Alberta condominium owners may find themselves having to pay for damage to condominium property that originated in their unit, even if they could not have done anything to prevent it.
Condominium corporations are required by law to insure common property and condominium units against loss resulting from perils such as fire, flood, and sewer back-ups. However, due to recent market corrections by condominium insurers, Alberta condominium corporations have encountered serious difficulties obtaining affordable insurance coverage. As a result, many condominium insurance policies have significantly higher deductibles than in the past.
Alberta Condominium Owners May be Liable for Insurance Deductibles
In response to escalating condominium insurance deductibles, effective January 1, 2020, condominium corporations may now charge back the insurance deductible to a unit owner merely because the cause of the damage originated in or from the owner’s unit or an exclusive possession area, such as a storage unit.
For example, if a pipe in an owner’s unit freezes and bursts, causing water damage to units in lower floors, the owner is now on the hook for the condominium corporation’s insurance deductible to repair the damage, even if the owner could not have done anything to prevent it. Similarly, an owner may be liable for the condominium corporation’s insurance deductible if an electrical fire starts in their unit that causes smoke and fire damage to adjacent units, regardless of whether the electrical fire was the unit owner’s fault.
The only exceptions to a unit owner’s liability for the condominium corporation’s deductible for damage originating from the owner’s unit are:
- When the damage is due to a construction defect,
- When the damage was attributable to the condominium corporation, or someone acting on behalf of the condominium corporation, or
- When the damage arose due to normal structural deterioration of property that the unit owner was not responsible for maintaining.
Condominium corporations have actually always been able to charge back insurance deductibles to unit owners, so long as the by-laws provided for it. However, as in the case of Owners: Condominium Plan No 7721985 v Breakwell, these by-laws would typically only permit a charge-back when the damage was the unit owner’s fault.
Now, a condominium corporation can charge back an insurance deductible to the owner from whose unit the damage originated, regardless of whether the unit owner was at fault for the damage, and regardless of what the condominium by-laws say about charge-backs or responsibility for damage, subject only to the three narrow exceptions described above.
The good news for condominium owners is that now, there is a $50,000.00 limit on deductible charge-backs, and any deductible must now be “reasonable.” Before, condominium corporations were permitted to create by-laws to charge back the entire insurance deductible. This meant that condominium corporations who enacted these by-laws could charge back a deductible of $100,000.00 or more, even if the amount of the deductible was entirely unreasonable for that kind of loss.
How Condominium Owners Can Protect Themselves & Recover a Charge-Back
Unit owners can sue the at-fault party to recover the amount of the charge-back. For example, if shoddy plumbing repairs caused a flood that damaged units on lower floors, the unit owner could sue the plumber to recover the amount of the charge-back. However, like any lawsuit, that alternative is often too risky, expensive and inconvenient to be worthwhile.
What should condominium unit owners do to protect themselves? Obviously, risk management through diligent maintenance of plumbing, heating and electrical will avoid many issues, as will ensuring the safe disposal of cigarettes. But accidents happen, and prudent condominium unit owners would be well advised to obtain condominium insurance with “deductible coverage.”
To ensure complete protection against deductible charge-backs, an owner should confirm with their condominium insurer that the limit of their deductible coverage matches the amount of the deductible on the condominium corporation’s insurance certificate. Owners may request a copy of this certificate from their condominium management or board. The first copy must be provided free of charge. A condominium corporation may charge a small fee of up to $10.00 for duplicate copies of its insurance certificate, but that is a small price to pay for peace of mind.
Condominium managers and board members are now permitted to create by-laws requiring owners to obtain deductible insurance. There are two key reasons to require owners to maintain deductible insurance. First, it will minimize the risk of disputes with owners regarding deductible chargebacks. Second, it will save the condominium managers and board the hassle of having to take enforcement measures or legal action against stubborn unit owners.
The new charge-back rules contain both protections and risks for condominium corporations and unit owners alike.
Condominium and insurance disputes require legal advice from knowledgeable counsel with experience addressing such matters and who understand the complex condo industry. Contact HMC Lawyers to speak with one of our experienced lawyers and get strategic and trustworthy advice. Call 1-800-480-3534 or contact us online. We represent clients in Calgary, the province of Alberta, and across Western Canada.