8.2 - Condominiums Flashcards
“condominium”
-individual ownership of a single unit in a multi-unit building or group of buildings, including a percentage interest in the part of the total property owned jointly by all unit owners. Condominium property requires special insurance treatment
Legislation Governing Condominiums
-housing falls within provincial and territorial jurisdiction, so the activities within a condo complex must comply with the provincial or territorial legislation governing condos
-each province or territory has its own legislation, which may be slightly different from others’
-in Ontario and many provinces and territories, the relevant legislation is called the “Condominium Act”. In BC, the relevant legislation is called the “Strata Property Act”
The Condominium Corporation
-the condo owners collectively make up a condo corporation (in BC, a “strata corporation”
-provincial and territorial legislation, though not uniform, essentially provides that registering a condominium declaration and description creates a corporation without share capital, of which the members are the owners
-on registration of the declaration and description, the condominium corporation is assigned a name
-the condo owners elect a board of directors from among them (in BC, they are known as a council) to administer the affairs of the condo corporation, they are responsible for managing the condo and any assets of the condo corporation according to the legislation
-to this end, it may pass bylaws, binding on all the members of the corporation, establishing their rights and duties as members
Standard Unit Bylaw
-the standard unit bylaw clarifies who is responsible - the unit owner of the condo corporation - for LoD to a unit and whose insurance policy should respond for repairing the improvements when damaged
-the bylaw defines the standard unit in a condo corporation by describing in detail the original fixtures and finishes in each unit and specifying that improvements to a unit are not the corporation’s obligation to insure and repair
-having a clearly written description makes it easier for the owner and the corporation to sort out what is covered under whose insurance policy in case of a claim
-the condo corporation’s building policy covers the items listed in the bylaw; the items not found on the list are considered improvements and covered under the unit owner’s policy
Examples of items that might be included in a standard unit bylaw
-individual unit electrical panel with circuit breakers
-all switches standard toggle
-36 oz broadloom off-white carpet with 1/4” foam underpad in living room
-6” x 6” basic white ceramic tile in kitchen
-paint grade on walls and doors - white flat latex
-stucco ceilings, except for kitchen and bathrooms
-vinyl-coated wire shelving in closets
-60” acrylic white bathtub with armrest
Condominium Corporation Insurance
-because the condo corporation is a legal entity, it must obtain its own insurance policy to cover all the properties it owns under its own name
-each condo corporation is required by statue to have an insurance policy covering the entire building, including individual units, and common property for LoD caused by major perils, such as fire, lightning, smoke, windstorm, hail, explosion, water escape, riot or civil commotion, impact by aircraft or vehicles, and vandalism or malicious acts
-insurance coverage for the condo corporation is written under a commercial form, it is beyond the scope of this section
-the unit owners can protect their own personal property under a condominium unit owners form
-this form not only covers the unit owners for their personal property and liability, but includes unique coverages for the building in cases where there may be a deficiency in coverage under the corporation building policy
Condominium Unit Owners Forms
-the IBC condominium unit owners forms are offered in a basic form and a comprehensive form
-a notable difference from the homeowners basic and comprehensive forms is that the condo forms omit Coverages A and B for a dwelling and detached private structures, because the condominium building and common property are covered under the policy of the condo corporation
-Coverage C - Personal Property - is essentially similar between the condo unit owners basic and homeowners basic forms and also between the condo unit owners comprehensive and homeowners comprehensive forms
-Coverage D is essentially similar in all of the condo unit owners and homeowners forms
Condominium Unit Owners Forms: Coverage C - Personal Property
-the homeowners forms allow the insured to apply part of the amount of insurance on the insured dwelling under extensions of coverage to trees, plants, and shrubs on the premises, but in the condo unit owners forms, the same optional extension of coverage applies to the amount of insurance on personal property under Coverage C
-where the homeowners forms refer to the insured’s “dwelling”, the condo unit owners forms refer to the insured’s “unit”
-otherwise Coverage C in the condo unit owners basic form is the same as Coverage C in the homeowners basic form, and Coverage C in the condo unit owners comprehensive form is the same as Coverage C in the homeowners comprehensive form
Condominium Unit Owners Forms: Coverage D - Additional Living Expense
-in Coverage D as in Coverage C, the condo unit owners forms refer to the insured’s “unit” where the homeowners forms refer to the “dwelling”
-otherwise, Coverage D in the condominium unit owners form is the same as Coverage D in the homeowners forms
Condominium Unit Owners Forms: Coverage U
