Title 34

Chapter 41
Rhode Island Real Estate Time-Share Act

Article III
Management of the Time-Share Property

R.I. Gen. Laws 34-41-3.08

 34-41-3.08.  Insurance.

(a) Commencing not later than the time a developer offers a time share for sale in a time-share property in which the number of time shares is more than twelve (12), the managing entity shall maintain, to the extent reasonably available and applicable and not otherwise unanimously agreed by the time-share owners or provided by the developer or by a person managing a project of which the time-share property is a part:

(1) Property insurance on the time-share property and any personal property available for use by time-share owners in conjunction therewith, other than personal property separately owned by a time-share owner, insuring against all risks of direct physical loss commonly insured against, in a total amount, after application of any deductibles, of not less than eighty percent (80%) of the actual cash value of the insured property, exclusive of land excavations, foundations, and other items normally excluded from property policies; and provided, however

(i) Prospective purchasers shall also be notified of the option of purchasing insurance for the replacement value of the time share property and its cost; and

(ii) Prospective purchasers shall also be notified of the option of purchasing insurance for the loss of use of the time-share property and its cost; and

(2) Liability insurance, including medical payments insurance, in an amount determined by the managing entity but not less than any amount specified in the time-share instrument, covering all occurrences commonly insured against for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the time-share property and time-share units.

(b) If the insurance described in subdivisions (a)(1) and (a)(2) is not reasonably available, the managing entity promptly shall cause notice of that fact to be hand-delivered or sent prepaid by United States mail to all time-share owners. The managing entity shall make copies of all insurance policies available for inspection by the time-share owners during normal business hours. The time-share instrument may require the managing entity to carry any other insurance, and the managing entity in any event may carry any other insurance deemed appropriate.

(c) Each insurance policy carried pursuant to subsection (a) must provide that:

(1) Each time-share owner is an insured person under the policy whether designated as an insured by name individually or as part of a named group or otherwise, as his or her interest may appear;

(2) The insurer waives its right to subrogation under the policy against any time-share owner or members of his or her household;

(3) No act or omission by any time-share owner, unless acting within the scope of his or her authority on behalf of an association, will void the policy or be a condition to recovery by any other person under the policy; and

(4) If, at the time of a loss under the policy, there is other insurance in the name of a time-share owner covering the same risk covered by the policy, the policy maintained pursuant to subsection (a) is primary insurance not contributing with the other insurance, and other insurance in the name of a time-share owner applies only to loss in excess of the primary coverage.

(d) Unless the insurance required by subdivision (a)(1) is provided by a person managing a project of which the time-share property is a part, any loss covered by that insurance must be adjusted with, and the insurance proceeds from that loss are payable to, the insurance trustee (who may be a party in interest) designated in accordance with the time-share instrument. If none has been designated or if the designated trustee fails to serve, the managing entity is the insurance trustee. The insurance trustee shall hold any insurance proceeds in trust for time-share owners and lien holders as their interests may appear and be determined in accordance with 34-41-2.05. Subject to the provisions of subsection (g), the proceeds must be disbursed for the repair or restoration of the property, and time-share owners and lien holders are not entitled to receive payment of any portion of the proceeds unless there is (1) a surplus of proceeds after the property has been completely repaired or restored, or (2) a termination pursuant to 34-41-2.05.

(e) An insurance policy issued pursuant to subsection (a) does not prevent a time-share owner from obtaining insurance for his or her own benefit.

(f) An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to any association and, upon written request, to any time-share owner, mortgagee, or beneficiary under a deed of trust. The insurance may not be cancelled until thirty (30) days after notice of the proposed cancellation has been mailed to any managing entity and each person to whom a certificate or memorandum of insurance has been issued, at their respective last known addresses.

(g) (1) Any portion of the time share property damaged or destroyed must be repaired or replaced promptly by the managing entity unless (i) another person repairs or replaces it, (ii) there is a termination ( 34-41-2.05), (iii) repair or replacement would be illegal under any state or local health or safety statute or ordinance, (iv) eighty percent (80%) of the time-share owners, including every owner of a time share in a time-share unit that will not be rebuilt, vote not to rebuild, or (v) a decision not to rebuild the damaged property is made by another person empowered to make that decision. The cost of repair or replacement in excess of insurance proceeds and reserves is a time-share expense.

(2) If the entire property need not be repaired or replaced, unless the time-share instrument provides otherwise, (i) the insurance proceeds attributable to the damaged area must be used to restore the damaged area to a condition compatible with the remainder of the property, and (ii) the insurance proceeds attributable to time-share units that are not rebuilt must be distributed as if those units constituted a time-share property in which all time shares had been terminated under 34-41-2.05.

(h) The provisions of this section may be varied or waived in the case of a time-share property in which none of the time-share units may be used as dwellings or for recreational purposes.

History of Section.
P.L. 1984, ch. 141, 2.