Condos' Insurance

The Condo Act of Ontario mandates that each condo corporation “obtain and maintain” insurance in the event of “damage to the units and common elements that is caused by major perils” or other perils specified in the declaration and by-laws. Obviously, a condo that includes a marina, extensive grounds, or a roof-top party room will contain a somewhat more extensive coverage than other condos.

What are the “major perils” that need to be covered, according to Section 99(2) of the Act?

Fire, lighting, smoke, windstorm, hail, explosion, water escape, riots or civil commotion, impact by aircraft or vehicles, vandalism or malicious acts.

The perils that most commonly occur in condos are water escape in terms of leaks, overflows, and pipes bursting, vandalism, and fire/smoke. Damage from drain and sewer backups should also be included.

In addition to perils, the condo insurance covers liabilities for injuries caused by accidents and acts of omission and commission in common elements. (For what are common elements and responsibilities,  click here into FAQs About Your Building & Your Unit)

Finally, the insurance carries liability for directors in the event that they are sued by owners, tenants, guests, employees, or even contractors and insurance companies as a result of their duties on the board. The insurance will cover them, however, only to the extent that they had done due diligence and acted in good faith while carrying their duties.

For instance,

In a high-rise condo, the entire board had been warned that a security person spent time in a suite after hours, against regulations. They also knew that heavy drinking and drugs were taking place in that suite. But nothing was done to discourage the staffer from his visits. At one point, he spent an entire night in the suite and, when he resumed his shift the next morning, he was too stoned to notice that an elderly man was lying unconscious on the floor of a corridor leading to the parking area in full view of a camera. The man had suffered a head injury and, when located two hours later by a resident, it was too late. He died in hospital several hours later. The family sued the board and the condo insurance company eventually refused to pay. Instead, the insurer went after the individuals who had, at the time, been on the board, and the family also sued the security company.

A new president and board had received a note from a previous treasurer explaining that some pipes between two particular floors had long ago been replaced by poor quality material and were cracking. It was urgent that they be replaced. Nothing was done. Six months later, one pipe did burst and caused considerable damage to walls, ceilings, and carpets in corridors and in nearby suites on several floors. Although the condo insurance initially paid for the damage (as did owners’ insurance for their personal possessions and upgrades), the insurer, upon investigating the matter, eventually turned against the board because the documentation clearly indicated that they had not done due diligence.

Such cases are relatively rare but they do happen and, with the number of condos rising, and insurers less well off financially, it is reasonable to expect that such situations will become more frequent.

Who pays for what when something occurs in a suite is at times a subject of confusion. Often, certain situations that are covered under the condo’s insurance in one building are covered by an owner’s insurance in another one. This is because the contents of a condo’s declaration and insurance by-law can dictate some of a condo’s and owners’ responsibilities.

Of course, a condo’s insurance pays for any damage that occurs in or from the common elements, unless this damage is the result of an act committed by a resident or a guest and it can be proven. That person would then be responsible.

As well, when a pipe bursts in the common elements and damages a suite or an owner’s locker, the condo insurance will pay for the repairs if the cost is above the deductible. Similarly, water damage from a suite to another below or adjacent has to be covered by the condo's insurance or the responsible suite owner. But the condo will only pay according to what is specified in the standard unit by-law. (Click here for Standard Unit By-Law)

When insurance cases are very complex, recourse to legal expertise is advisable.