Insurance Flashcards
SIUD Requirements
The Condominium Property Regulation (CPR), starting with section 61.1, provides that the condominium is to create and have approved a SIUD. The essential parts of these sections set out that:
- If any improvement is made to a unit (such as cupboards, counters) and that improvement is included in the SIUD description, then it is insured by the condominium, not by the owner.
- Subject to the bylaws, the condominium is to insure based on the concept that all of the units have the same improvements as set out in the SIUD; where there are dissimilar units, a condominium can have different SIUDs. For example, there may be townhouse units with their own heating and cooling systems and high-rise units where the heating and cooling are supplied to all units in the high-rise.
- The SIUD must have a detailed description of the improvements. The level and kind of details that must be reviewed and considered (but not necessarily added) are more particularly set out in the Regulation, but include floor coverings, wall and ceiling coverings, electrical lines and fixtures including lighting fixtures, plumbing lines and fixtures, fixtures with respect to air exchange and temperature control, cabinets and countertops, and non-chattel appliances.
What is the approval process for SIUDs?
The approval process is set out in section 61.2 of the CPR:
- The SIUD can be adopted by a special resolution of the owners, or
- It can be approved by an ordinary resolution of the owners, or
- It can be adopted by the board; however, in this case, the SIUD description must be presented as an agenda item at the next annual general meeting for ratification or amendment by ordinary resolution.
Once adopted, the SIUD should be circulated to all of the owners with the advice that they should in turn forward it to their own insurance agents for clarity as to what is being covered.
What types of insurance is required for the corporation?
More extensively covered in the CPA and CPR, but the risks covered should at least include:
- Replacement or repair of all of the units and common property (other than improvements made to units by the owners)
- Replacement or repair of managed property, if it is a bare land condominium
- If required by the bylaws, replacement or repair of improvements made to the units by the owners
- Liability in the event of any accident or other event that makes the condominium liable to any third party for damages
- Liability for directors and officers
- Theft and dishonesty by any employee of the condominium, or by the management company or any of their employees
- Damage caused by any mechanical equipment
Specific Provisions of the Insurance Policy
Due to the nature of a condominium, there are a number of provisions of an insurance policy that must be adapted to a condominium format. Accordingly, there are a number of provisions set out in section 47 of the CPA, such as:
- The loss payee under the policy must be to an insurance trustee if there is one appointed, and, if none, then the condominium itself. Payments cannot be made to owners or lenders.
- The funds must be used for the repair of the property.
- The insurance is deemed first-loss insurance, which means that it pays out even if an owner has unintentionally placed insurance against some or all of the same risks.
What is Deductibles Permitted?
The Regulations require that insurance be placed to cover various risks, but there is a provision in the CPR that permits the coverage to be subject to a limitation, exception, exclusion, or restriction that is usual and customarily imposed or provided for in the insurance industry or is reasonable in the circumstances. The effect of the wording is to allow the coverage to be modified to suit the requirements of the condominium since, for instance, the coverage is different between high-rise and townhouse condominiums
When placing insurance, there is always a trade-off between the amount of the deductible for any particular risk and the premium being charged (sections 61 and 62, CPR). The board must assess the benefits of a higher deductible against the savings in premiums and decide what is best in the circumstances.
What are examples of some Perils To Be Insured Against as outlined in the CPR?
(a) fire;
(b) leakage from fire protective equipment;
(c) lightning;
(d) smoke;
(e) windstorm;
(f) hail;
(g) explosion of natural, coal or manufactured gas;
(h) water damage caused by flood;
(i) water damage caused by sewer back-up or the sudden and
accidental escape of water or steam from within a
plumbing, heating, sprinkler or air conditioning system or
a domestic appliance that is located within an insured
building;
(j) impact by aircraft, spacecraft, watercraft and land
vehicles;
(k) riot, vandalism or a malicious act, other than vandalism or
a malicious act caused by an owner to the unit the owner
owns or by an occupant or tenant to the unit that the
occupant or tenant occupies;
(l) any other perils as required in the by-law
How to do maintain replacement cost coverage to ensure that insured amount is not too low?
To support the replacement cost value, it is important that the condominium obtains the opinion of a qualified appraiser of the replacement cost of the structures and improvements, as at the time the policy is being placed or renewed.
It is good practice to have this appraisal updated on an annual basis, or at least several months prior to any renewal of the insurance policy. This allows the board to see that the policy is for the correct amount. The danger is that if the amount insured is too low, then a “co-insurance” clause in the policy might become applicable, with a reduction in payout to the condominium.
If damage to common property or condo unit has arrised from an individual unit, can a corporation charge the owner back?
If there is an insurance claim for damage that originates in or from the owner’s unit or an exclusive possession area assigned to the owner, then the corporation will pay the deductible relating to that claim but is entitled to collect that deductible from the owner of the unit.
This requirement is not subject to any finding of fault but rather is an absolute liability of the owner.
According to the CPR, what is the max amount that corporation can collect from an individual unit owner to put towards the deductable?
$50,000
Why is it important to include a provision in the condo bylaw requiring owners to maintain insurance against deductibles?
- It might protect the condominium from a claim by an owner that they were unaware of the obligation.
- If the bylaws require the owner to carry such insurance, but an owner fails to do so, that failure could lead to a fine being levied, which again would remind owners that they must have that insurance coverage.
Section 60.2 of the CPR provides that the bylaws can require an owner to carry insurance against such deductibles and impose specifics for such coverage. Bylaws may also specify what proof of insurance the owners must supply to the condominium
The Act has imposed strict liability; however there are possible defences against that strict liability as set out in CPR.
The owner will avoid liability if they can establish that:
- The claim arose from a defect in the construction of the unit, or
- The damage is attributable to an act or omission of the condominium, a board member, officer or employee of the condominium, or
- The claim arose because of normal structural deterioration (unless it deteriorated due to a failure of the owner to repair or maintain)
If the board determines that one of those defences is applicable, they should not attempt to collect that deductible, but, if it is not clear, then the board will need to proceed to collect and leave it to the owner to dispute that liability. If they cannot resolve it, then litigation may be needed to resolve whether or not there is liability.
How must the Board notify the owners of insurance coverage changes as per the CPA?
As per the CPA:
“48 A corporation shall, when there is a change in one or more of
the following matters with respect to the corporation’s insurance
policy, provide each owner with written notice of the change and a
copy of the insurance certificate reflecting the change within 30
days of the date the corporation receives the insurance certificate:
(a) the amount of the deductible payable in the event of a
claim;
(b) the replacement value of the coverage;
(c) any addition to permitted exclusions;
(d) any other matter prescribed in the regulations.”
What is the first step in the event of a loss?
The first step in the event of a loss is to protect people and property and mitigate damages. That means arranging for work such as shutting off water, organizing for water extraction and drying, hiring security, boarding up and cleaning up a broken window, etc.
If the corporation decides to file a clain, it is done by comntacting the corporation’s insurance broker. The insurance broker will need certain information including:
- Name, address, contact numbers
- Date of the incident
- Type of incident
- Details on the incident (police case number if applicable)
The insurance broker will assist by having a claims adjuster assigned. The adjuster will begin their investigation, including a review of the insurance policy. They will work with the board and the condominium manager to determine the scope of work and whether other experts are required, obtain quotations, approve contractor(s), and pay out the settlement amount.
