Canada: Understanding Insurance Deductibles And Responsibilities

Last Updated: March 31 2017
Article by Audrey M. Loeb, LSM, B.A., LL.B., LL.M

Insurance coverage, responsibilities and deductibles in condominiums is one of the most complex issues to deal with, in large part because it may be counterintuitive to what people think it should be.

If your Corporation's By-laws provide that, where there is damage to a unit, the unit owner is responsible for the lesser of the cost of repairing the damage and the Corporation's insurance deductible, then this is important information for you. This article assumes that the corporation has a Standard Unit by-law or Schedule for standard units turned over by the developer.

If there is damage to a unit, excluding personal possessions and betterments and/or improvements, which exceeds the amount of the insurance deductible, the Corporation's insurance policy would cover the costs in excess of the deductible. The personal possessions, betterments and/or improvements in the unit would be covered under the owner's insurance policy.

Consider the following examples, which are based on the assumptions that a Corporation's insurance deductible is $5,000 and the damage is covered under the Corporation's insurance policy.

Example #1 – There is a leak from a pipe that forms part of the common elements of the building and as a result, damage occurs to a unit for which the cost of repair is $2,000.

The unit owner would be responsible for the $2,000 (the lesser of the cost of repair and the deductible). The corporation will however be responsible for repairing the pipe and any damage caused to the unit by the necessity of gaining access to the broken pipe. However, the unit owner will be responsible for any damage to his/her personal possessions, betterments and/or upgrades (wallcovering, mirror, etc.).

Example #2 – There is a leak from a pipe that forms part of the common elements of the building and as a result, damage occurs to a unit for which the cost of repair to the standard unit (excluding personal property, betterment and/or improvements) is $8,000.

The unit owner would be responsible for the $5,000 deductible and the Corporation would be responsible for the balance, which in this example would be $3,000.

Example #3 – There is damage to a unit caused by a faulty dishwasher located within the unit.

The resulting damage would again be the owner's responsibility, up to the amount of the Corporation's insurance deductible, as the unit owner is responsible for the lesser of the cost of repairing the damage and the Corporation's insurance deductible. This is exactly the same as Examples #1 and #2.

Example #4 – There is damage to the unit below as a result of a faulty dishwasher in the unit above.

In this case, the owner who is responsible for the damage caused, would be responsible for the lesser of the cost of repair to the unit below and the deductible. If the damage to the unit below exceeds the deductible under the Corporation's insurance, the owner who is responsible for the damage would be responsible for the deductible and the Corporation's insurance is responsible for restoring the standard unit. If there is damage to the owner's personal property, betterments and/or improvements, then the unit owner below could either make a claim against the owner above or make a claim to his or her own insurance company.

Negligence – The only time the Corporation would be responsible for the lesser of the cost of repair and the deductible would be if the damage to a unit was caused as a result of the negligence of the Corporation. This would require the unit owner, to show that (a) the Corporation knew there was a problem, in the common elements of the building, which might result in damage, (b) the Corporation failed to correct the problem, and (c) as a result of the Corporation's failure to repair the defect, damaged occurred to the unit.

Deductible Insurance and Living Expense Coverage – As the above examples demonstrate, it is very important for unit owners to carry "deductible insurance coverage" as part of their policies. This would cover the owners for the lesser of the cost of the repair and the deductible under the Corporation's insurance policy. (This coverage is in addition to and should not be confused with the normal deductible portion of a unit owner's insurance coverage, which in many cases is between $500 and $1,000). Unit owners should be aware that we have heard that some insurers are limiting the circumstances in which the deductible will be payable.

Owners should also carry insurance for any living expenses they might incur if they have to move out of their units to have repairs carried out because of an insured loss.

Unit owners are well advised to consider obtaining coverage from the same company that insures the Condominium Corporation. This will reduce the likelihood of any gaps in coverage.

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.

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Audrey M. Loeb, LSM, B.A., LL.B., LL.M
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