Condos & Insurance

Each condo corporation, whether big or small, has to carry insurance and all owners and tenants have to carry personal insurance.

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)

Standard Unit By-Law

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

Owners' Insurance

All owners should have and maintain a comprehensive condo insurance policy to cover damage to their personal possessions as well as to their upgrades and to cover any damage that they might incur to a suite below or adjacent to theirs as a result of an accident, negligence or, as stated in a condo’s declaration or insurance by-law. This insurance should include a sufficient amount for liabilities in the event of an injury in the suite, such as if someone falls as the result of a toy left on the floor. (Click here for further information in Tenants and Landlords.)

Other points of interest:

  • Insurance should be renewed before its annual expiration date.
  • Condo insurance is not as expensive as insurance for a non-condo house.
  • Owners should present a copy of their insurance to the management office of their condo.

When taking an insurance policy, owners should familiarize themselves with the insurance by-law and standard unit by-law of their condo to make sure that their insurance covers what the condo policy does not cover.

For instance, although most condos do not cover upgrades, some condos do not cover other parts of units, such as floorings or countertops.

All residents should have a car insurance policy. For instance, cement may detach itself from the garage ceiling and fall on a car and dent it: A garage door may malfunction and damage a car.  Condos are not responsible for such damage unless, of course, the damage results from negligence to carry out repairs in a timely fashion on the part of the corporation.

Condos are not responsible for any possessions left in cars, on bike racks, or in lockers. Owners’ home insurance or car insurance should cover these.

Always use the remote control or entry card before entering a garage.

Indeed, a problem that frequently arises concerning garage doors is that residents follow others rather than use their entry card or remote control—despite notices to the contrary.

Generally, the motion sensor will detect the additional car and the doors will stay up or climb back up. But there are occasions when this does not happen and the door comes down on a vehicle or a cyclist.

The condo is neither responsible for injury nor damage because a basic safety rule has been disregarded. Monitoring cameras and entry cards provide the timing as well as visual evidence of these occurrences.

Tenants' Insurance

Tenants should carry insurance for personal possessions and liabilities to complement that of owners.

However, if tenants are not certain whether their landlord has comprehensive insurance, then they would do well to take a complete condo insurance package covering upgrades and liabilities.

For their part, owners who are landlords should make sure that their tenants have insurance for their personal possessions.

Landlords would do well to maintain an insurance for the condo itself and the upgrades because, if a tenant does not carry that kind of insurance or stops paying the premium, then the owner may have to pay a great deal of money if damage occurs to the suite and is not covered by the condo corporation’s own insurance.

What’s a Deductible?

This is the amount that an owner (or a condo corporation) has to pay before the insurance kicks in. The deductible is generally negotiated between the insurer and the person who is insured and can be changed from year to year. The higher the deductible, the lower the insurance premium. (The premium is what a person pays each year to maintain the insurance.)

An insurance deductible for a suite may be $250 or $500 or even $1,000 or $2,000 depending on the amount of coverage that an owner wants.

Let’s take the example of a deductible of $500. If an owner incurs a $450 damage to her suite, this amount is lower than the deductible. This means that this owner has to pay for the damage and cannot claim anything from the insurance.

On the other hand, if the damage amounts to $550 and the deductible is $500, it would be advisable that the owner pays the $550 and not claim the small difference of $50, or any other small difference, so as to avoid having to report the damage to the insurer. Why? A claim may result in higher insurance costs a year or so after.

Policy holders should never report damage to their insurance company when they do not make a claim. Why? So as not to be seen as a risk to the insurance company and perhaps get a raise in premium the following year.