help cover this loss. Similar to the liability section, this coverage is extremely inexpensive and should be set as high as possible.

• All cabinetry, book cases, shelving, countertops, and vanities • All plumbing finish including toilets, sinks, bathtubs, showers, and all surrounds. • All wall/ceiling coverings including wallpaper, wainscoting, paneling, texture, paint and decorative coverings. • All appliances including ovens, ranges, range hoods, microwaves, refrigerators, dishwashers, water purification systems (including softeners), washers, dryers, garbage disposals and trash compactors. • Furnace in the unit, A/C units if they service only the specific unit (including their outside condenser unit), baseboard heaters, wall heaters and hot water tanks in the specific unit. 24

Minnesota Communit y Living

This is meant to be a summary of the highlights of an HO-6 policy. Exceptions apply and every scenario is different, so be sure to consult a professional insurance agent.

red u t a fe ber m e m

Meet a Board Member

Interested in being a featured member? Contact Raymond Dickey at

James Stroebel

Chris Jones

Where do you currently work? I’m retired.

Where do you currently work? I work as an attorney at Hellmuth & Johnson PLLC law firm in the Construction and Real Estate practice groups and frequently work with associations and related clients.

How long have you worked in the field? I’ve been retired for ten years.


What is your educational I have a Master’s in Hospital Administration.

What do you hope to do as a board member/hope to achieve for CAI-MN? I’d like to see an increase in CAI-MN’s visibility and the number of CAVL members. What do you love about your job? I enjoy immense control over how I use (or waste) my time. What is your favorite city or travel destination? München, Bayern, Deutschland What do you like to do when you are not working? I read, I wonder about what makes an organization effective, I watch a bit of TV, and I wonder about what makes an organization effective. What is the last book you read that you would recommend? Elizabeth: The Forgotten Years by J.A. Guy, or any book by John Le Carré

How long have you worked in the I began practicing law in 1999. I have been with Hellmuth & Johnson for 12 years after some prior stops. field?

What is your educational background? I have a Bachelor of Science in Criminal Justice Studies from University of North Dakota and a law degree from UND as well. What do you hope to do as a board member/hope to achieve for CAI-MN? To continue the good work of those before me, provide some different viewpoints and experience in the industry and other organizations. What do you love about your job? Helping people. I love working with clients to try to find a solution to a problem and sometimes even more trying help avoid problems in the future. What is your favorite city or travel destination? Italy – Tuscany. I’ve been there a couple times and it is one of the most beautiful and fun places to go. So much to see and do and lots of history. What do you like to do when you are not working? Acting as hockey/soccer taxi for my two kids, running, reading.

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January | February 2017


2017 Legislative Outlook By Troy Olsen, Ewald Consulting


n January 3, 2017 the Minnesota Legislature convened into session for the 2017-2018 Legislative Session.

Mark Dayton due to concerns over a drafting error which could have created a $100 million hole in the state’s budget.

Last November, all 201 Minnesota House and Senate seats were up for election. In addition, hotly-contested congressional races in Minnesota helped lead to record levels of spending by candidates, political parties and other groups on both Minnesota’s congressional and state legislative races.

Adding to the pressure of unfinished business will be the responsibility of passing a state budget before the legislature adjourns in late May. If a budget agreement between the House, Senate and Governor is not reached, a partial or full state government shutdown on July 1, 2017 is a real possibility.

After all the ballots were counted, Republicans in the state legislature were able to build off the national wave and gained seats across Minnesota in a presidential election year— something that historically has not happened often. Republicans in the Minnesota House of Representatives grew their existing majority from 73 members to 76 with potential to add an additional seat should they win a special election scheduled in February this year. Rep. Kurt Daudt (R-Crown) was re-elected Speaker of the House while Rep. Melissa Hortman (DFL-Brooklyn Park) was elected House Minority Leader.

The Minnesota Legislative Action Committee (MLAC) welcomes Joe Crawford as its new chair and thanks Randy Christensen for his past leadership as chair.

Republicans in the Minnesota Senate received a net gain of six seats and now control the chamber with a slim 34 to 33 majority. Sen. Paul Gazelka (R-Nisswa) was elected Senate Majority Leader and Sen. Tom Bakk (DFL-Cook) was elected Senate Minority Leader. With the 2017 Minnesota Legislative Session now underway, legislators are picking up with legislative business that was not completed during the 2015-2016 biennium. Though tax relief, transportation and infrastructure funding were top priorities of both the DFL and Republicans last year, legislative leaders were unable to find enough middle ground to pass legislation. Even when compromise could be found in the form of tax relief, a tax bill that passed on the final day of the legislative session was vetoed by Gov.


