WHAT YOU DON’T KNOW ABOUT YOUR CONDOMINIUM INSURANCE...
...Could end up hurting all your Owners
Condominium insurance is for most of us an intimidating subject. Between corporate policies, homeowner insurance, tenant insurance, claims, deductibles, the Condominium Property Act and the Corporation’s Bylaws there is a lot involved in understanding and purchasing adequate coverage for your Corporation or your Unit.
Plenty of Board members do not understand the Condominium Property Act, the Corporation’s Bylaws or the requirements placed on the Corporation to secure specific and adequate coverage. Many take the “head in the sand” approach, preferring to simply not think too much about it. While this might have short-term benefits, the obvious problem here is that if the Corporation or a Unit Owner ever face a situation where they actually need insurance coverage, they will either find themselves without adequate coverage or possibly without any coverage at all.
A condominium where the Board is made up of residents who are busy, and where nobody really has the appropriate skill sets should engage a Condominium Manager to help them navigate the murky waters of Insurance.
When Board members are not really cognizant of the problems they could end up facing, they tend to be poorly insured. This would be a costly mistake when it creates a situation in which a condominium isn’t set up with the proper insurance.
In some cases, unfortunately, when individuals are purchasing a condominium unit, the conveyancing lawyer may be more interested in pushing the sale through quickly rather than educating the buyers appropriately and ensuring that they understand not only the limits imposed Bylaws that will now govern their co-habitation with the other owners but also what falls under the specific obligations of the Condominium Corporation vs what is their responsibility. This leaves the new owners not understanding the Bylaws and perhaps thinking they’re insured under the Corporation’s policy, when in fact they’re actually not fully covered, specially when it comes to their personal belongings or additional living expenses they may face if they need to move out while the repairs are completed.
If the Condominium Corporation must, as per the Condominium Property Act, secure an insurance policy again specific risks, this doesn’t mean homeowners are covered. Purchasing a homeowner policy on your individual unit is a must, for a number of reasons: not only will this ensure that your own possessions are protected and replaced in the event of an accident, but additionally, you’ll be covered with regards to guest liability and anything that might happen when you invite friends or other individuals onto your property and into your individual home.
The lack of directors’ and officers’ liability coverage. We cannot stress enough that this is an absolute necessity. Board members are legally responsible for their Condominium Corporation, they are all of sudden at the helm of, in some cases, a multi-million-dollar corporation – whether they’ve got the skill set for the job or not. As directors and officers, the Board members govern the Corporation, their liability is at risk if they make a decision that turns out to be a mistake. A professional Manager will help the Board ensure that both the Corporation and the Board members have the right coverage to protect everyone from any legal backlash that might result from an error caused by a lack of experience.
All owners are named insured on the Corporation’s policy. Owners are paying into this policy and are therefore entitled to the coverage it affords. It is a wide spread misconception that the Board can decide on the merit of a claim. If the loss is covered than the owners are protected. In addition, the Condominium Property Act stipulate that the Corporation’s insurance is the first responder in all claims.
This statement does come with a few caveats. Sometimes it is more economically advantageous for the Corporation to not file a claim. For instance, if the total of the damage is less than the deductible, the Corporation should elect to not file a claim and proceed with the repairs under their operating budget. Of course, such budget should contain a contingency amount to allow for at least a claim per year. In addition, most of the Bylaws that are currently being drafted allow the Corporation, in the sole discretion of the Board, to reassess the deductible of a claim, whether it is filed or not, to the condominium Owners of the Unit in which the loss originated. This could be costly for homeowner without a proper insurance policy to cover the amount of the deductible that can now in some cases reach over $50,000.
If Owners are insured under the Corporation’s policy, the same is not true for the tenants living on the property. If tenants cause a loss, they are likely to be called to task to cover the cost of the repairs. Should the loss be severe, the Corporation’s Insurers will likely try subrogation of the costs. In short, Owners and tenants must carry personal insurance, which must be in addition to that of the Corporation.
As you can see, there is a lot to consider when purchasing insurance, both for the Corporation’s Board members and for Owners and tenants living on the premises. The assistance of a good Property Manager has proven time and time again to be invaluable. Through the relationship she has with the Insurance Brokers, not only can the Property Manager sometimes negotiate better premiums and deductibles, she can also make recommendations on the most effective and efficient way to deal with a loss.
Should you have any questions, do not hesitate to contact us.
Nathalie Skyrie, CPM®, ARM®,
Senior Condominium Manager