The insurance provisions in the Condominium Act, 1998 ("the Act")1 override any conflicting provisions in an insurance policy or the Insurance Act.2
The Condominium Corporation
All condominium corporations in Ontario are required to obtain and maintain insurance for damage to the units and common elements caused by major perils or the other perils that the condominium corporation's declaration or by-laws may specify. The Act requires that this insurance be replacement cost insurance, subject to a reasonable deductible.
The common elements in a high-rise condominium property would typically include areas such as the parking garage, fitness facilities, swimming pool, lobby and recreation or party room as examples.
The condominium units are defined by the standard unit definition by-law or in a schedule given by the developer to a new condominium corporation registered after May 5, 2001. The condominium corporation has an obligation to insure the condominium units themselves other than upgrades.
The condominium corporation is also obliged to insure the contents owned by it, which might include furniture in the lobby, the exercise machines, mechanical equipment, etc.
A condominium corporation's master insurance policy will contain a deductible. The Act states that the amount of any deductible shall be a common expense of the condominium corporation. In effect, this means that all unit owners pay the deductible in accordance with their proportionate contributions to the common expenses.
The insureds of the master insurance policy are the condominium corporation and the owners.
The Unit Owner
While not mandatory under the Act, most unit owners would obtain a homeowners' policy to insure any of their personal contents. Unit owners would also typically obtain insurance for any betterments or improvements beyond the standard unit.
The "Standard Unit"
The Act has created the concept of a standard unit which is the touchstone for determining insurance coverage. This is intended to establish, for insurance purposes, what portions of a condominium unit will be insured by the condominium corporation with the remainder being the responsibility of the individual unit owners to insure.
The condominium corporation is responsible for repairs or damage to the standard unit and the common elements. Anything beyond the standard unit is considered an "improvement" and as such is the unit owner's responsibility to insure.
An improvement is any alteration, change or upgrade to the base unit as originally sold by the developer, or if there is a standard unit by-law, anything that is not listed as part of the standard unit.
Some condominium corporations have passed a standard unit by-law reflecting the original builder specification, which may not account for floor coverings and/or countertops that have been installed. In rare cases, condominium corporations have passed standard unit by-laws reflecting a totally stripped, barebones unit. The effect of such by-laws is that the condominium corporation is not responsible to insure as much in each unit as it otherwise would have been and that obligation falls to the individual unit owner.
Condominium corporations incorporated prior to 2001 may or may not have passed a by-law defining the standard unit. If no by-law was enacted, it is arguable that the unit "as built" should be considered the standard unit.
The Declaration and By-Laws
The declaration is the most important of the various documents registered on title and deals with the framework of the condominium corporation. The condominium insurance declaration sheet will specify the deductible amount and will set out a definition of the standard unit in the insurance section, if it is not defined in the standard unit by-law.
The condominium corporation or property manager will likely have a copy of the declaration or it can be obtained from the local land registry office.
The board of directors of the condominium can enact by-laws under the Act with respect to virtually all aspects of condominium governance, including:
- establishing a standard unit definition;
- determining the amount of the insurance deductible;
- deciding when the cost of repairing damage to a unit may be added to the owner's common expenses; and,
- maintaining the units and common elements.
Condominium corporations and unit owners share responsibility for common property. When damage occurs, the first question to ask is: whether or not the damage was caused by an "insured event" under the condominium corporation's property insurance policy.
If the damage was caused by an insured event, the unit owner is entitled to the protection available under the condominium corporation's insurance policy. The cost of the deductible can be passed on to all unit owners in proportion to their ownership interests as a common expense. In addition, if a loss to a common area exceeds the condominium corporation's policy limit, each unit owner can be assessed their proportionate share of the repair costs. Such costs can be collected by way of a lien on the owner's unit if they are not paid.
An exception to this general rule is that the condominium corporation can pass on the cost of the deductible to an individual unit owner in the event that the unit owner, lessee of an owner or a person residing in the owner's unit with the permission or knowledge of the owner causes the damage by an Act or omission (eg. leaves a faucet running which causes water damage to other units in a high-rise building).
In addition, the Act allows a condominium corporation to pass a by-law which provides that an individual unit owner can be responsible for the condominium corporation's insurance deductible if the loss originates from the owner's unit regardless of fault.
A unit owner's homeowners' policy may provide coverage to a unit owner in cases where the unit owner is obliged to pay the condominium corporation's insurance deductible.
Repair / Maintenance of Common Elements and Condominium Units
Maintenance obligations must be considered separate and apart from insurance obligations. The term "maintenance" includes repair and replacement due to wear and tear. The only thing it does not include is repair or replacement after failure. In order to determine the respective maintenance obligations of the condominium corporation and the unit owner, reference must be made to the Act and the declaration. The Act allocates the default rights and duties to repair and maintain the common elements and the units between the condominium corporation and unit owners, but it also provides that these may be altered by the declaration.
The condominium corporation must repair the units and common elements after damage, unless the declaration provides otherwise. If the declaration provides that the unit owner has an obligation to repair after damage but the owner fails to do so within a reasonable time after damage occurs, the condominium corporation is required to do the work necessary to carry out this obligation. Typically, the condominium corporation's obligation to repair does not include the obligation to repair improvements made to a unit after damage.
The Act states that the condominium corporation is required to maintain the common elements and that each owner is required to maintain his or her unit. The declaration may, however, shift those obligations. Reference should be made to the declaration to determine whether the obligations created in the Act have been allocated differently in each particular case.
Many condominium corporations prepare maintenance charts and distribute them to the unit owners so that the unit owners know what portions of the common elements or units are the corporation's responsibility and what items are the responsibility of the unit owner. For example, the maintenance of windows may be the responsibility of either the corporation or the unit owners or the maintenance may be shared with the frames being the corporation's responsibility and the glass inserts being the unit owners' responsibility.
Occupier's Liability and Individual Unit Owners' Insurance
The condominium corporation is deemed to be the occupier of the common elements and the unit owners are not. It is the condominium corporation and not the unit owners that is liable for injuries or damages that occur on the common elements. Since the Act requires the corporation to insure the common elements, the condominium corporation's insurance policy is the primary insurance for liability claims.
The Act is silent on the question of the corporation's and/or the owner's rights of subrogation against one another. However, because each unit owner in the condominium is an insured under the condominium corporation's policy, the corporation's insurer cannot assert a subrogated claim against a unit owner.
Unit owners can always pursue claims against other unit owners for uninsured losses, including deductibles.
The standard declaration requires all policies of insurance obtained by unit owners to contain waivers of subrogation against the corporation, its manager, agents, employees and servants, and against the owners and any members of their households, or guests, except for arson, fraud, vehicle impact, vandalism or malicious mischief. If there is no waiver of subrogation in the declaration, then subrogated claims can be asserted provided that the unit owner's insurance policy permits same.
1. S.O. 1998, Chapter 19
2. RSO 1990, cI.8
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.