How the New Balcony Inspection Requirements Might Impact Insurance

By:  Timothy Cline

Right now, we’re not seeing any insurance carriers that are monitoring compliance with the new balcony inspection requirements (SB 326).  But that’s likely to change.  And with the effective date of January 1, 2025 fast approaching, this is a serious topic worth discussing.

As community associations age, the potential of moisture causing dry rot in the wood elements of the balconies increases. And the possibility of major termite damage is an ongoing concern for any wood frame structure in Southern California. If a balcony collapses and people are injured, we anticipate lawsuits will follow, and we can all expect the HOA, the Board, and the community to be named defendants in any resulting Summons and Complaint.

To better understand how this situation might play out, let’s look at a fictitious description of a loss, and see how the various carriers could respond…

Imagine a 36-unit condominium located in Los Angeles, CA.  The building is about 40 years old.

On the 4th of July, a group of college students decide to watch the nighttime fireworks display from a third floor balcony.  The loud noise of the fireworks immediately drowns out the sounds of splintering wood beneath their feet. It’s a warning sign that the floor joists supporting the balcony floor are about to fail. 

Soon, all six individuals are suddenly catapulted over the top of the railing and appear to be on a collision course with the concrete sidewalk 40 feet below.

Students 1, 2, and 3 hit the sidewalk and die instantly. 

Students 4 and 5 have impacted some zeroscape cactus plantings. Both suffer broken bones, deep bruises, and cuts on their arms and legs but otherwise escape any life-threatening injuries. 

Student 6 has found himself relatively free of injuries, his fall inexplicably interrupted by mother nature, as he finds himself lodged between branches of a pine tree. 

What could be the financial aftermath of this situation?

  • Cost to repair or replace 24 balconies (on floors two and three):   $4.8 million.
  • Summons and Complaint (Student 1, 2 and 3): $2 Million Each
  • Summons and Complaint (Students 4 and 5):  $325,000 and $500,000 respectively. 
  • Summons and Complaint  (Student 6):  $150,000

How might the respective carriers respond?


  • DECLINE. Dry Rot and Termite damage are specifically  excluded on a  Special Form policy.

  • YES. Would respond to third-party claims of negligence.
  • But NO coverage for the first party damage to the structure (cost to repair or replace the failed balcony).

  • DECLINE. Outright exclusion for ANY property damage or bodily injury.

  • YES. Assuming there is a potential loss of life (depending on the height of the balcony).  A jury award for many millions of dollars is not unlikely.

Reflecting on what may be at stake in this situation, the prudent choice is to hire an architect or structural engineer to perform the prescribed tests * and provide the Board with a written report as required by the law. If the report gives the HOA a clean bill of health, you have a defense against allegations of negligence in the event something tragic happens.

* The statute requires an architect or structural engineer to perform sufficient number of tests to provide 95 percent confidence that the results from the sample are reflective of the whole, with a margin of error of plus or minus 5 percent. (Civ. Code §5551(a)(4).)  Inspectors are allowed to use the least intrusive method necessary to examine load-bearing components, including visual observation in conjunction with moisture meters, borescopes, and infrared technology. (Civ. Code §5551(a)(5).) The statute also requires inspection of associated waterproofing systems, which includes flashings, membranes, coatings, and sealants that protect the load-bearing components from exposure to water. (Civ. Code §5551(a)(1).

Inspections must be completed every nine years. The first inspection must be completed by the end of 2024. Buildings that complete construction after this law went into effect on January 1, 2020 will need to complete their first inspection within six years of issuance of a certificate of occupancy. If your association does decide to upgrade or redo the balcony, please be sure that it meets both insurance and building code requirements.

For further interest in this topic, you may want to check out the Balcony Bill episode of The HOA Show Podcast, where they cover SB 326 in depth. Listen Here