Ensuring you Insure Yourself Against the Claims of the Insured
/By Tami Fric and Patrick Trudel
If you own a condominium or townhouse, you likely have homeowner’s insurance of some kind. In fact, it is possible that your mortgage provider requires that you hold such coverage. But is your level of coverage sufficient for the kind of risk you’re taking on and, more importantly, are you fully aware of the risk you are exposed to?
Unlike living in a detached home, the scope of the damages that can be caused extends far beyond your property when living in a Highrise condominium or attached home. Think of common household hazards: water damage, inadvertent fire damage - we all know someone who has experienced these things or gone through it ourselves. The consequences of these have recently found themselves expanded. As of January 1st, 2020, changes to the Condominium Property Regulation of Alberta have come into effect. Specifically, section 62.4(1) allows Condominium corporations to chargeback to the individual condo unit owner the cost of their deductible on their insurance policy, up to a value of $50,000, for any damage found to be originating from the condo in question without needing to prove fault or negligence. This could result in a substantial headache, not to mention the potential ensuing litigation and resulting cost. With the recent history of property damage in our city (floods and hail to name a few), deductibles on condo corporation’s insurance policies have never been higher.
To protect against these things, you’ve purchased homeowners insurance. You have got to be covered… right? Not necessarily. There are two primary considerations for the homeowner in this regard:
1. Does your insurance cover the condominium corporation’s deductible?
2. If so, what amount is covered?
Remember that you can be charged up to a maximum of $50,000. If your insurance policy covers deductibles to the tune of $25,000, but your condominium corporation’s deductible is $40,000, then you have a deficiency of coverage to the tune of $15,000 that likely needs to be rectified. Knowledge is key, so consider following these three steps:
1. Ensure you are an insurance policyholder in good standing;
2. Ensure your current policy covers your condominium corporation’s deductible;
3. Contact your condo board and ask for a copy of their Certificate of Insurance, showing the deductible amount, and ensure you are sufficiently insured (sadly, they may charge you a fee for this).
Property owners are not the only ones needing to pay attention to these changes. Where increased liability exists for a landlord, accompanying increases in liability could exist for the tenant. Section 21 of the Residential Tenancies Act confirms that tenants automatically covenant under all tenancy agreements to not damage the premises. Based on this obligation, Landlords retain the right to sue the Tenant under section 26(1)(d) for damages resulting from the breach – in this case, the physical damage to the unit, or evict them under section 30(1). Although the tenant would have needed to be negligent in their conduct or shown an intent to damage the premises, they still need to be aware of the possibility that they could be sued for the costs resulting from their negligence.
In keeping with the above trend, tenant’s insurance is a fantastic way to limit liability in case of damages. The tenant could consider naming their landlord as an additionally insured party, as the insurer would then be able to cover the condominium corporation’s deductible, leaving a smaller deductible for the tenant to cover. It should be noted that the amount insured would need to be sufficient to cover the often-large cost of repairs in a condo building and it is imperative that you ensure that your lease agreement permits you to undertake this type of risk mitigation strategy.
Property owners and tenants need to take careful notice of these recent legislative amendments that could leave them woefully unprepared for possible surprises arising from their occupation of a multi-family building. Real Estate lawyers at Caron & Partners LLP stand ready to advise you if you’ve suffered severe damage originating from your condo.