KRS 381.9187: Insurance.

(1) Commencing not later than the time of the first conveyance of a unit to a person

other than a declarant, the association shall maintain, to the extent reasonably

available:

(a) Property insurance on the common elements insuring against fire and

extended co verage perils and such other risks as may be determined by the

association. The total amount of insurance after application of any deductibles

shall be not less than one hundred percent (100%) of the actual cash value of

the insured property at the time the insurance is purchased and at each renewal

date, exclusive of land, excavations, and other items normally excluded from

property policies; and

(b) Liability insurance, including medical payments insurance, in an amount

determined by the executive board b ut not less than any amount specified in

the declaration, 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 common elements.

(2) If the insurance described in subsection (1) of this section is not reasonably

available, the association shall immediately cause notice of that fact to be hand -

delivered or sent prepaid by United States mail to all unit owners. The declaration

may require t he association to carry any other insurance, and the association may

carry any other insurance it deems appropriate to protect the association or the unit

owners.

(3) Insurance policies carried pursuant to subsection (1) of this section shall provide

that:

(a) Each unit owner is an insured person under the policy with respect to liability

arising out of his or her interest in the common elements or membership in the

association;

(b) The insurer waives its right to subrogation under the policy against any un it

owner or member of his or her household;

(c) No act or omission by any unit owner, unless acting within the scope of his or

her authority on behalf of the association, will void the policy or be a

condition to recovery under the policy; and

(d) If, at the time of a loss under the policy, there is other insurance in the name of

a unit owner covering the same risk covered by the policy, the association's

policy provides primary insurance.

(4) Any loss covered by the property policy under subsection (1) of this section shall be

adjusted with the association, but the insurance proceeds for that loss are payable to

any insurance trustee designated for that purpose, or otherwise to the association,

and not to any mortgagee. The insurance trustee or the associat ion shall hold any

insurance proceeds in trust for unit owners and lienholders as their interests may

appear. Subject to subsection (6) of this section, the proceeds shall be disbursed first

for the repair or restoration of the damaged property, and unit o wners and

lienholders are not entitled to receive payment of any portion of the proceeds unless

there is a surplus of proceeds after the property has been completely repaired or

restored, or the condominium is terminated.

(5) An insurance policy issued to the association shall not prevent a unit owner from

obtaining insurance for his or her own benefit.

(6) Disposition of insurance proceeds shall be made as follows:

(a) Any portion of the condominium for which insurance is required under this

section and wh ich is damaged or destroyed shall be repaired or replaced

promptly by the association unless:

1. The condominium is terminated;

2. Repair or replacement would be illegal under any state statute or local

health or safety ordinance; or

3. Eighty percent (80%) of the unit owners, including every owner of a unit

or assigned limited common element which will not be rebuilt, vote not

to rebuild.

The cost of repair or replacement in excess of insurance proceeds and reserves

shall be a common expense;

(b) If the entire condominium is not repaired or replaced:

1. 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 condominium;

2. The insura nce proceeds attributable to units and limited common

elements which are not rebuilt shall be distributed to the owners of those

units and the owners of the units to which those limited common

elements were allocated, or to lienholders, as their interests may appear;

and

3. The remainder of the proceeds shall be distributed to all the unit owners

or lienholders, as their interests may appear, in proportion to the

common element interests of all the units.

If the unit owners vote not to rebuild any unit, that unit's allocated interests are

automatically reallocated upon the vote as if the unit had been acquired by

eminent domain under KRS 381.9113, and the association shall promptly

prepare, execute, and record an amendment to the declaration reflecting the

reallocations; and

(c) Notwithstanding the provisions of this subsection, KRS 381.9157 governs the

distribution of insurance proceeds if the condominium is terminated.

(7) The provisions of this section may be varied or waived in the case of a

condominium all of whose units are restricted to nonresidential use.