Insurance

November 26, 2024 Published by Toronto and Area Chapter - By Sandy Fantino

What’s the Difference?

From the Fall 2024 issue of CCI Toronto Condovoice Magazine.

Making sure you have the right condo insurance coverage

We all take comfort knowing that our possessions are protected. That’s why homeowners purchase home and other types of insurance. In fact, it is a requirement of the Condominium Act that the corporation have insurance for all units. But like just about everything else, the devil is often in the details as the Act doesn’t cover improvements to individual units.

This is especially true when it comes to insuring a condominium where there are different limitations b etween the condominium corporation itself and individual owners. Having a set of clearly defined details is critical to help guide repairs or damages in the event of a claim. Fortunately, legislation allows condominiums to enact Standard Unit Bylaws which sets out responsibility and liability in the event of a claim. Without this clear definition, if a loss were to occur repairs could result in lengthy and costly debate among the corporation, owners and insurers alike. If there is any sense of ambiguity when it comes to responsibility, this can create serious headaches and roadblocks in settling the claim and repairing any damage.

Condo owners must individually have coverage for the contents of their units as well as any additional improvements that they may have made to their home. This works in concert with the overall coverage of the condominium corporation itself. However, if you have made upgrades to the unit by adding new flooring, a new suite of kitchen appliances and fixtures, and other improvements you will have to ensure that you have appropriate coverage. It is important that you have your broker review your coverage to see if there are gaps between your policy and the master policy. For example, windows and fireplaces may not be covered under the master policy.

That’s why it’s important for condo owners to familiarize themselves with the rules, regulations and terminology around their coverage. A good starting point is the Standard Unit Bylaw — one of the by-laws of the condominium corporation that outlines the standard unit definition, lists the components insured by the corporation’s insurer, and details the exclusions that become improvements or betterments insured by the respective insurer of the unit owner. The “standard” unit components, such as the walls, ceilings, electrical, and mechanical items, are listed in the relevant schedule. For the purposes of Sections 89 and 99 of the Condominium Act, 1998, any objects inside the unit that are not included in the Standard Unit Bylaw are referred to as “improvements.” The corporation and unit owners will have differing interpretations of these by-laws. This by-law will clearly define the parameters for repairs.

What are the choices?

There are really two choices to make when it comes to how a standard unit bylaw is defined. And this is where some debate occurs. One option is to go with an uncomplicated, bare bones approach that covers basic inclusions such as ceilings, walls, sub-floors (not carpet or coverings such as laminate), and basic electrical systems excluding items like a furnace or heat pump. Everything else is defined as an improvement.

The second option is to go with what is called a “developer’s grade” which would include those improvements. This is where it is critical to specify the type of materials that are used as there are many ranges of quality. If the unit has baseboard, is it wood or some other material, how wide is it and does it have some other feature. Understandably, insurance premiums would be higher, but the owner would take comfort knowing that their home will be returned to its former level of comfort. This is important especially if the unit owner is considering selling soon.

What is the process or steps you need to take to pass a Standard Unit Bylaw?

Organization and structure are critical to passing a standard unit bylaw. There are many good sources for this information, but good communication with residents is a basic rule of thumb to being successful. O nce a need has been identified, a draft of the bylaw needs to be prepared. It is advisable to have this prepared by legal counsel and then presented to the Board for discussion, debate and any modification. It is also advisable to seek input from other interested parties such as the property management company or resident manager, engineers and the property’s insurer to flag any potential issues.

From an insurance perspective, it is ideal that your insurer has experience in insuring condominiums, as the representative can provide a heads-up on possible issues and pitfalls. They are often invited to speak during these deliberations and can provide advice and solutions to concerned owners.

Once the Board has settled on the final wording of the proposed bylaw, they must then get approval from the owners as part of a regular meeting. A copy of the proposal must be circulated with the notice of meeting. Owners may wish to make amendments, and after the wording is agreed to, it must be voted on and approved by a majority of 51 per cent.

In conclusion, adequate insurance coverage is about peace of mind and preparing for the unexpected. And a key element of that is ensuring that you know which policy covers what situations and understanding what to do in the event of a claim.

Sandy Fantino, R.I.B. (Ont.) is a Vice President, Client Executive for the BFL CANADA Realty Division with over 12 years of insurance industry experience. Her focus is finding the best insurance solutions for condominium corporations and along with her team, she prides herself on professionalism and service to her clients.

About BFL CANADA
BFL CANADA Risk and Insurance Services Inc. is one of the largest employeeowned and operated commercial insurance brokerage and consulting services firms in Canada. Our Realty Division, with a team of over 200 real estate professionals located in 27 cities across the country, understands the risks faced by all types of properties from strata and condo corporations to apartments, commercial and bare land properties. To learn more about us and what we do, visit www.bf lcanada.ca/realty-insurance- services