Condo deductibles need to be clearer: provincial regulator

Proposed regulations on deductibles for condominium insurance in Quebec need to be clear, affordable and consider the number of units in the building, the province’s self-regulatory body for brokers, agents and claims adjusters said Monday.

“The government is saying, ‘Well, you shouldn’t be able to increase the deductible too much because otherwise if you do have a claim, you may not have enough money to pay it,’” said Ingi Khouzam, compliance lawyer with the Chambre de l’assurance de dommages (ChAD). “The idea is: does the condominium [corporation] have enough money to pay that deductible once a claim arrives?”

The regulator’s position is that deductibles need to be clear and affordable in the sense that either the condo corporation’s liquidities are enough to cover a claim or, if there is a claim, the condo owners themselves are aware how much they must contribute to the fund. ChAD also proposes that a self-insurance fund contain at least twice the amount of the deductible provided for in the condo corporation insurance policy; the co-owners (individual condo unit owners) would have two years to replenish this fund should it fall below this threshold.

ChAD submitted its comments to the provincial finance ministry as part of consultations on proposed regulations to condo insurance in Quebec. Aspects of Bill 141, which changes regulations related to financial services sector, come into force in principle on June 13, 2019, one year after assent.

Deductibles are currently contractually determined with the insurance company. However, the regulations just refer to a “reasonable deductible” and there is no set amount. There is also leeway if the condominium corporation wants to reduce premiums by increasing deductibles.

Another issue raised by ChAD is whether there should be a mandatory minimum amount of liability insurance individual co-owners need to purchase for third-party claims. Currently, the “industry standard” is $1 million in liability insurance.

“We haven’t seen studies or any indication that this has proven insufficient,” Khouzam said. “If the law says, ‘You need to have liability insurance,’ and the [broker’s] clients asks, ‘How much should I get?’ It’s difficult for them if there’s no clarity on what is the expectation of the government.”