New rules that came into effect at the beginning of the year mean Alberta condo owners could be on the hook for upwards of $50,000 if damage is caused within their unit.
Effective Jan. 1, 2020, condominium corporations will be able to seek recovery of the deductible portion of the corporation’s insurance claim — up to a maximum of $50,000 — from a condo owner for any damage that originates in their suite or private area.
“That means that if something happens in the unit and it’s not your fault — the toilet explodes, there’s water loss, water damage goes through to the floors below — and there’s a $50,000 deductible or a $25,000 deductible, the owners are now responsible for the deductible,” Todd Shipley, of Reynolds Mirth Richards & Farmer LLP, explained at a recent Canadian Condominium Institute educational event.
This means the owner may be responsible to pay the corporation’s deductible amount regardless of whether there was any proven negligence, according to the CCI.
“The typical example, and we’ve seen this in Edmonton in the past few years, is when someone is smoking on their balcony and they put out their cigarette in a flower pot and then within minutes or hours, the entire balcony is engulfed in flames and perhaps the entire building within an hour is engulfed in flames,” explained lawyer Robert Noce, who specializes in real estate and condominium law.
“In that case, because the fire originated in that owner’s unit or in an area in which that owner is responsible for, the condominium corporation would be entitled to go after that owner for the deductible that the condominium corporation will eventually be paying.
“The fact that you left your cigarette in a flower pot on the balcony of your unit, that may have been stupid but not negligent. They don’t have to worry about your stupidity or your negligence, all they have to show is that it came from your unit and the corporation can go after an owner for that deductible.”
Recent market corrections due to the amount and size of claims have seen deductibles rise “substantially” from around $2,500 to $10,000 to upwards of $25,000 to $100,000, according to the CCI.
Under the legislation, the maximum amount a corporation can make the owner liable for is $50,000. This means if the deductible is $25,000, then the owner’s liability would be $25,000. If the deductible is $100,000, the owner’s liability would be the maximum $50,000.
Noce said there are some defences available to owners in the event of a loss, but added they are “very small and insignificant.”
“If I were an owner in a condominium building anywhere in Alberta today, I would immediately be calling my insurance broker or insurance provider and asking them how much will it cost to get some form of insurance deductible insurance so in the event of a loss in my unit and the corporation comes after me for that deductible, at least I have insurance that can cover those costs. Because those costs could be as much as $50,000,” Noce explained.
“So there’s an added expense to owners to get that level of insurance… but the peace of mind and the safety that will flow from that additional cost is undeniably a necessity for owner’s today.”
There are three important things all condominium owners need to do to ensure they have proper coverage:
- Ensure you have a unit owner’s insurance policy
- If you have a unit owner’s policy, make sure you have deductible coverage. If you do not, ask to have it added to your coverage
- Ask your condo board, manager or corporation for a copy of the corporation’s certificate of insurance that outlines the current deductible amounts, specifically for water damage and ensure the deductible coverage is at least that amount
“If you have $10,000 worth of coverage from your insurance provider and a $25,000 water deductible, you’ve got a problem to the tune of $15,000,” Shipley said.
The changes were made under Section 62.4 of the Condominium Property Regulations.