Vermont HOA Insurance Requirements

Section 1: Overview — How HOA insurance is regulated in Vermont

Vermont governs condominiums, cooperatives, and planned communities under one UCIOA-based statute, the Vermont Common Interest Ownership Act (VCIOA), which carries a statutory insurance mandate for covered communities on the UCIOA Section 3-113 model, with the recorded declaration remaining operationally central. The insurance section is 27A V.S.A. § 3-113.¹ VCIOA is based on the 1994 Uniform Common Interest Ownership Act, and the Vermont text tracks that 1994 model rather than the 2008 UCIOA insurance revisions, so the property standard is an actual-cash-value standard and there's no statutory authority to charge a deductible to an owner who is the source of a loss.¹ Certain VCIOA provisions apply to communities created before January 1, 1999 through 27A V.S.A. § 1-204, but the insurance section isn't on that list, so pre-1999 condominiums instead look to the earlier Condominium Ownership Act (27 V.S.A. ch. 15) and their recorded declarations.²³ The property-coverage obligation is keyed to building structure, so a detached-home planned community differs from a condominium: the association insures common elements, while owners of structurally independent homes generally insure their own dwellings.¹ Fidelity and directors-and-officers coverage aren't statutory mandates; they're typically declaration-driven or lender-driven.⁵ Within the national picture, Vermont sits with UCIOA states such as Alaska and Colorado, distinct from CC&R-primary states and from comprehensive prescriptive states such as California and Florida. The sections below set out the statutory framework, the coverage allocation, and recent activity.

Section 2: The statutory insurance framework

2A. The VCIOA insurance mandate

The Vermont insurance section is 27A V.S.A. § 3-113, titled "Insurance," within Article 3 (Management of the Common Interest Community).¹ It descends from UCIOA Section 3-113, and the Vermont text carries the 1994 UCIOA language. Vermont did not adopt the 2008 UCIOA revisions to the insurance section, a point that matters for both the property valuation basis and the deductible-allocation question below.

The mandate reaches condominiums, cooperatives, and planned communities created on or after January 1, 1999.⁴ The property-coverage obligation is keyed to building structure rather than to the condominium-versus-planned-community label. Under § 3-113(a)(1), the association must maintain property insurance on the common elements, and in a planned community also on property that will become common elements. Under § 3-113(b), for a building that contains units divided by horizontal boundaries or by vertical boundaries comprising common walls between units, the property insurance must include the units, but need not include improvements and betterments installed by unit owners.¹ This is the structural keying: stacked or attached construction pulls the units into the master policy, while detached homes don't fall within the mandatory unit-coverage language.

The section requires two coverages. First, property insurance against risks of direct physical loss commonly insured against. Second, commercial general liability insurance, including medical payments insurance, covering occurrences commonly insured against for bodily injury or property damage. The liability amount is set by the executive board but not less than any amount specified in the declaration; there's no fixed statutory dollar minimum.¹

The mandate is conditioned on coverage being "to the extent reasonably available and subject to reasonable deductibles." Under § 3-113(c), if the required property or liability insurance isn't reasonably available, the association must promptly notify all unit owners by United States mail or hand delivery.¹

The property valuation basis is distinctive. Under § 3-113(a)(1), the property insurance, after application of deductibles, must be not less than 80 percent of the actual cash value of the insured property at the time of purchase and at each renewal, exclusive of items normally excluded from property policies.¹ This is an actual-cash-value floor, not a replacement-cost mandate. Vermont associations financed in the conventional market frequently carry replacement-cost coverage, but that comes from lender requirements, not from § 3-113.

