Understanding how condominium insurance coverage is set-up, and how owners and boards can reduce risk, is the best protection in order to keep the corporation’s insurance record healthier. Condominium corporations can also protect themselves by adopting a standard unit by-law and/or an insurance deductible by-law.
A properly drafted Standard unit By-law can shift onto the owners (and their insurer) part of the responsibility to insure and repair a unit. In the absence of this By-law, the insurer may decide at his/her discretion as to what would have been the standard finishes at the time the property was built. The owner is usually responsible to insure and repair his/her improvements to the units. By adopting a Standard unit By-law expanding what is considered to be an “improvement”, the Corporation reduces its exposure, cost and risk.
The insurance deductible By-law will shift the cost of paying the Corporation’s deductible to the owners and their insured. As with any change to addition to the Corporation’s documents, boards should work closely with their condominium Property Manager, and the Corporation’s lawyer.
Even without this By-law, the Board may determine that the damage caused is due to unit owner’s negligence, willful misconduct or failure to maintain his/her unit and/or exclusive use common elements, resulting in the responsibility of paying the Corporation’s deductible being that of the unit owner. This will further preserve the Corporation’s insurance record and, inevitably, reduce the number of claims done at the Corporation level. The Corporation’s deductible is just like the deductible you may have on your car insurance. When you make a claim, you are responsible for the deductible. The amount of the deductible varies based on the insurance coverage you have. The same is true for the insurance coverage obtained by the corporation. Some deductibles can be quite high. In some Corporations, the deductible may be $50,000, which is money most people don’t have just laying around. When claims fall below the Corporation’s deductible, the Corporation does not have to turn to its own insurance and in that case, the owner is responsible to pay back the Corporation amounts for damages up to the amount of deductible.
While the Condominium Act mandates the Corporation maintains 4 types of insurance, namely Property, Liability, Boilers & Machinery, Directors & Officers, it only specifies that the owner “may” obtain insurance for the unit. It is strongly recommended, however, that each owner obtains a copy of the Corporation’s insurance certificate and sends it to his/her insurer. Coverages highly recommended are: liability, contents, betterments & improvements, Corporation’s insurance deductible and cost of alternative accommodation when owner’s unit is uninhabitable.
Every owner should consult with the Condominium Property Manager and their own insurance company to determine the type and amount of insurance right for them.