The rules for who pays what in insurance claims between condominium corporations and unit owners are clear. A condominium corporation must provide insurance on the common elements of the property (e.g., hallways and stairs) and the units against loss resulting from any peril prescribed or otherwise required by the regulations, such as fire, water escape, and lightning. Generally, the insurance that a condominium corporation maintains is deemed to be the primary, or first loss, insurance.
A unit owner’s insurance policy covers personal belongings, improvements to the unit and personal liability for bodily injury or property damage to neighbouring units. The insurance placed by the unit owner in respect of the same property is deemed to be excess insurance or applicable only if the corporation’s insurance is inapplicable, inadequate or ineffective.
What is less clear, however, is whether the unit owner or the condominium corporation bears responsibility for payment of the deductible portion of an insurance claim.
Determination Flows from Statutes and By-Laws
In the case Condominium Plan No 0122336 v Shivji, 2007 ABQB 572, two units were damaged because water escaped from a frozen pipe. The condominium corporation had an insurance policy in place, but the amount of the damage was below the deductible. The question posed to the Court: who was responsible for the deductible?
Justice Lee looked at the Condominium Property Act, R.S.A. 2000 c C-22 and the condominium corporation’s by-laws. He found that although the Act and the by-laws were silent as to payment of the deductible, the unit owner was not responsible for the deductible. He reasoned that because the Act and the by-laws required the condominium corporation to insure the units and the common elements of the property against damage caused by the sudden escape of water, a covenant to insure was created in favour of the unit owner. The condominium corporation thus assumed the risk of the damage and was barred from suing the unit owners to recover the costs of repairs.
Shivji emphasizes that although condominium corporations are not insurers for the deductible, the issue of responsibility for the payment of the deductible is determined by the by-laws, rules and regulations of the condominium corporation.
In Ontario, the Condominium Act, 1998, S.O. 1998, c 19, stipulates that if a condominium corporation’s policy contains a deductible, then the portion of the loss that falls within the deductible is treated as a common expense to be paid by all unit owners. However, the Act also provides that if the owner is “at fault” (where the damage is the result of the acts or omissions of the owner), the owner is responsible for the costs of the repairs up to the deductible. The Act also permits condominium corporations to enact by-laws that extend the circumstances in which the unit owner will be found responsible for the payment of the deductible.
The responsibility of paying the deductible may be determined by the by-laws of the condominium corporation. However, Ontario courts have also looked at whether the loss occurred as a result of an “act or omission of the owner” in determining who is responsible for the deductible.
This was the case in Zafir v York Region Condominium Corp No 632, 2007 CarswellOnt 1044 (ON SCJ). In Zafir, the issue was whether the owner turning off the shut-off valve that resulted in a leak made the owner responsible for the deductible. In denying the condominium corporation from recovering the cost of the repairs from the unit owner, Justice Conway found that opening and closing the shut-off water valves was not an “act or omission” under the Act. Justice Conway reasoned that it would be inequitable for the owner to be held responsible for an act that the condominium corporation required the owner to take.
While there is no clear guidance as to who is responsible for paying the deductible, Zafir is good authority on the issue. Zafir emphasizes that the question of who pays the deductible is best answered by the by-laws, rules and regulations of the condominium corporation and by determining whether the damage was the result of an “act or omission” by the owner.
In British Columbia, the question of the deductible is determined by looking at the Strata Property Act, SBC 1998, c 43, and the by-laws, rules and regulations of the strata corporation. Under the Act, the deductible payable under the strata corporation’s policy is a common expense to which all unit owners contribute. However, the Act also permits a strata corporation to recover the deductible portion of an insurance claim from a particular owner if the owner is “responsible for” the loss or damage. The owner may be responsible for the loss or damage notwithstanding that the owner was not negligent.
In Strata Corporation LMS 2723 v Morrison, 2012 BCPC 0300, the unit owner was found responsible for the damage caused by a fire resulting from her tenant leaving a lit candle unattended. Justice Merrick found that although the unit owner had no control over the candle, she is responsible for what occurs in the unit. As a result, Justice Merrick allowed the strata corporation to recover the deductible portion from the unit owner.
In finding the unit owner “responsible” notwithstanding that the owner was not negligent, Justice Merrick followed Mari v Strata Plan LMS 2835, 2007 BCSC 740, and Wawanesa Mutual Insurance Company v Kieran, 2007 BCSC 727. In both cases, the Court made it clear that being responsible is not the same as being negligent, and that a unit owner “responsible for” loss or damage will be required to pay the insurance deductible.
In British Columbia, a strata corporation’s by-laws, rules and regulations will generally set out who is responsible for paying the deductible portion of an insurance claim. However, it is also important to determine whether the unit owner is “responsible for” the loss or damage that gave rise to the claim, since British Columbia case law makes it clear that a unit owner “responsible” for the loss or damage will be required to reimburse the strata corporation for the deductible.
The Courts in Alberta, Ontario and British Columbia have not provided clear guidance as to whether the condominium corporation or the unit owner will be liable for the deductible portion of an insurance claim. Some cases have allowed the condominium corporation to recover the deductible portion from the unit owner, while others have not.
What is clear, however, is that the determination of liability for the deductible is fact specific and heavily dependent on the provisions of the applicable statute and the by-laws, rules and regulations of the condominium corporation. Where the by-laws clearly specify that the owner is required to reimburse the condominium corporation for the deductible portion of an insurance claim, it follows that the owner is responsible for the deductible. However, where the by-laws are silent or are unclear, the issue turns to who is liable or responsible for the loss or damage, or as in Alberta, to whom the risk is allocated.
It is incumbent upon condominium corporations and unit owners to review the by-laws, rules and regulatio
ns to determine whether it is clear who bears the responsibility of paying the deductible portion of an insurance claim.
Ryan Ewasiuk is a partner with Brownlee LLP, with over 15 years of experience on a vast array of litigation maters, including large and complex insurance claims.