Canadian Underwriter

How liability for deductibles on strata claims is changing in B.C.

July 3, 2020   by Greg Meckbach

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Strata unit owners might see a reduction in liability risk for common-area damage if a recently-tabled bill is passed in British Columbia.

“Right now, if a water pipe bursts in a bathroom due to manufacturer error and leaks beyond common property into other units, a strata corporation may sue the owner of the unit where the pipe burst originated to recover the full deductible cost,” a B.C. government spokesperson told Canadian Underwriter Thursday. “With strata corporation insurance deductibles rising to hundreds of thousands of dollars, it can leave individual strata owners at risk of bankruptcy or foreclosure in some cases.”

To address this issue, Municipal Affairs and Housing Minister Selina Robinson tabled Bill 14 on June 23. If passed into law, Bill 14 would change the Strata Property Act to protect unit owners against large lawsuits from strata corporations in cases where the unit owner was legally responsible for a loss or damage through no fault of their own, Robinson told the legislature at the time.

Bill 14 would also give the province the ability to set a maximum dollar amount that an individual can be asked to pay toward a deductible on a claim where common property is damaged due to a problem from within the unit, the provincial government spokesperson said. “Any remaining portion of the strata corporation’s deductible would then be raised from all owners via a special levy or through the strata’s contingency reserve fund.”

News of the bill was well-received by the Insurance Bureau of Canada.

A strata corporation could have deductibles for its property insurance amount to hundreds of thousands of dollars, said Rob De Pruis, IBC’s director of consumer and industry relations, western.

“Based on their bylaws they could be assessing that full deductible against the unit owner, and the unit owner might not have that protection,” De Pruis said in an interview.

An example of where this could be an issue is when a washing machine leaks, said De Pruis. The water could flow through the floor into a unit below, affecting two units plus common property in between.

“So Bill 14 allows for the creation of some clear guidelines for the corporations and the unit owners and provides some clarity for everyone, making a cap against those particular financial assessments,” De Pruis said of strata corporations charging unit owners for the deductible on common property damage.

“The issue with water damage claims in high-rise residential buildings is that, once the flood occurs, the water damage can affect all units below,” said Sam Biglou, a Toronto-based litigation lawyer with Mason Caplan Roti LLP, whose practice includes subrogated claims.  Biglou’s comments are not intended as legal advice and she is not commenting specifically on the British Columbia market.

With a plumbing failure, water continues to flow until the origin is located and the water source is turned off, Biglou told Canadian Underwriter.

“Often in high-rise residential building cases, the discovery of the flood is a major impediment to mitigating the water damage.  Unless the occupant of the unit is home at the time of the origin of the flood, the source of the flood is often undetected until it is subsequently discovered, say by another unit that is affected.”

But it can still take some time to figure out the unit from which the flood came. The investigation becomes more complex in cases where the source of the flood is behind an enclosed area such as a wall, said Biglou.

Insurers are struggling to make a profit on B.C. strata coverage, according to interim findings released in June by the B.C. Financial Services Authority.

The average reported combined ratio in the B.C. strata market was just over 100 in 2019, close to 100 in 2018 and over 100 for 2017, FSA CEO Blair Morrison wrote in a June 16 letter to Finance Minister Carole James.

A key driver of those losses is water damage from plumbing leaks and failures. This accounted for about 46% of the total claim costs since 2017 (56% alone in 2018), Morrison noted in the interim report.

Among other things, the changes proposed in Bill 14 include:

  • guidelines to require strata corporations to inform owners about any changes to their insurance coverage and provide notice of any policy changes, including any increases in deductibles; and
  • prohibiting strata property managers and other third parties from collecting referral fees from insurers or brokers.


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9 Comments » for How liability for deductibles on strata claims is changing in B.C.
  1. Eric Lapenis says:

    Unfortunately, they can’t legislate that more insurers provide capacity for the strata market.

  2. TBA says:

    Again, I will state, the Act is very very clear. And all people are doing is complicating and Act that is clear.

    Place the responsibility where it lies. Unit Owner. What needs to be included in the Act is for UNIT OWNERS must be mandated to purchase insurance. But alot of the times, they don’t. That is where some of the issues lie and what the act is missing, otherwise is clear.

