How are higher insurance deductibles affecting condo corporations?
Gone are the days of condominium corporations enjoying low deductibles on their mandatory property insurance policies. A high frequency of water damage losses, coupled with a hardening of the general insurance marketplace has led most insurers to demand much higher minimum property deductibles. There is typically a separate deductible that applies to water damage claims, which will often start at a minimum of $25,000 for multi-storey buildings. However, it is far more common to see $50,000, $100,000 or higher water damage deductibles where a condo has had claims in the past few years.
How do corporations handle losses that are below their deductible?
If loss or damage occurs that is insurable, the condominium has the same responsibility to repair or replace property, regardless of whether or not they submit an insurance claim. For insurable losses, the condominium is responsible for the cost to repair the common elements and the units, but not any improvements made to the unit.
Unit owners may elect to use their own personal insurance policies to pick up where the condominium’s repair responsibility leaves off. Unit owner policies cover damage to their contents, betterments and improvements made to the unit, costs to live elsewhere while the unit is repaired, and possibly the charge-back of the condominium’s applicable insurance deductible. It is common that the condo corporation insurance must work together with unit owner insurers to determine who is paying for what.
If the damage event is below the condo corporation deductible it will be up to the board of directors and property management to handle the situation, work with unit owner insurance adjusters, and determine the proper allocation of costs. It is recommended to speak to your insurance broker, even for losses below the deductible, as they may be able to provide guidance and assistance with these situations.
How has this been affecting unit owners this past year?
With higher condo insurance deductibles, it is critical for condo unit owners to be aware of what their corporation’s property deductibles are and the exposure that those deductibles could present to them.
The Condominium Act of Ontario allows for corporations to charge an owner up to the corporation insurance deductible for certain property damage situations that are caused by a unit owner’s act or omission. This can also be further clarified and modified by an insurance deductible bylaw. So, even if an accident happens in an owner’s unit that causes damage to corporation property, they could be faced with a charge-back of up to the condo corporation deductible amount.
With larger corporation deductibles, unit owners must make sure that they align their own unit owner policy with the corporation insurance policy to avoid gaps. If a unit owner does not have enough coverage for the corporation deductible charge-back, they could face significant out-of pocket-costs. For condo corporations, it is important that the board of directors and property management promptly communicate any change in corporation insurance policy deductibles to unit owners.
For unit owners, it is strongly recommended that they select a broker and insurance company that can provide them with the level of coverage that they need for their particular condominium and minimize the exposure they have to out-of-pocket expenses.
Tom Gallinger is the vice-president of Atrens-Counsel Insurance Brokers, a brokerage that specializes in managing insurance programs for condominiums, unit owners and property management professionals. Tom has been in the insurance industry for over 16 years in various underwriting, brokering and management roles. As a specialist in condominium insurance, Tom strives to deliver a high level of service by managing the long-term insurance needs of his clients.