1) Beware of Gaps in Coverage

A major change introduced by the Condominium Act, 1998 was to require all Condominium Corporations to pass a by-law, for insurance purposes, defining a “standard unit” of the Condominium building. Every Condominium Corporation must also obtain and maintain insurance for both a standard unit and the Common Elements – though improvements made to the units and not covered. This means that building’s insurance is not required to (and in fact does not) provide any insurance coverage for any betterments, improvements, nor upgrades contained in a unit in the event of an insurable loss, such as a fire or flood.

Also, for buildings constructed after May 1, 2010, builders are required under the Act to include with their Agreements of Purchase and Sale a schedule listing what a standard unit consists of. However, in many cases these schedules provide only bare-minimum levels of compliance, are prepared for sales document purposes only, and do not address equitable matters. Any items subsequently added to a unit but not contained in that builder’s schedule (or one amended or newly-added by the Board of Directors) constitute an “upgrade” to the unit. This means that loss or damage to these upgrades are not covered by the Condominium Corporation’s insurance policy and considered an “insurable loss”.

Every owner and tenant of a unit should therefore obtain their own Standard Condominium Insurance Policy providing both loss and liability coverage. That policy must be in effect the day one becomes an owner, or the day one moves in as a tenant. With this insurance in place, there will be no insurance coverage gap between the Condominium Corporation’s policy and that of an owner or tenant.

2) Responsibility for Insurance Deductible

Changes to the Condominium Act, 1998 also enabled a situation where, by by-law, a unit owner may be made liable for paying the insurance deductible payable by the Condominium Corporation under the insurance policy – in other words, allowing for the transfer of the liability for paying the deductible from the Corporation to the unit owner. Normally, each time the Condominium Corporation makes a claim against its policy as a result of an insurable loss, a deductible is charged and is payable – usually by the Condominium Corporation via the monthly maintenance fees paid by all of the owners. The payment of the deductible is made irrespective of whether the damage:

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–  is caused by an accident or careless act of an Owner or Tenant of a Unit;

– originates in a unit; or

– is caused by the neglect of an Owner or Tenant in maintaining and repairing the Unit.

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Essentially, all owners subsidize the cost of the insurance deductible payable for insurable damage originating in a unit. But to ensure fairness amongst all owners, a properly drafted and enacted by-law sets out the circumstances under which the Condominium Corporation can transfer the responsibility for the deductible to individual unit owners.

The by-law can permit the Condominium Corporation to charge the lesser of the deductible payable and the actual cost of repairs to an owner whose unit is the source of an insurable loss; it does not permit the Condominium Corporation to transfer the responsibility for paying the deductible to any owner where damage originates from the Common Elements, or where it is caused by an act or an omission on the part of the Condominium Corporation or any of its employees, contractors, or agents.

The good news is that the typical comprehensive Condominium owner’s insurance policy may include coverage for the corporation’s deductible in the event it is transferred

to a unit owner pursuant to the by-law. Owners should review their policies, and consult with their insurance brokers to confirm the extent of the coverage provided by their policy. Similarly, if you rent out your unit to a tenant, ensure that the tenant’s insurance policy provides this coverage.