Jason Rivait B.A., M.A., LL.B. Partner Miller Thompson LLP
Condo Insurance
Condominium Insurance Three Steps to Mitigate Risk from Rising Premiums and Deductibles
It is safe to say that condo insurance is becoming a sore spot for condo corporations not only in Ontario but across Canada. Condo corporations have seen soaring premiums and deductibles. In some jurisdictions, it has been reported that premiums have risen 780%.
The issue is so pressing that the Insurance Bureau of Canada is engaging a risk manager to make recommendations to condo corporations to reduce risks. The problem, however, is that the Insurance Board of Canada has no cap on condo premiums and the government does not require insurers to apply for rate increases. So, what can a condo corporation do to mitigate this risk? 1. Standard Unit By-law One of the key features of a Standard Unit By-law is defining the components of the units that the condo corporation is responsible to insure and defining the com-
ponents that the owners are responsible to insure. Condo corporations should be passing Standard Unit By-laws and removing items such as flooring and countertops from the items that are the Corporation’s responsibility. For condo corporations that have Standard Unit By-laws or Standard Unit Schedules (which are prepared by Declarants), boards should be reviewing these documents to determine if other items should be removed. The purpose of removing items from the condo corporations’ insurance responsibility is not to merely pass the buck to unit owners. Rather, it mitigates the collective risk of unit owners and common expense increases. Unit owners sometimes forget that the condo corporations’ insurance premiums and deductibles (when paid) form part of
their common expenses. They also sometimes forget that if an insurance claim is made by the condo corporation pertaining to damage to a unit, the condo corporation will be required to pay the deductible. In this scenario, one unit owner may have his/her flooring replaced (the cost of which could be $15,000) but all unit owners will be required to contribute towards the cost of the deductible. 2. Insurance Deductible By-law Speaking of deductibles, condo corporations may pass by-laws which extend the circumstances in which unit owners may be responsible for the lesser of the cost of repair and deductible. Under the existing Condominium Act, 1998 (the “Act”) the deductible may only be charged back to the unit owner if the damage was caused by the unit owner’s act or omission and only for damage to that owner’s unit. The Act, however, allows bylaws to be created which makes unit ownCONDOVOICE SPRING 2020
CV
43
ILLUSTRATION BY HAYDEN MAYNARD
The reason for the increase seems to be multi-faceted including, but not limited to, higher property values, reduced number of insurers, rising costs for insurers and drastic weather patterns.