1. Common Area Insurance. The Association acting through its Board or its duly authorized agent, shall obtain blanket "all-risk" property insurance, if reasonably available, for all insurable improvements on the Common Area. If blanket "all-risk" coverage is not generally available at a reasonable cost, then the Association shall obtain fire and extended coverage, including coverage for vandalism and malicious mischief. The face amount of the policy shall be sufficient to cover full replacement cost of the insured property. The cost of such insurance shall be a Common Expense to be allocated among all Lots subject to assessment as part of the annual Annual Assessment.
2. Public Liability. The Association also shall obtain a public Liability policy on the Common Area insuring the Association and its Members for damage or injury caused by the negligence of the Association or any of its Members, employees, agents, or contractors while acting on its behalf. If generally available at reasonable cost, the public liability policy shall have at least $1,000,000.00 combined single limit as respect bodily injury and property damage per occurrence and at least $2,000,000.00 limit per occurrence and in the aggregate.
3. Premiums. Premiums for all insurance on the Common Area shall be Common Expenses and shall be included in the Annual Assessment.
4. Deductible. In the event of an insured loss, the deductible shall be treated as a Common Expense in the same manner as the premiums for the applicable insurance coverage.
5. Policy Requirements. All insurance coverage obtained by the Association shall:
a. be written with a company authorized to do business in North Carolina which holds a Best's rating of A or better, if reasonably available,or, if not available, the most nearly equivalent rating which is available.
b. be written in the name of the Association as trustee for the benefited parties. Policies on the Common Area shall be for the benefit of the Association and its Members.
c. vest in the Board exclusive authority to adjust losses; provided, however, no Mortgagee having an interest in such losses may be prohibited from participating in the settlement negotiations, if any, related to the loss;
d. not be brought into contribution with insurance purchased by individual Owners, occupants, or their Mortgagees; and
e. have an inflation guard endorsement, if reasonably available.
The Board shall use reasonable efforts to secure insurance policies containing endorsements that:
a. waive subrogation as to any claims against the Association's Board, officers, employees, and its manager, the Owners and their tenants, servants, agents and guests;
b. waive the insurer's rights to repair and reconstruct instead of paying cash;
c. preclude cancellation, invalidation, suspension or renewal by the insurer on account of any one or more individual Owners, or on account of any curable defect or violation without prior written demand to the Association to cure the defect or violation and allowance of a reasonable time to cure;
d exclude individual Owner's policies from consideration under any "other insurance" clause; and
e. require at least 30 days' prior written notice to the Association of any cancellation, substantial modification, or nonrenewal.
7. Additional Coverage. The Association shall also obtain, as a Common Expense, worker's compensation insurance and employer's liability insurance, if and to the extent required by law, Directors' and officers' liability coverage, if reasonably available, and flood insurance, if advisable and reasonably available. The Association also shall obtain, as a Common Expense, a fidelity bond or bonds, if generally available at reasonable cost, covering all persons responsible for handling Association funds. The Board shall determine the amount of fidelity coverage in its best business judgment.
8. Damage and Destruction.
a. immediately after damage or destruction to all or any part of the Properties covered by insurance written in the name of the Association, the Board or its duly authorized agent shall file and adjust all insurance claims and obtain reliable and detailed estimates of the cost of repair or reconstruction. Repair or reconstruction, as used in this paragraph, means repairing or restoring the property to substantially the condition in which it existed prior to the damage, allowing for changes or improvements necessitated by changes in applicable building codes.
b. Any damage to or destruction of the Common Area shall be repaired or reconstructed unless the Voting Members representing at least 75% of the total Class "A" votes in the Association, and the Class "B" Member, if any, decide within 60 days after the loss not to repair or reconstruct.
If either the insurance proceeds or reliable and detailed estimates of the cost of repair or reconstruction, or both, are not available to the Association within such 60-day period, then the period shall be extended until such funds or information are available. No Mortgagee shall have the right to participate in the determination of whether the damage or reconstruction to the Common Area shall be repaired or reconstructed.
9. Disbursement of Proceeds. Any insurance proceeds remaining after paying the costs of repair or reconstruction, or after such settlement as is necessary and appropriate, shall be retained by and for the benefit of the Association and placed in the capital improvements account.
