Whether you live in a townhome or high rise, the impact of water damage as a result of a burst pipe can be a very trying experience.
Depending on the severity of the event you may be dealing with damaged possessions such as furniture and clothing (otherwise known as contents) and possibly your walls, ceilings and flooring. In extreme cases it may involve you having to relocate from your home for a period of time.
While each condo is unique, that Corporation’s Declaration, By-laws and Rules, as well as the Condominium Act, 1998 along with case law, provide some baseline in determining the responsibility of all parties.
The initial assessment will address who is affected. In determining the extent of damage, originating unit, adjoining units, common area, etc., the corporation will be able to assess responsibility and liability.
According to Michelle Kelly, partner with Sutherland, Kelly LLP, “generally speaking, there are two types of repair situations in condominiums: 1) repairs where insurance is available (“insurable losses”); and 2) repairs where insurance is not available (“non-insurable losses”).”
In most circumstances, a burst pipe is an event which is typically deemed an insurable loss.
Michelle explains that “The Condominium Act, 1998, requires every condominium to maintain insurance for damage to the units and common elements that is caused by major perils or other perils as defined in the declaration or by-laws. “Major perils” includes water escape. The condominium’s obligation to insure the units does not include insurance for damage to improvements made to the units. The improvements are determined by reference to a standard unit by-law, if one exists, or to a scheduled provided by the builder of the condominium.”
A standard unit by-law provides clear language on what the base unit finishes will be brought back to in the event of an incident, such as a flood. As finishes change and may become unavailable, the insurer will usually look for comparable finishes, by price and standard, to make final determination. You should be aware of what limitations this may present to you, in the event of a claim. Additionally, you should verify with your insurance carrier that they have read and understand the corporation’s standard unit by-law, and that they have made adjustments to your coverage, in the case you have improved your unit, such as flooring, cabinetry and even countertops.
Michelle warns that “where an insurable loss occurs to a unit the condominium may be able to recover any deductible paid to its insurer from the owner of the damaged unit. Section 105 of the Act states that the condominium shall charge the lesser of the actual repair costs and the deductible on the condominium’s insurance policy to the owner of the damaged unit if the damage was caused by an act or omission of the owner, tenant or other person residing in the unit.”
Unfortunately, water claims are on the rise. According to the Insurance Industry of Canada water claims represent almost 50% of all insurance claims reported. Nathan Gulliver, Vice President of HUB Ontario says “one of the main reasons that deductibles and premiums are on the rise, is a result of increased water claims, more so when one event can affect multiple units.”
In the case where the damage is a result of a slow leak, most condominium documents will spell out the obligations of the owner for maintenance and repair of their unit, and the condominiums responsibility for the common elements.
The interesting point to note is how involved the Corporation needs to be when a substantial event occurs.
Michelle notes that “the obligation to insure does not necessarily mean that the Condominium must complete the repair work. The Condominium can satisfy its obligations by filing a claim with its insurer and providing the proceeds to the owner once received from the insurer. The owner would then be responsible for ensuring the work is completed in the unit. The Condominium’s insurer may have a preference as to whether the Condominium arranges for the work to be completed or if it provides the proceeds to the owner and allows the owner to complete the work. The Condominium’s insurance broker should be able to assist in this regard.”
“The Condominium cannot avoid its obligations to insure the unit because the source of the damage may have been within the unit.”
So what does a corporation do, when the damage is a result of the conduct of the person residing within the unit?
The Corporation is obligated to step in. Michelle adds “the Act permits a condominium to recover the cost of the deductible, or repair costs, from the owner of the damaged unit. The purpose is to ensure that the unit is repaired (so it does not cause damage to the other units or common elements), but to also ensure that the other owners are not responsible for any portion of the cost to do so.”
In addition, you should be familiar with your own insurance policy as well as your corporation’s documents, as many obtain clauses that speak to shutting off the water to your home when you are not home, or away for an extended period of time.
It is recommended that you request a copy of the Corporation’s insurance policy and provide it to your unit’s insurance provider. They will need to ensure that there are no gaps or overlaps.
When in doubt, a board should seek an opinion from the corporation’s lawyer about repair work to a unit or a deductible chargeback.
While unit insurance is not mandatory, it is highly recommended. Your insurer will be able to offer you a variety of coverages for liability, contents, betterments & improvements, deductible, special assessment, loss of residence, etc. You may think a lot of it is unnecessary today, but if you are ever caught in the middle of an incident, you may be saving thousands and thousands of dollars. Still unsure? Ask your Property Manager what the deductible amount is for claims through your Corporation’s insurance.