How to reduce a condo corporation’s insurance premiums
January 15, 2020 by David Gambrill
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With condo insurance premiums on the rise – in some jurisdictions, premiums have reportedly increased by 780% — and coverage scarce, legal counsel and Canadian Underwriter readers have a few ideas for the Insurance Bureau of Canada’s forthcoming risk manager for condo corporations.
As reported, IBC’s newly created risk manager role will help condo corporations mitigate their risks, the first step towards finding coverage and reducing premiums. Given public comments so far, it appears that brokers and defence counsel already have several recommendations prepared for their condo corporation clients.
Jason Rivait of Miller Thomson LLP, in a blog for Mondaq, identified three ways for condo corporations to reduce risk, two of which involved changing condo rules and regulations.
The first is for condo corporations to start passing Standard Unit By-laws — which define the components of the units for which the condo corporation is responsible to insure — so that items such as flooring and countertops are no longer the responsibility of the condo corporation to insure.
“The purpose of removing items from the condo corporations’ insurance responsibility is not to merely pass the buck to unit owners,” Rivait wrote. “Rather, it mitigates the collective risk of unit owners and common expense increases.”
Rivait notes that condo unit owners tend to forget that the condo corporation’s premiums and deductible payments form part of their common expenses. So if a condo corporation pays the deductible for a $15,000 flood claim in one unit, for example, all of the condo owners will be required to pay for the cost of that deductible.
Rivait also recommends that condo corporations pass by-laws that extend the number of situations in which unit owners may be responsible for the lesser of the cost of repair and the deductible.
“Under the existing Condominium Act [in Ontario], the deductible may only be charged back to the unit owner if the damage was caused by the unit owner’s act or omission and only for damage to that owner’s unit. The act, however, allows by-laws to be created which makes unit owners responsible for these costs in the event the damage is from their unit irrespective of any act or omission and for damage to other units and the common elements.”
Two caveats, Rivait says: Such a charge back to the unit owner should only apply to insurable events such as floods or fires. Also, the charge back should be limited to the lesser of the cost of the repair or the deductible.
Finally, Rivait recommends something that also appeared under reader comments on Canadian Underwriter’s website — water escape detection devices that immediately shut down the water line.
In online postings on Canadian Underwriter’s website, readers added a number of other ways to reduce a condo corporation’s risk exposure. Among them:
- “For older condos, get rid of the crane toilets from the 1970’s. Unbelievably they still exist.”
- “Don’t allow unit owners to do their own plumbing (dishwashers, water filters, etc.). Hire licensed and insured plumbers.”
- Mandatory replacement of hot water tanks at 10 years old.
- “Two sided sinks with lower middle divider and remove the stopper on one side. Kitchen sinks for some unknown reason do not have overflows like other sinks.”
- Don’t run dishwashers and washing machines when not in the unit. (If renting, advise renters).
- Require at least two members of each board to take educational seminars on condo insurance, maintenance prevention.
- Require all tenant/unit owners to have a minimum liability limit of $2 million. Once a year, request those certificates of insurance to confirm.
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very insightful article. thanks
It should be also be said that directives to unit owners from a strata council about what proactive actions that should happen to prevent damage – strata would/could be held liable for covering a damage claim because it took “ownership” of an issue. This was told to us by an insurance adjuster.
A couple of comments on this article
1) Passing a Standard By-Law Unit eliminating flooring/countertops is good advise, in practice these by-laws are difficult to pass. In Ontario it requires a meeting and a majority vote to pass. In condo buildings where the majority of owners have high end flooring/countertops etc it is almost impossible to pass. If the legal advice is that all condos should have the unit owners responsible from an insurance perspective then shouldn’t it be entrenched in law – ie part of the Condo Act?
2) Extending the circumstances in which a unit owner can be held accountable for the corporations repairs or deductibles is a slippery slope especially in the example of damages emanating from a unit regardless of fault. This is an actual case…the unit owner lived in a building where such a by-law had been passed. There was a flood from a pipe located in a common element area, the water then went through his unit into the hallway and to the gym below. As the water emanated from the unit before it created the damage the unit owner had to pay damage up to the deductible of $25K – unfortunately his insurance only paid for $1,000 due to a corporations deductible and he was on the hook for $24K for a leak in a pipe that was actually located in a common element simply because his unit was unlucky enough to be in the way of the natural water flow.
3) Water Detection/Shutoff devices are a good idea but they can be VERY costly to install depending on the set up off the condo. A high rise condo is not the same as a house where there is one shutoff valve for the water to the home…in my condo unit for example I have 6 shutoff valves – 3 hot and 3 cold, one each for my bathroom, laundry and kitchen, some of the larger units with more bathrooms have 12. There are 239 units in my building. Even if they were installed on just the risers (which would shutoff water to a number of units) – there are approx. 50 risers. Huge initial cost and huge maintenance and not very practical.
Do regular maintenance of all areas that can cause leakage. Windows, doors, roofs and the proximity of trees too close to the buildings.
Regular checks on the age of the hot water tanks.
Hold a meeting and initiate a clear discussion between the owners and an insurance representative to clarify where the condo insurance and their insurance coverage overlap.
Can a unit owner be charged back an insurance deductible by a corporation for a claim they never submitted through their main policy? I.e can I be charged back a 5k deductible on the main policy for a water leak if the corporation has confirmed they did not run the claim through insurance.
Did you receive an answer to your question as I’d like to know as well. Thanks in advance.
Loved the way you explained everything.Informative and a useful post.Thanks for sharing the blog.Keep sharing more your valuable thoughts.Keep it up.!!!
The Ryse Residences showflat
We are a condo association and are presently having our policy renewed. The forms they send are daunting to complete. Thank you for information. I am researching ways we can upgrade our building to avoid costly increase in insurance
Can individual owners get better premium rates than condo corporations? If so, can Condo Corporations in Alberta decline to insure units, including Managed Property, and require owners to insure units themselves? What are the risks to condo corporations and owners in doing so?
Thanks for sharing this solution here. When it is about quality homes, there are so many things one needs. Really, the above information is going to be very helpful for everyone. Keep sharing this more and more!
I as a Condo Corporation we install a full emergency management plan would that reduce costs to the Condo Corporations