The Condo Act requires condominium corporations to insure against damage to the common elements and (standard) units that is caused by major perils such as fire or water escape. Picture this: you come home from a long day at work, only to find your unit flooded because of a broken dishwasher tube. Fortunately, your condo files a claim with its insurance company and the remediation team is already on-site. You happily assume the condo’s insurer is handling the repairs through their policy.
A few weeks later, the repairs are complete but you receive a letter from the condo demanding you pay for the deductible on the insurance policy. In this case, the condo asks you to pay $100,000 or else this amount will be added to your common expenses. How could this happen?
Even though the condo has to maintain insurance coverage for this damage and indeed activates its policy, you are not necessarily off the hook. If the insurance coverage is triggered, the condo may have the right to chargeback the lesser of (a) the cost to repair the damages and (b) the deductible limit of the insurance policy in two scenarios:
- The owner, through an act or omission, caused the damage to the owner’s unit; and
- The condo has passed a by-law that allows it to chargeback the lesser amount for damage to common elements and other units so long as the condo did not cause the damage.
In this scenario, damage originated from the owner’s unit and the condo did not cause the damage, so the owner is still liable if the condo has passed the appropriate by-law.
To avoid a similar situation, it’s important for unit owners to obtain comprehensive insurance coverage for their units. We commonly see owners with coverage up to approximately $25,000 towards insurance deductible chargebacks despite skyrocketing insurance deductibles in recent years. To use the example above, an owner would still be liable for $75,000 out-of-pocket. We recommend owners periodically check their insurance policy against the condo’s policy to ensure “gapless” coverage. Don’t be caught off guard by unexpected charges – take the time to review the condo’s insurance certificate or latest periodic information certificate which will set out the deductibles in various scenarios.