Minnesota Communit y Living

As always, the MLAC will be monitoring the legislative session and directly lobbying legislators on behalf of CAI-MN members. Of immediate concern is anticipated legislation attempting to amend the Minnesota Common Interest Ownership Act to weaken Minnesota’s consumer protections on defective construction. Legislation introduced in the 2016 Legislative Session did not advance due to objections and concerns from MLAC and other groups. However, advocates of these changes have indicated they continue to be interested in pursuing these changes during the 2017 Legislative Session. As the session progresses, MLAC asks that CAI-MN members consider contacting their individual legislators to convey their opposition to weakening Minnesota’s consumer protection laws. Letters, personal visits and phone calls from constituents are effective tools in helping policy makers better understand issues as well as influence their policy positions and voting decisions. You can determine who your legislators are and find their contact information by visiting

January | February 2017


Balancing Development with Green Outcomes (continued from page 18) It took more than two years of learning, meetings and discussion among members, who ultimately agreed upon new Best Management Practices to reduce impermeable surfaces by 20 percent. A project involving asphalt and sidewalk removal would add natural-growth rain gardens around the property with the largest in the main lot, and eliminate an elevated parking island.

homeowner provided the rest of the funds needed to complete the project.

After a season of digging, removing, replacing and landscaping, now three rain gardens grace the center of the association, with two more around the perimeter and another at the entrance. Rain gardens would collect stormwater runoff from the association’s two acres, allowing 80 percent of the stormwater a better route.

“Now,” said Hammink, “A vast majority of the property’s rainwater goes into the gardens.”

Another change came in a guest parking area, where asphalt was replaced with permeable pavers. The specialized and expensive bricks aren’t as tough as asphalt, but these lesser-used parking spaces were an ideal place for such a substitution. And, the number of parking spaces was not changed. It was a good alternative, creative and green use, association members decided, of the reserves it had set aside as part of its 30-year asphalt plan. The project was completed in 10 weeks from August through October 2015. The association had much of the money already (the project cost $335,000) by using the $150,000 it had in reserves for asphalt replacement. Good news came in 2015 when the association received a $100,000 grant from the Minnehaha Watershed District, along with a $50,000 grant from Hennepin County. That portion was promised as reimbursement with the correct design followed by proven results. Finally, a $1,500 special assessment to each


Minnesota Communit y Living

Parkway Place took down trees along the way, causing comments that it is “not as pretty” as it once was, but residents understood that it was a tradeoff. The new rain gardens have special soil that encourages growth; native plants with deep roots. As they grow and mature, the roots will help the water flow into the ground.

Partners Make Perfect

To design the stormwater runoff project, the association partnered with the Minneapolis-based Earth Wizards, Inc., whose motto and tagline is “Balancing Urban Development and Water Conservation.” With each project it takes on, the company looks at the site and learns about the client’s needs, budget and aesthetic desires before offering designs, construction advice and installation of a “green” alternative to existing properties. The company’s project lead, Stacy Anderson, began working with Parkway Place in May 2014, when they were already a couple of years into the project. Earth Wizards is expert at starting or picking up a project at whatever stage it may be in. Parkway Place was delighted, Hammink said, by the professionalism and creativity of the company. Earth Wizards considers drainage, erosion, grading, excavation, permeable surfaces and installation and maintenance of living rain gardens as it works with client properties. Now, Parkway Place and its amenities are congruent with the mission of Earth Wizards: “Balancing urban development while making the best green outcome.”



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When Policies Overlap (continued from page 15) Original Specifications: This coverage includes ceiling and wall finishing materials, floor coverings, cabinetry, finished millwork, electrical and plumbing fixtures, heating, ventilating and air conditioning equipment serving a single unit, built-in appliances constructed or installed as part of the original construction of a unit and comparable replacements. This coverage does not include betterments or improvements. Modified Original Specifications: This coverage can have several different options. An example would be that the policy includes the unit’s cabinetry, finished millwork, electrical and plumbing fixtures and built-in appliances constructed or installed as part of the original construction of a unit and comparable replacements. The coverage DOES NOT cover carpeting, floor coverings, drapes or wall coverings. It also does not include betterments or improvements. All In: This coverage includes ceiling and wall finishing materials, floor coverings, cabinetry, finished millwork, electrical and plumbing fixtures, heating, ventilating and air conditioning equipment serving a single unit, appliances and permanently attached fixtures regardless of installation date. No Building Coverage: Homeowners are responsible to insure their dwelling units— interior and exterior. (Typical policy for Single Family Homes in a Homeowners Association.) And now is when you say, “OK, fine, that’s great. Can you just tell me what I need to buy?” Yes, now we can! And, it’s not that complicated at all, now that we know what coverage is provided… Every unit owner in a Condominium or Townhouse Association must have a personal HO-6 policy. This is a specific policy designed for the unit owner. It is not a renter’s policy; nor is it a full homeowner’s policy. It can be tailored specifically to your Association’s Master Policy to provide seamless coverage. To be sure you have an appropriate HO-6 policy you will need to know three things: the Master Policy deductible(s), the type of coverage specific to your Association’s Master Policy (listed above) and the cost to replace all your personal property and any improvements or betterments you’ve made to your unit (except in the case of an All In Master Policy whereby Improvements and Betterments are covered.) That’s it! Three things!!