On proceeds and rebuilding, § 3-113(e) provides that a covered loss is adjusted with the association, proceeds are payable to an insurance trustee or the association — not to a security-interest holder — and proceeds are held in trust and spent first on repair or restoration. Under § 3-113(h), any damaged or destroyed portion for which insurance is required must be repaired or replaced promptly by the association unless the community is terminated, repair would be illegal, or 80 percent or more of the unit owners, including affected owners, vote not to rebuild.¹

On deductibles, § 3-113 doesn't include the 2008 UCIOA authority to charge a deductible to an owner who is the source of a loss. The Vermont text instead provides, in § 3-113(h), that the cost of repair or replacement in excess of insurance proceeds and reserves is a common expense.¹ A Vermont association therefore can't rely on the statute to shift a deductible to a culpable owner; any such allocation must come from the declaration.

2B. Applicability, retroactivity, and earlier communities

VCIOA applies to condominiums created on or after January 1, 1999 and to other common interest communities of 12 or more residential units created on or after that date, under 27A V.S.A. § 1-201.⁴ Certain VCIOA provisions reach communities created before January 1, 1999 through the retroactivity list in 27A V.S.A. § 1-204. The insurance section, § 3-113, isn't among the listed sections.² Retroactive application doesn't extend the insurance mandate to pre-1999 communities.

Pre-1999 condominiums instead fall under the Condominium Ownership Act (27 V.S.A. ch. 15). Its insurance provision, 27 V.S.A. § 1325, is permissive rather than prescriptive: the manager or board, if required by the declaration, bylaws, a majority of owners, or a first mortgagee, shall obtain insurance against fire and other hazards under such terms and amounts as required or requested, with premiums treated as common expenses.³ The recorded declaration therefore does more work for an older community than the statute does.

The practical implication: a manager taking over an older Vermont community must first determine whether § 3-113 applies at all. It applies only if the community was created on or after January 1, 1999 or has amended its declaration to opt into VCIOA under § 1-206.² For a pre-1999 condominium that hasn't opted in, the coverage rulebook is the declaration read against the older Condominium Ownership Act, not § 3-113.

2C. The declaration, corporate law, and the federal and market overlay

VCIOA permits the § 3-113 defaults to be varied only in nonresidential communities; the declaration may also require additional insurance in any community, and the association may carry any other insurance it deems appropriate.¹ For residential communities, the § 3-113 defaults are otherwise mandatory, but because the declaration can add coverage and set the liability floor, the recorded declaration read against the statute is the practical rulebook.

Fidelity (crime) insurance and D&O liability insurance aren't § 3-113 mandates. No separate VCIOA provision requires fidelity coverage. Under 27A V.S.A. § 3-102(a)(13), the association may provide indemnification for its officers and executive board and may maintain D&O liability insurance, but this is a power, not a requirement.⁵ Where the association is incorporated as a nonprofit, the Vermont Nonprofit Corporation Act (11B V.S.A. § 1.01 et seq.) governs director conduct and permits indemnification, again without mandating insurance.⁶ Fidelity and D&O coverage in Vermont are therefore driven by the declaration or by lender requirements.

The federal and secondary-market overlay applies regardless of state law and frequently exceeds the state floor. Fannie Mae and Freddie Mac require master property coverage at 100 percent replacement cost value with claims settled on a replacement-cost basis, general liability of at least $1,000,000 per occurrence, and fidelity or crime coverage for condominium and cooperative projects other than those of 20 units or fewer and certain other exceptions.⁷⁹ FHA condominium project approval and National Flood Insurance Program requirements add further conditions. These overlays, not § 3-113, drive fidelity, flood, and replacement-cost adequacy decisions for financed units, and they must be labeled as lender or federal requirements rather than Vermont statute.

The Vermont market context shapes real coverage decisions. Riverine and flash flooding is the defining natural-hazard exposure: Tropical Storm Irene in 2011 and the catastrophic July 2023 and July 2024 floods caused widespread damage.¹⁰ Flood loss is typically excluded from standard property policies and insured separately through the NFIP for buildings in Special Flood Hazard Areas, and lenders require flood insurance for federally backed mortgages on structures in those areas.⁸ Severe winter perils (snow load, ice dams, frozen pipes) are a major secondary claim source. Vermont has no coastal windstorm exposure. These are market realities that interact with the "reasonably available" qualifier and with lender flood requirements, not statutory HOA mandates.