    Now just make it clear to Lawyers to stop perpetuating law suits when there shouldn’t be and Insurers/Adjusters NEED TO FOLLOW THE ACT.

    If BILL 14 is passed, this will create further issues for Strata’s and high deductibles and premiums


    • Eric Lapenis says:

      How is it the unit owners fault if the original build installed a faulty dishwasher hose? Or if a pipe bursts in the washroom?

  3. Ryan says:

    Am I missing something because in cases I see, the unit holder isn’t considered liable unless it’s due to an accident like say flushing kitty litter down the toilet. Would it be reasonable for someone to open their walls and flooring to check for leaks they have no reason to suspect. I think the solution is to make all the damage to individuals units go through their own insurance and just the true strata common damage go through the strata corps insurance company.

    • Eric Lapenis says:

      Yes, you’re missing something. Stratas can currently assess the loss deductibles to unit owners regardless of any fault.

  4. Alan McNulty says:

    Certainly an incentive now, for insurers to actually increase the deductibles (improving combined ratios) as these are to be backstopped (In a tight capacity market) by the strata corp’s. Strata’s will mandate unit owners provide COI’s. And owners, having 2-3 previous claims and have opted not to have very expensive individual insurance? Will strata fees now go through the proverbial roof, along with contingency fees? Only a purblind fool expects gov’t’s to solve anything. The gov’t has provided a limited response, pre election. Some benefit. It may have to revisit this file sooner than expected.

  5. LC says:

    Whether the insurer for the strata or the individual policy owners pay, essentially they are the same main group of insurers. If they save on the commercial side in claims payment, they are just paying out from their personal side. Why are we keep talking about the aftermath, when we should push the gov’t to change building codes for better designs of buildings? And also holding developers to hire more professional trades (including experienced employees) and using better quality materials? There used to be overflow drains in houses and certainly in many parts of Asia, all high-rise have them. Why aren’t we learning from them? For the existing, I think unit owners must step up and make sure they have enough contingency funds in Strata. I get no one wants to pay high monthly maintenance fees, but it’s the reality and price you pay for living in condos. As for responsibilities, if it was truly the unit owner’s negligence like leaving a tap on, then they should absolutely be the one to pay the deductible. A sudden burst pipe not due to wear and tear but rather the building’s construction may seem a little harsh.

  6. Bridge Dale says:

    Ah, so that is how the liability for deductibles is changing on strata claims. This is something that I was thinking about, and now you’ve answered me. Thanks a lot for sharing these details here.

  7. DLM says:

    Water damage claims have the highest frequency of insurance claims and the highest costs in high rise strata condos. Why aren’t the Government Building Codes regarding high-rise construction changing in order to prevent these claims. I believe all bathrooms and kitchens and water piping chases within buildings should be mandated to have access to floor drains to accommodate any leaks or overflow of water from the internal pipes in the pipe chases or sinks and tubs in the bathrooms and kitchens. If the water escape issue was resolved in our high-rises, the strata insurance costs would get resolved.

    The final building product begins with the wrong thinking; how to get the building process through the municipality building permit process? When the municipalities are presented with a building proposal from a developer, the municipalities are more intent with getting some new art work for their City instead of getting a quality building built for their new constituents. This short sighted thinking of the City Fathers, regarding trading permits for new municipal art work, leads to a large portion of the new owners of the municipality living in fear due to the poor building codes which allow for the multiple water damage claims and therefore the higher insurance costs.

    I agree with LC from the July post. Our government building codes need to be upgraded for condo high-rises in order to bring them inline with a new building code that would accommodate a lower insurance premium.

    The new building code could force developers, architects and builders to design and build buildings in order to accommodate insurance policies which condo owners could afford.

    We have realized the need for water escape alarms which tell us when we have a water escape, we need to move even further along with this thinking and develop building codes which change the way we design and build our high rise condos.

    I know we are smart enough to build better. Possibly the high insurance costs will make us demand a better product in regard to the quality of building we design and build? Other parts of the world already have accommodated this issue. Why haven’t we?

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