Insurance

June 3, 2022 Published by London and Area Chapter - By Jennifer Dickenson, Chris DiPietro, Michael Sroka, Tricia Baratta

Q&A: Insurance Basics

From the CCI Review 2021/2022-4 June 2022 issue of the CCI London Chapter

Insurance is on every condominium Board’s mind these days, as fewer and fewer insurers are offering to cover multiunit dwellings. Maintaining insurance is a requirement in Section 99 of the Ontario Condominium Act, 1998 and if a Corporation is denied insurance with a local company, it can get VERY expensive.

1. What is the average insurance price you’ve noticed across the Condo Corporations you broker?

CD- Corporations vary considerably, in so many ways (size, location, age, construction to name a few) If inquiring how one corporation’s premium compares to another, an average premium would not provide a good indicator – much the same as the average sale cost of a condominium.

MS - Every Condo price varies from construction type, fire safety measures, floodable territory, amount of coverage required, claims history etc. The same replacement cost on two buildings can be drastically different given all of these measures.

TB- This one is hard to answer as each corporation differs in size and construction.

2. Does increasing deductibles or implementing standard unit by-laws with insurance clauses help keep premiums lower?

CD- Increasing deductibles can make a difference with some insurers; however, many programs have fixed deductibles and there is no credit. My experience is, the cost saving for increased deductibles is usually minimal and not enough of an incentive to risk the exposure. Standard Unit By-laws do not save on insurance premiums, however, they do help considerably (when detailed) in adjusting claims. A Standard Unit By-law that is described as “bare bones” and does not include cabinets, flooring, fixtures etc. – will save premium as it will decrease the amount insured. In addition, it may have unrealized savings down the road due to insurance claims not incurred because there was no damage to the corporation’s structure.

MS- Increasing deductibles can definitely bring premiums down. For the by laws, it all comes down to what is the responsibility of the condo vs the unit owner. If more is being put on the unit owners, then the condo replacement cost may go down which will drive premiums down.

TB- In the long run, yes. The fewer finishes included in the standard unit means the portion the Corporation is responsible for will be smaller in the event of an insurable loss. The smaller the loss, the less likelihood it will be higher than the deductible and will trigger a claim. And with a higher deductible, the threshold for triggering a claim is higher which requires the Corporation to self insure for the smaller losses. Fewer claims triggered results in less surcharges related to losses and keeps the premium as low as possible.

It is important to remember that higher deductibles put the onus on the unit owners to have adequate coverage for that deductible through their own unit owner policy in the event it is charged back to their unit.

3. Does one type of claim affect your premiums more than other types? Which?

CD- With most programs, it does not make a difference.

MS- Any claim with a payout will affect the policy across the board. Different claim types for example, water losses may result in coverages being taken away or amended.

TB- Insurance companies are most concerned with severity and frequency. The more severe or large the claim, the higher the cost to the insurance company which will result in a surcharge being added to the premium at renewal. If a corporation has frequent losses of the same type, such as water or fire, the premium is likely to increase as well as the deductibles related to that type of coverage.

4. What are the main reasons being given by insurers why they aren’t renewing?

CD- Frequency of losses, older buildings not updated, buildings being located in flood zones (not a problem in the past)

MS- Frequency of claims.

TB- A major concern for insurance companies and their reinsurers is age of buildings. Older buildings are more likely to contain older components such as water heaters, furnaces, plumbing and wiring. If a corporation is able to provide proof these components have been inspected and are not at risk of failing and being a hazard to the property, the insurance company is more likely to stay on risk for that property.

5. What should condos start doing to help prevent non-renewal of insurance coverage?

CD- If they have a property loss that is not considerable, call a restoration company and get an estimate. If the estimate is close to your deductible or a cost that the corporation can tolerate on their own, look after the loss yourself. This is something that you should discuss with your broker as there are many things to take into consideration.

If there is a Bodily Injury incident, it must be reported, no matter the severity. Winter maintenance is definitely where a corporation can make a difference. Address any slip and fall conditions immediately. Landscape companies cannot be there 24/7, take it upon yourself to address any unsafe conditions. Identify any conditions such as a dip in the pavement that is known to collect water and ensure that it is sanded during freezing conditions. Sand/salt where downspouts drain onto traffic areas.

MS- It is important to make sure the building stays up to date to prevent major losses that would cause insurance to lapse.

TB- Work with their broker and property manager well ahead of renewal to ensure any requirements the insurance company may have can be met in good time. If inspections are required, it is best to have them completed prior to renewal in order to get the best renewal terms possible.

When a Corp cannot find insurance, what are the first three steps they should consider, to make sure they’re compliant with the Act?

CD- This is best answered by a lawyer.

MS- They may have to consider a sub-standard market in order to meet the requirements of the act which I believe is replacement cost. Keeping claims free. For Desjardins we consider any claims where there has been a payout in the past 5 years. After 3 claims within that timeline, a client would no longer qualify.

TB- 1 – A legal opinion from a condominium lawyer on how to be compliant with respect to notification to owners/ mortgagees, etc. 2 – Discussion with their broker to determine what steps must be taken in order to secure insurance as soon as possible. 3 – Review Corporation’s budget to allow payment for future losses until insurance can be secured.

Our thanks to Jennifer Dickenson for posing the questions and for our experts Chris DiPietro, Michael Sroka and Tricia Baratta for their responding guidance.

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Jennifer Dickenson, B.Sc (Hons) RCM, LCCI is a condominium manager with Dickenson Condo Management and the President of the CCI-London and Area Chapter.

Chris DiPietro, R.I.B. (Ont) is an account exsecutive with Selectpath Insurance (formerly May McConville) and a past-president of the CCI-London and Area Chapter

Michael Sroka is an Agent for Desjardins Insurance operating as Michael Sroka Insurance & Financial Services

Tricia Baratta, R.I.B. (Ont) is an Account Executive with Gallagher and is currently the Vice President of the CCI-London and Area Chapter.