Section 3: Coverage allocation and compliance obligations

A. Association coverage obligations

The master policy must carry property insurance on the common elements — and, in a planned community, on property that will become common elements — and commercial general liability insurance including medical payments, under 27A V.S.A. § 3-113(a). Property coverage must be not less than 80 percent of actual cash value after deductibles under § 3-113(a)(1). Both coverages apply to covered communities and are conditioned on being reasonably available, with an owner-notice duty if coverage becomes unavailable under § 3-113(c).¹ Where a building has units divided by horizontal or common-wall boundaries, the master property policy must also insure the units under § 3-113(b); in a detached-home planned community, that unit-coverage obligation doesn't attach and owners insure their own dwellings. These residential defaults may not be varied by the declaration except to add coverage.

B. Coverage allocation between association and owners

The master policy covers common elements and, in stacked or attached buildings, the units, but need not include improvements and betterments installed by unit owners, under 27A V.S.A. § 3-113(b). The owner is therefore responsible for owner-installed improvements, interior finishes beyond original construction, and personal property, which are typically covered by an individual unit-owner (HO-6) policy. Under § 3-113(d), the master policy provides primary coverage where an owner also carries insurance on the same risk, and the insurer waives subrogation against unit owners.¹ An owner in a detached-home planned community typically insures the entire dwelling. Loss-assessment coverage on an owner's policy addresses the owner's share of a common-expense assessment for shortfalls.

C. Deductibles, proceeds, and repair-or-replace

By default, the master-policy deductible is absorbed at the association level: § 3-113 doesn't authorize charging a deductible to an owner who is the source of a loss, and under 27A V.S.A. § 3-113(h) the cost of repair or replacement in excess of insurance proceeds and reserves is a common expense. Proceeds are held in trust and spent first on repair or restoration under § 3-113(e). The association must repair or replace promptly under § 3-113(h), subject to the termination, illegality, and 80-percent-no-rebuild-vote exceptions.¹ Owners bear loss-assessment exposure for the uninsured excess because it's a common expense allocated across all units. These are mandatory residential defaults that the declaration may supplement.

D. Fidelity, D&O, and disclosure

Fidelity (crime) and D&O coverage aren't statutory mandates; the association may maintain D&O coverage and indemnify under 27A V.S.A. § 3-102(a)(13), and otherwise these coverages are declaration-driven or lender-driven.⁵ On disclosure, § 3-113(g) requires the insurer to issue certificates or memoranda of insurance to the association and, on written request, to any unit owner or holder of a security interest, and to mail insurance notices to the association, each unit owner, and each security-interest holder to whom a certificate has been issued.¹ Flood coverage is a distinct layer: standard master policies exclude flood, so a community with buildings in a Special Flood Hazard Area obtains separate NFIP coverage, which lenders require for financed units.⁸ Given that flooding is Vermont's dominant loss exposure, the separate flood layer is the single most important allocation point a Vermont board and manager should confirm.

Section 4: Recent legislative and judicial activity

A. Recent bills

Vermont enacted no bill in the past 24 months that amends 27A V.S.A. § 3-113 or otherwise changes an association's statutory insurance obligations. The most material recent legislative activity touches flood-risk disclosure in real-estate transactions, which sits alongside association insurance rather than within § 3-113.

B. Recent appellate rulings

No Vermont Supreme Court opinion in the past 36 months addresses association insurance obligations, coverage allocation, deductible disputes, or insurance-proceeds and rebuild questions under VCIOA or the Condominium Ownership Act.¹⁴ Vermont common-interest litigation in the window has centered on governance and declaration-amendment questions rather than insurance. Trial-level insurance-allocation disputes proceed through the Vermont Superior Court (Civil Division), and civil appeals go directly to the Vermont Supreme Court; Vermont has no intermediate appellate court.