• Items not included in the Master Policy (like carpeting, granite countertops, fixtures—dependent on the included coverage). • Your personal property. • Liability for an occurrence on that portion of the premises occupied or used exclusively by the unit owner, or off the premises. So, how about that leaking water example at the beginning of this article? Depending on the coverage version, the cost to repair may fall under the deductible or the damage could be the responsibility of the association. Following are examples of how the Master Policy would respond and the remaining responsibility left to be covered by the HO-6. An actual loss scenario is that the leaking water is coming from a sprinkler head that burst when the owner hung his laundry from it. The damage was $15,000 and the Master Policy had a $5,000 deductible. The association with Bare Walls coverage will not have coverage beyond the deductible. Assume the dry down, mechanical, insulation and sheetrock costs $4,500. In that case, the owner will be responsible for the rest of the damage such as flooring, paint, cabinets of $10,500 plus the association assessment of $4,500 for their share of the damages. So, the HO-6 is responsible for all $15,000 of damage. In an All In policy, the association will handle the repairs with the $10,000 of proceeds from the Master Policy and the $5,000 assessment to the owner. It is much the same with Original Specifications, unless there had been improvements installed by the owners, which would then have to be covered by the HO-6. In summary, the coverage provided by the Master Policy determines how the claims are settled. That coverage is determined by the documents. But, the best situation is when the Board adds its interpretation of the documents to the association Rules and Regulations and informs the insurance company writing the policy. No two HO-6 policies are the same and no two losses are the same. Unit owners are encouraged to be thorough and careful when designing their HO-6 policy with the help of their personal insurance professional.

From that information an HO-6 policy can be written to provide coverage for the: • Master Policy deductible (many are $10,000 or $25,000) so you don’t end up paying that amount out of pocket.

January | February 2017


Ask the Attorney By Nigel Mendez, Esq., Carlson & Associates, Ltd.

This column is comprised of questions that have been posed to me by homeowners, property managers and related professionals regarding legal issues that they have encountered with respect to their associations.


We have a unit that was foreclosed on by the mortgage company and is now vacant. How can we ensure that the pipes won’t burst this winter?


If the occupants of a unit that has been foreclosed on (either by the mortgage company or the association) vacate the unit, the association should inspect to ensure that the heat is on or the property has been properly winterized. This time of year it is very important to verify that any units that are vacant have had measures taken to avoid


Minnesota Communit y Living

frozen and burst pipes. Burst pipes can cause significant damage that will often extend beyond the single unit into other units or association owned property. So, what can an association do? First off, be sure to monitor foreclosures in your association so that you know when the redemption period ends and the resident moves out of the unit. If it was a mortgage foreclosure the unit will often be secured by a property management firm retained by the mortgage company. They will usually place a sticker on the door of the unit once they have secured it stating that it has been winterized and providing contact information. If there is no notice, advise the association’s attorney who can contact the foreclosing attorney to determine if the necessary measures have been taken to protect the unit and the association. If you are not sure if the unit is vacant, a board member or manager should take steps to determine the occupancy status. A letter can be sent asking the resident to contact the association. If you don’t get a response, you should also attempt hand delivery or tape a copy of the letter to the door. If your association uses electronic door keys, you can verify if the key is still being used. If the association confirms that a unit is vacant and has not been winterized by the mortgage company, the association is able to enter the unit to protect it against freezing. Further, if your association

has a common sprinkler system with pipes going into a vacant unit, you want to ensure that the heat is left at a safe temperature to avoid a burst in the communal system. Occasionally a property management agent hired by the mortgage company will simply shut off the water and winterize the pipes and then turn off the heat completely. This may be an acceptable method in units without sprinkler systems, but may lead to broken pipes in buildings that have a shared system. While you can’t guarantee that your association won’t have a burst pipe this winter, you can take steps to try and avoid the problem.


I heard that my association has to register with the state each year. How do I do that?


Associations in Minnesota are nonprofit corporations. They are required to file an annual corporate renewal with the Secretary of State. There is no charge for filing the renewal and it is very simple to complete. The one-page form can be submitted online via the Secretary of State (SOS) website or can be printed and mailed in to the SOS. The renewal process ensures that the State has current contact information for the association. Failure to file the annual renewal will subject the association be being involuntarily dissolved, thereby potentially losing its nonprofit status. Should this happen, an association can retroactively reinstate its corporate existence by simply filing the annual renewal form. To check the status of your association’s standing with the State, please visit https://mblsportal. and enter your association name. If your association is not found by this initial search, change the “Filing Status” to be inactive and re-run your search. If you are inactive, the website has a link to the form that should be completed and returned as soon as possible.

