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Minnesota Legislature

Office of the Revisor of Statutes

515B.3-113 INSURANCE.
(a) Commencing not later than the time of the first conveyance of a unit to a unit owner other
than a declarant, the association shall maintain, to the extent reasonably available:
(1) subject to subsection (b), property insurance (i) on the common elements and, in a
planned community, also on property that must become common elements, (ii) for broad form
covered causes of loss, and (iii) in a total amount of not less than the full insurable replacement
cost of the insured property, less deductibles, at the time the insurance is purchased and at each
renewal date, exclusive of items normally excluded from property policies; and
(2) commercial general liability insurance against claims and liabilities arising in connection
with the ownership, existence, use or management of the property in an amount, if any, specified
by the common interest community instruments or otherwise deemed sufficient in the judgment
of the board, insuring the board, the association, the management agent, and their respective
employees, agents and all persons acting as agents. The declarant shall be included as an
additional insured in its capacity as a unit owner or board member. The unit owners shall be
included as additional insureds but only for claims and liabilities arising in connection with the
ownership, existence, use or management of the common elements. The insurance shall cover
claims of one or more insured parties against other insured parties.
(b) In the case of a common interest community that contains units, or structures within
units, sharing or having contiguous walls, siding or roofs, the insurance maintained under
subsection (a)(1) shall include those units, or structures within those units, and the common
elements. The insurance need not cover the following items within the units: (i) ceiling or wall
finishing materials, (ii) floor coverings, (iii) cabinetry, (iv) finished millwork, (v) electrical or
plumbing fixtures serving a single unit, (vi) built-in appliances, or (vii) other improvements and
betterments, regardless of when installed. If any improvements and betterments are covered, any
increased cost may be assessed by the association against the units affected. The association may,
in the case of a claim for damage to a unit or units, (i) pay the deductible amount as a common
expense, (ii) assess the deductible amount against the units affected in any reasonable manner, or
(iii) require the unit owners of the units affected to pay the deductible amount directly.
(c) If the insurance described in subsections (a) and (b) is not reasonably available, the
association shall promptly cause notice of that fact to be hand delivered or sent prepaid by United
States mail to all unit owners. The declaration may require the association to carry any other
insurance, and the association in any event may carry any other insurance it considers appropriate
to protect the association, the unit owners or officers, directors or agents of the association.
(d) Insurance policies carried pursuant to subsections (a) and (b) shall provide that:
(1) each unit owner and secured party is an insured person under the policy with respect
to liability arising out of the unit owner's interest in the common elements or membership in
the association;
(2) the insurer waives its right to subrogation under the policy against any unit owner of
the condominium or members of the unit owner's household and against the association and
members of the board of directors;
(3) no act or omission by any unit owner or secured party, unless acting within the scope
of authority on behalf of the association, shall void the policy or be a condition to recovery
under the policy; and
(4) if at the time of a loss under the policy there is other insurance in the name of a unit owner
covering the same property covered by the policy, the association's policy is primary insurance.
(e) Any loss covered by the property policy under subsection (a)(1) shall be adjusted by and
with the association. The insurance proceeds for that loss shall be payable to the association, or
to an insurance trustee designated by the association for that purpose. The insurance trustee or
the association shall hold any insurance proceeds in trust for unit owners and secured parties as
their interests may appear. The proceeds shall be disbursed first for the repair or restoration of
the damaged common elements and units. If there is a surplus of proceeds after the common
elements and units have been completely repaired or restored or the common interest community
is terminated, the board of directors may retain the surplus for use by the association or distribute
the surplus among the owners on an equitable basis as determined by the board.
(f) Unit owners may obtain insurance for personal benefit in addition to insurance carried by
the association.
(g) An insurer that has issued an insurance policy under this section shall issue certificates or
memoranda of insurance, upon request, to any unit owner or secured party. The insurance may
not be canceled until 60 days after notice of the proposed cancellation has been mailed to the
association, each unit owner and each secured party for an obligation to whom certificates of
insurance have been issued.
(h) Any portion of the common interest community which is damaged or destroyed as the
result of a loss covered by the association's insurance shall be promptly repaired or replaced by
the association unless (i) the common interest community is terminated and the association votes
not to repair or replace all or part thereof, (ii) repair or replacement would be illegal under any
state or local health or safety statute or ordinance, or (iii) 80 percent of the unit owners, including
every unit owner and holder of a first mortgage on a unit or assigned limited common element
which will not be rebuilt, vote not to rebuild. Subject to subsection (b), the cost of repair or
replacement of the common elements in excess of insurance proceeds and reserves shall be paid
as a common expense, and the cost of repair of a unit in excess of insurance proceeds shall be
paid by the respective unit owner.
(i) If less than the entire common interest community is repaired or replaced, (i) the
insurance proceeds attributable to the damaged common elements shall be used to restore the
damaged area to a condition compatible with the remainder of the common interest community,
(ii) the insurance proceeds attributable to units and limited common elements which are not
rebuilt shall be distributed to the owners of those units, including units to which the limited
common elements were assigned, and the secured parties of those units, as their interests may
appear, and (iii) the remainder of the proceeds shall be distributed to all the unit owners and
secured parties as their interests may appear in proportion to their common element interest in
the case of a condominium or in proportion to their common expense liability in the case of a
planned community or cooperative.
(j) If the unit owners and holders of first mortgages vote not to rebuild a unit, that unit's
entire common element interest, votes in the association, and common expense liability are
automatically reallocated upon the vote as if the unit had been condemned under section
515B.1-107, and the association shall promptly prepare, execute and record an amendment to the
declaration reflecting the reallocations. Notwithstanding the provisions of this subsection, if the
common interest community is terminated, insurance proceeds not used for repair or replacement
shall be distributed in the same manner as sales proceeds pursuant to section 515B.2-119.
(k) The provisions of this section may be varied or waived in the case of a common interest
community in which all units are restricted to nonresidential use.
History: 1993 c 222 art 3 s 13; 1994 c 388 art 4 s 10; 1995 c 258 s 65; 1999 c 11 art 2 s
21; 2005 c 121 s 28