C. Active legislative debates

The most material recent pressure on Vermont association insurance is market-driven rather than statutory: after the 2023 and 2024 floods, property-insurance availability and cost, and flood-insurance uptake, remain active policy concerns, and the Vermont Department of Financial Regulation has issued a consumer advisory stating that "many policyholders are experiencing significant increases in insurance premiums for auto and homeowners insurance."¹⁵ Legislative attention has focused on flood-risk disclosure and floodplain management rather than on amending the VCIOA insurance section.

Section 5: National positioning and related coverage

Vermont sits in the first of three broad categories of association insurance regulation: UCIOA states that impose a statutory insurance mandate keyed to Section 3-113 and conditioned on reasonable availability, alongside Alaska and Colorado. The second category comprises comprehensive non-UCIOA prescriptive states, notably California (Davis-Stirling) and Florida (Chapter 718, with replacement-cost, structural-inspection, and reserve requirements). The third comprises CC&R-primary and traditional-statute states such as Alabama, Arkansas, and Mississippi. Vermont's distinctive features are a 1994-UCIOA base that retains the actual-cash-value property standard and omits the 2008 owner-source-of-loss deductible authority, no intermediate appellate court, and a flood-dominated insurance market after Irene and the 2023 and 2024 floods. For a multi-state operator entering Vermont, obligations track the UCIOA Section 3-113 pattern, but the 1994-model valuation standard, the absence of an intermediate appellate court, the building-structure keying, and the flood-dominated market are Vermont-specific factors. Vermont hasn't moved to update its insurance section toward the 2008 UCIOA amendments.

HOA Weekly's Vermont Insurance Requirements coverage updates quarterly as the Legislature and the Vermont Supreme Court act and as the property-insurance market shifts. Federal frameworks (Fannie Mae, Freddie Mac, FHA, NFIP, and FHA fair-housing accommodation rules) also apply to Vermont associations regardless of the state framework, with fuller treatment to follow once that coverage is built out.

1. 27A V.S.A. § 3-113 (Insurance), The Vermont Statutes Online, Title 27A, Article 3 (Management of the Common Interest Community) ↩
2. 27A V.S.A. § 1-204 (Preexisting common interest communities) and § 1-206, The Vermont Statutes Online, Title 27A, Article 1 ↩
3. 27 V.S.A. § 1325 (Insurance), Condominium Ownership Act, The Vermont Statutes Online, Title 27, Chapter 15, § 1325 ↩
4. 27A V.S.A. § 1-201 (New common interest communities), The Vermont Statutes Online, Title 27A, Article 1 ↩
5. 27A V.S.A. § 3-102(a)(13) (Powers of unit owners' association), The Vermont Statutes Online, Title 27A, Article 3 ↩
6. Vermont Nonprofit Corporation Act, 11B V.S.A. § 1.01 et seq., The Vermont Statutes Online, Title 11B ↩
7. Fannie Mae Selling Guide B7-3-03, Master Property Insurance Requirements for Project Developments ↩
8. National Flood Insurance Program in Vermont, Flood Ready Vermont, Flood Insurance ↩
9. Fannie Mae Selling Guide B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments ↩
10. July 2024 Vermont flood resources and disaster response, Vermont.gov ↩
11. H.687 (Act 181), 2023-2024 session, bill status and veto override, Vermont General Assembly ↩
12. 27 V.S.A. § 380 (flood-risk disclosure; added 2023, No. 181, eff. June 17, 2024; amended 2025, No. 52, eff. September 1, 2025), The Vermont Statutes Online, Title 27, § 380 ↩
13. H.106 (Act 52), 2025-2026 session, bill status, Vermont General Assembly ↩
14. Supreme Court Published Opinions and Entry Orders, Vermont Judiciary ↩
15. Vermont Department of Financial Regulation, Consumer Advisory: Rising Insurance Premiums ↩