Condo owners advised to check their insurance policies

Leak in their unit could leave them paying strata’s deductible

Zoe McKnight, Vancouver Sun

Government must change the rules so the owner of an individual condo unit doesn’t have to pay the huge insurance deductible on the entire condo complex when something goes wrong in their individual unit, the Insurance Bureau of Canada says.

Those deductibles have risen sharply in recent years. Some Metro Vancouver residents have been shocked to find, after a leak in their unit causes water damage to other parts of the building, that they are required to pay the entire deductible on the strata council’s insurance policy, which can amount to $100,000 or more.

Many condo owners have their own unit policy that covers a portion of the deductible on the strata corporation policy. But some are finding out the hard way their insurance covers only a fraction of the larger deductible – usually about $10,000 – or in some cases, not at all.

“We’ve begun to speak to government officials at a variety of levels to say there’s a problem here,” said Lindsay Olson, vice-president of the Insurance Bureau of Canada for B.C., Alberta and Saskatchewan.

“This is becoming a real issue. There’s a shortfall, and I don’t know what a person can do … if it’s a common expense it should be dealt with as such.”

She said it is important to read the strata council’s bylaws to see who can be held financially responsible for damage to common assets.

In the past, accidental damage to common assets was the liability of the entire strata unless a single owner had been negligent.

But recently, strata councils have been changing their bylaws so they can designate an individual responsible if the damage occurred in their unit, even if that person had not been negligent.

Such a change is allowed under provincial law. “It’s been tested in court and it’s been permitted. It’s been occurring over the last few years,” Olson said.

Previously, deductibles for claims made by the strata were in the $10,000 range.

“Over the last number of years what we have seen happening is strata corporations having higher and higher deductibles on the building insurance policy,” Olson said. Often insurers insist on higher deductibles because of multiple claims, especially water damage, in a complex. Some strata corporations have opted for higher deductibles to lower their premiums.

Under the provincial Strata Property Act, the strata corporation is required to review their insurance policy annually and provide a summary to unit owners at the annual general meeting. According to the Insurance Brokers Association of B.C., it’s the unit owner’s responsibility to make sure their own insurance policy dovetails with their building’s policy and strata bylaws.

If a building is well-maintained, the deductible can be small.

“In the old days, deductibles could be $1,000, $2,500 generally, which was well within the strata council’s ability to pay,” said Alan Rees, a longtime insurance broker at KRG. He said water damage is becoming a huge problem in the Lower Mainland due to aging infrastructure.

There are big variations in strata council bylaws and condo owners can’t be forced to take out individual insurance policies.

“It boils down to: read the rules,” Rees said.

The solution is to make sure your own unit insurance covers the strata deductible. Rees said he pays $20 a month for such coverage, which is worth $100,000.

But not all companies will provide that kind of coverage, said Lindsay de Craene of the InsureBC Group.

For example, she said, only two insurers provide such coverage in downtown Vancouver, where there are seven condo complexes carrying a deductible of $100,000, 19 with a $50,000 deductible and one with a $150,000 deductible.

The B.C. Ministry of Housing said it has no plans to revisit the Strata Property Act.

– from October 1, 2012 Vancouver Sun

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