-condominium unit owners policies, in addition to providing insurance coverage for the unit owner’s personal property, cover losses and expenses that are unique to owners of the condominium unit
Condominium Unit Owners Forms: Coverage U - U1, Unit Improvements and Betterments
-all improvements to a condo unit - by the current and any previous owners - become part of the building but are not covered under the building policy of the condo corporation
-it is therefore important that the insured know of all additions or changes that have been made to the unit to ensure that an adequate amount of insurance is carried under the policy
-in the condo unit owners forms, Coverage U1 covers unit improvements and betterments made or acquired by the insured, up to the specified amount of insurance, including:
>any building, structure, or swimming pool on the premises; and
>materials and supplies on the premises for use in such improvements and betterments
-example, insured replaces kitchen cabinets with upgrades, if there is a loss, the condo corporation insurance policy will only pay for the cost of the original cabinets, and the insured’s own condo unit owners form will pay the difference in cost between the new upgraded cabinets, and the old previous cabinets
Condominium Unit Owners Forms: Coverage U - U2, Loss Assessment
-under certain circumstances, the condo corporation might charge a special assessment to each unit owner if the insurance it bought for the building on behalf of all unit owners is insufficient
-there are several reasons this might occur:
>underinsurance
>application of a coinsurance penalty
>a cause of loss that is not an insured peril or is excluded under the building policy
>breach of a policy condition
-under Coverage U2, the condo unit owners form will pay, up to the specified amount of insurance, for the insured’s share of any special assessment imposed by the condo corporation for LoD to the common elements
-there are 2 conditions to this coverage:
1. the assessment must be valid under the condominium corporation’s governing rules
2. there must be direct loss to the collectively owned condominium property caused by a peril insured under the condominium unit owners form
example - pipe bursts from a unit and damages common areas, the condo corporation’s policy is not sufficient to cover the loss, so the remaining will be assessed a portion of the amount not covered, and the condominium unit owners form policy will cover the assessment up to the specified amount
-if the cause of loss originated from the insured’s unit, the unit owner may be charged with the deductible on the condo corporation’s building policy
-the loss assessment coverage in the IBC condominium unit owners forms will not pay for that charge, although some insurers may extend loss assessment coverage in their policies to include the insured’s share of the building deductible, up to a specified amount
Condominium Unit Owners Forms: Coverage U - U3, Unit Additional Protection
-if LoD occurs to an individual unit and the coverage in the corporation’s building policy is inadequate or insufficient, the unit owner must bear the difference between the amount available from the building insurance and the damage to the individual unit, so Coverage U3 under the condominium unit owners forms will cover that difference
-Coverage U3 insures the unit, excluding improvements and betterments (covered under Coverage U1), to a specified amount if the condo corporation’s insurance is inadequate, ineffective, or nonexistent
-Coverage U2 in the IBC forms will not pay the unit owner’s share of a loss assessment for the deductible on the condo corporation’s policy, but Coverage U3, concerning loss only to the unit owner’s unit, says nothing about this deductible
-thus to the extent that the unit owner’s share of the deductible on the corporation’s building policy is greater than the deductible on the condo unit owners form, the condo corporation’s insurance will be inadequate to indemnify the unit owner completely, therefore Coverage U3 of the condo unit owners form will cover the difference between the two
example - condo corp’s insurance policy has a $5000 deductible, and damages to the insured’s unit is $4000. Because the loss is less than the deductible, the condo corp’s policy will not indemnify the insured for their loss, so the condo unit owners form, with a $500 deductible, will pay for the repair to the unit, less the policy deductible ($500)
Condominium Unit Owners Forms: Basis of Claim Payment
-the basis of claim payment section in the condo unit owners forms reflects the unique form or property ownership that a condo represents
-like the HOs forms, the condo forms pay up to the insured’s financial interest in the property or the amount of insurance for any one occurrence, whichever is less
-the condo policy assumes this liability for insured LoD:
>to the insured unit, less any amount recoverable from any insurance covering the collective interests of the unit owners; ad
>to personal property and unit improvements and betterments
-under Coverage U1 and U3, the condo unit owners forms provide for replacement cost for unit improvements and betterments and unit additional protection
-the same requirements to repair or replace with materials of similar quality within a reasonable time after damage apply here as in other forms
-the condo unit owners forms include a waiver of subrogation for claims against the condominium corporation and its directors, property managers, agents, and employees, except for loss arising from arson, fraud, and vehicle impact
-independent contractors are not considered agents or employees of the condominium corporation, its directors, property managers, or the unit owners for purposes of this waiver