Understanding the Basics of Property Damage Insurance Claims (continued from page 16) One other extremely important and relevant insurance policy consideration in working on property damage claims is the deadline for making a legal claim. Often times people make the mistake of believing that the “right to suit” provision under an insurance policy (typically two years pursuant to Minnesota Statute §65A.01 et seq.) begins to run from the date of denial of a claim or the date a dispute arises regarding the value of the claim. It does not. That deadline runs from the date of the loss itself whether or not there has been a denial. Several basic steps must be followed when a property damage claim arises. They include: 1) Immediately notifying the insurer that a loss has occurred; 2) Mitigating damage to the property by protecting any aspect of it which has been exposed to the elements; 3) Cooperating with the insurer pursuant to policy cooperation clause. (Failure to cooperate with an investigation can be a separate basis for denial of the claim); and 4) Acquiring independent estimates for damages. If these steps are followed and there is a difference between the value of the loss as purported by the insurer and the value of the loss based on the insured’s own investigation, and negotiation is unsuccessful, the next step is appraisal. Anyone assisting an Association with an insurance claim should be aware of the limitations period and the appraisal provision contained in the policy. The appraisal provision in particular offers a neat, clean and distinct way to resolve disputes regarding the value of the loss. If the insurance company is not offering enough to fix the damage the first thing that should come to mind is the appraisal process.

To have a question answered in a future article, please email it to me at with the subject line of “Ask the Attorney.” While I can’t promise that all questions will be answered, I will do my best to include questions that have a broad appeal. Questions will also be answered by other attorneys practicing in this area of law. The answers are intended to give the reader a good understanding of the issue raised by the question but are not a substitute for acquiring an opinion from your legal counsel.

January | February 2017


Join us in April for our 2017 Trade Show! We’re planning a day full of informational sessions, exhibits and more — and we want to see you there! Check to learn more about this event.

Registration opens soon!

Ge t Invol ve d and Win! Your involvement is what makes CAI-MN great — and now it’s your chance to win! Throughout the year, Minnesota Community Living offers several opportunities for you to share your knowledge and expertise with your fellow CAI‑MN members. In 2017, we will hold a prize drawing for members who contribute to the magazine.* You’ll be entered into the drawing in any of the following ways: • Contribute an article to the magazine • Submit an answer for the Member Pulse feature • Be a featured member The winner will be announced in the November/December 2017 issue. To learn more, email us at *CAI-MN board and committee members are not eligible for the prize drawing.


Minnesota Communit y Living

Drip. Drip. Drip.

That’s the Sound of an Ice-cycle. For Insights into Your Home Exteriors, Sign Up for Our Quarterly Newsletter!

You might be able to escape to a Caribbean island during the winter, but your home can’t. It needs to stay put and function well during winter’s extremes. If your home doesn’t have proper ventilation and insulation, your roof may be vulnerable to the effects of repeated freezes and thaws, creating ice dams that are damaging to your home. At Xtreme Exteriors, we call it the “ice-cycle.”

Even New Roofs Can Be Susceptible. You’ve recently re-roofed your home, but you’re still having ice dams form during winter months. Our experience has shown us that roofs are more than their shingles — it’s a system in which each part needs to function well together to minimize ice dams from forming.

Jeff and Jeannie Sigler, Owners of Xtreme Exteriors. Your Dependable Single-Source Solution for Your Entire Home Envelope.

How Can You Minimize Your Ice-cycles? Start by giving us a call for a free inspection. We’ll provide you with affordable, proven solutions to keep your home looking and functioning at its best. Now you can head for the beach.

MN License: BC362463

WI License: 962215

Call Us Today at 763.441.1334.

Expect the Best.

Visit Us at

Making Homes Beautifully Functional Year Round.

What does CAI-MN do for me? CAI members have access to information in this rapidly changing industry with practical knowledge and insights from leaders in the field, best practices, research and tools you can use every day. We provide information, resources and education programs to help you keep current on the latest news, laws and issues affecting community associa-

• Legislative Advocacy • Networking

tions, condominiums and cooperatives, and the homeowners who call them home. As a CAI member, you'll also get a membership to your local chapter and gain a network of industry colleagues—over 33,500 of them in 60 chapters worldwide.

• Professional Development & Continuing Education

Take advantage of your benefits today!

CAI-MN Minnesota Community Living – Jan/Feb 2017  

CAI-MN Minnesota Community Living – Jan/Feb 2017

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