For Vasana Chiu, the one-bedroom condominium with a lanai overlooking Waikiki Beach and the azure Pacific Ocean beyond, was her dream place. But the dream vanished last week when a fire destroyed her apartment on the 27th floor of the Marco Polo condominium.

Now Chiu must pay a mortgage on a condo that she can’t live in or rent out. Her insurance will provide a cushion, Chiu says, but it won’t be enough.

“They have teams in there doing everything they can,” she said. But she added, “I’m going to run out of insurance money before they finish.”

Chiu’s situation illustrates something condo owners often overlook: the master insurance policy that is typically paid through condo fees rarely makes people whole in the event of a major loss.

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The Marco Polo fire has raised questions about building safety and the need for sprinkler systems in older high-rise residential towers. It also is serving as a wake-up call for condo owners seeking to manage risk, said Sue Savio, president of Insurance Associates, an independent insurance agency that specializes in insurance for condominium associations and individual owners.

“Since the Marco Polo fire, I’ve been talking to a lot of people who say, ‘What do I need?’” said Savio, who represents the Marco Polo condo association.

Her advice to individual owners: “Tell yourself, ‘What if I lived in a building that was completely destroyed? What do I need?’”

It’s a question that Chiu wishes she had asked before the fire.

“There’s so much you don’t know until this happens,” Chiu said.

The fire last week at the distinctive, wave-shaped condominium complex was devastating.

It killed three people and damaged 200 units of the 36-story, 568-unit building on Kapiolani Boulevard at the edge of Waikiki. Approximately 80 of the units suffered damage from fire, heat and smoke, and more than 30 units had heavy damage or were completely destroyed, said Capt. David Jenkins, a spokesman for the Honolulu Fire Department.

Although the fire started on the 26th floor, Chiu’s floor bore the brunt of the damage, Jenkins said.

Mike Webb/FloodPro

In many ways, Chiu is fortunate. A certified public accountant, she lives with her elderly parents in Hawaii Kai and was using the Marco Polo apartment as an investment. So she has a place to live.

But she also has a mortgage on the unit at the Marco Polo.

Chiu hasn’t been allowed to see her unit, but her property manager told her the condo is now a fire-gutted shell without walls, open to the ocean. Chiu has an individual insurance policy on the unit, which covers lost rent for a year. But she expects repairs to take much longer.

“If I didn’t have a mortgage, it wouldn’t be such a big deal because I could wait it out,” said Chiu. “But I’m on the hook unless I default on my mortgage.”

Condos are usually insured by a master policy, typically paid for through association fees, Savio said. However the policy usually pays only for restoring common areas and a unit to its original condition.

That means upgrades like marble countertops and fancy cabinets won’t be replaced. In addition, the master policy won’t pay for loss of use for owners who live in units or the loss of rent. Even if an association requires owners to buy an additional policy, known as an HO-6, the requirement might cover the bare minimum, Savio said.

“I tell people, pull out your policy, look at it, check it out, and ask – ‘If I was in a building like that, do I have enough?’” she said.

Jef Saragena, an agent with State Farm Insurance Co. in Kakaako, agreed.

“Ask if there’s a fire that goes through your place, what would it take to replace your unit?’” Saragena said.

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People often opt for the least expensive insurance, Saragena said, even though the most expensive comprehensive HO-6 policy might cost only about $250 annually, versus a barebones policy for $90.

He said a policy could include not only coverage for unit contents and loss of use or loss of rents, but also liability coverage for accidents that damaged neighboring units.

Chiu has increased the coverage on another unit she owns in Makiki.

In some cases, lenders may be willing to work with condo owners.

Bank of Hawaii, for instance, has the mortgage for 28 condo owners at the Marco Polo, which represents about 5 percent of units.

The bank is reaching out to residents to see if they need help, such as payment deferrals, Stafford Kiguchi said in a statement. He added that the bank will work with each homeowner individually to understand their specific situation and needs.

The deferral program could extend up to a year, he said. Deferred payments do not have a negative impact on a borrower’s credit rating, he said.

Chiu said she hasn’t had time to discuss an alternative plan with her lender.

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Attorneys said the fire is likely to spawn lawsuits to determine who should pay for the damage. Jeff Shapiro, a fire protection engineer based in Austin, Texas, who serves as an expert witness in legal disputes involving fire codes, said the question of why the building did not have sprinkler systems could arise in civil lawsuits, even though state and county fire codes do not require sprinklers in older buildings.

The Honolulu Fire Code adopts the State Fire Code, which in turn is based on a model code created by the National Fire Protection Association, a 120-year-old organization that establishes a variety of model fire laws used by various jurisdictions as a basis for their laws. Although the model code adopted as the basis for Hawaii’s laws requires sprinklers in old buildings such as the Marco Polo, state and city officials chose to remove that requirement in the Hawaii and Honolulu codes.

Plaintiffs could use the building’s decision to disregard the national standard to show the Marco Polo was not exercising reasonable care, Shapiro said.

Mark Davis, a Honolulu trial lawyer known for high-profile personal injury cases, agreed. He said a national standard can be used to show reasonable care under common tort law, which may differ from what a fire code requires.

“It’s a question of what a reasonable property owner should do under the circumstances,” Davis said. “Was there a duty to retrofit those buildings with sprinklers?

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The Honolulu Fire Department is working with other agencies on a comprehensive investigation of the fire, said Jenkins, the department spokesman.

Among other things, Jenkins said, the department is looking at the building’s fire alarm system, which he said could not be heard well in some areas, and the building’s elevator system, which was working “in a diminished capacity.”

That meant firefighters had to haul some equipment up the building staircase using a human chain.

Meanwhile, cleanup crews are working to assess the extent of the damage, which affected floors far below where the fire blazed.

Jenkins said water damage may be worse in some cases than damage due to smoke or heat.

Jack Webb of the remediation firm FloodPro, said that the use of asbestos in the 1970s-era building complicates the cleanup. Webb said his firm was called in to help clean up a unit, but is limited in what it can do because the firm is not certified to deal with asbestos.

While many questions remain, the need for condo owners to check their policies is clear, Savio said.

“Everybody who was not in the Marco Polo will learn from this experience,” Savio said. “This is something people need to know about, whether they want to know it or not.”