From the Summer 2021 issue of the CCI Toronto Condovoice Magazine.
Shockwaves in the Condo Insurance Industry
The condominium insurance industry has been going through some shock waves recently. Most condominiums, even when they have not had claims, have seen their insurance premiums and deductibles increase substantially. Some with claims have seen up to a ten-fold increase in premiums and very high deductibles.
There are many reasons for the recent increases, including forest fires in Alberta and other natural disasters, historically low interest rates, insurers failing to have historically increased premiums and deductibles for condominiums to keep pace with increased payouts by the insurers, and the limited number of insurers willing to enter the condominium market. Regardless, condominiums have to deal with the consequences.
There are steps that a condominium corporation can take to manage insurance claims and keep increases in premiums and deductibles to a minimum.
- Pass a standard unit by-law that sets out what forms part of the standard unit for the condominium's insurance responsibility. The advice of professionals in the industry has been and continues to be to exclude flooring from the standard unit, so that flooring is an improvement which owners insure. Flooring represents the item that is most commonly Condominium Insurance The Last Word damaged by water leaks and can result in large claims. If flooring is not included in the standard unit by-law this will reduce the number of claims made and should reduce future increases in premiums and deductibles. Although this increases an owner's insurance obligation it tends to benefit owners. The cost of individual unit coverage which includes flooring is quite reasonable.
- Implement an insurance deductible by-law making owners responsible for the lesser of the cost to repair damage caused to the owner's unit, other units and the common elements when damage stems from the owner's unit, in all circumstances except where the condominium, through an act or omission, caused or contributed to the damage.
condominium is less likely to put a claim through its insurance where the amount of damage exceeds the deductible, when a unit owner is responsible for the deductible, unless the amount of damage is significant. Without this by-law, if the corporation is responsible for the deductible, this will mean increased common expense payments for all the unit owners as the deductible will have to be paid from the operating or reserve account. Owners can insure the deductible' a condominium corporation can not.
- It can take steps to reduce the likelihood of damage. Primarily this means reducing the potential for water leaks. Condominiums would be well advised to consider, in consultation with their legal counsel, implementing an annual inspection program pursuant to which the condominium has a qualified contractor inspect various elements of the units such as pipe connections, including to any washing machine or dishwasher, drains, including any drainpipes for fan coil units, and water shut-off valves to ensure they are accessible, work and do not leak. The condominium would then fix anything for which it is responsible and would require the unit owners to fix any problems found, that are their responsibility. Corporations that have a history of drain back-ups should consider regular drain stack cleaning to prevent the potential for future back-ups. Consider having owners or the corporation install water sensors that will shut off the water supply if a leak is detected.
Although nothing will guarantee no future damage, anything that can be done to reduce its likelihood or that will reduce possible insurance claims and mitigate increases in insurance premiums and deductibles would benefit the collective financial interests of the unit owners and should be considered.
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