Check Your Liability Insurance Coverage for Water Damage
From the Summer 2022 issue of the CCI Nova Scotia Condo Connection Vol. 3, Issue 1
All condominium owners should check their personal insurance policies to ensure they are not exposed to claims by their condominium corporation that will not be paid by insurance.
The corporation must repair damage to the common elements and must insure against that loss. However, the insurance is subject to a deductible and the Condominium Act provides1 that the corporation can recover from an owner who is responsible for the loss, the cost of repairs to the common elements up to the amount of the insurance deductible. This situation arises most frequently with a water loss from a unit – typically a failed hot water tank – that causes damage to the common elements and another unit or units. In that situation, the owner will probably also be subject to a claim by the insurer of the damaged unit(s).
Two things have happened recently in condominium insurance: First, insurers of corporations have been raising their deductibles (particularly for water damage) and a deductible of $50,000 is not uncommon. Second, insurers of units have been setting special caps on coverage, specifically for payment of deductibles under corporation policies, and a cap of $25,000 is not uncommon. In that situation, the owner whose unit caused the loss would be on the hook personally for up to $25,000. Make sure you do not have a gap in coverage like this!
What to do:
- Ask your Board or Manager what the deductible is under the corporation’s insurance policy, including any special deductible for water damage.
- Contact your own insurance broker or agent to ensure that you have enough liability coverage to look after that deductible if you are unfortunate enough to have such a loss. (There may be an additional premium to increase that limit.)
But, most importantly:
- Check your unit carefully for possible sources of loss. The most likely is a hot water heater that is beyond its expected service life. Most units have a service life of 10 years, and most plumbers will mark the date of installation right on the unit. The corrosion damage occurs on the inside and the first sign is usually a leak – sometimes a catastrophic one.
An ounce of prevention is worth a pound of insurance!
1 35 (9) The corporation may recover any insurance deductible in respect to damage to any unit or common elements from an owner if that owner is responsible for the damage.
By Dan Campbell, CCI-NS board member, and recently retired lawyer from Cox & Palmer
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