The first thing to understand is that while condominium’s governing documents such as the declaration, by-laws, and rules are in general quite similar, there are specific differences between each condominium corporation, so it is important that each condominium is familiar with what its declaration states.
The Condominium Act 2001 granted authority to the owners of condominium corporations to pass a standard unit by-law and/or and insurance deductible bylaw. This is a topic for another discussion.
Notwithstanding the above, most declarations state that the condominium corporation is not responsible for damages due to negligence (such as in the scenarios noted above). However, most declarations also state that owners shall be responsible for all damages caused by the failure of the owner to maintain and repair his unit, save and except where coverage for same “may” be recovered under the corporation’s insurance policy. The operative word here is “may”.
Concurrently, the insurance section of most declarations state that the condominium is responsible for all damages; “as the board “may” from time to time deem advisable. If the “may” in the insurance section is not applicable then the may in the damage section is redundant.
Therefore, the board is responsible for determining whether or not damages caused are the owner or the condominium corporation responsibility. This allows the board to assume responsibility under the corporation’s insurance for items that an owner obviously cannot maintain. A good example would be an exterior water main located on a townhouse driveway. There is no way that an owner could be expected to maintain a pipe located five to six feet underground even though technically it may be their responsibility. However it is imperative that the board is consistent with their determination.
Now let’s discuss the insurance companies. One would almost think that there appears to be a major conflict of interest with the insurance companies and brokers. We know that the more claims you have, the higher the premium you pay which means the more money the insurance company is making.
All too often condominium boards and property management companies call their insurance company/broker to find out if a certain loss is covered under the corporation’s insurance and the insurance company/broker is very willing to all too quickly respond yes! We have even experienced insurance companies that have been adamant and even threatening. Our condo management team once had an adjuster contact a unit owner directly with half truths.
Most declarations also have a clause holding the unit owner responsible for all increases to the condominium corporation’s insurance premium as a result of processing a claim on their behalf, and this is transferred to all future purchaser/s of that unit indefinitely. Some argue that it is only until such time as COLA catches up with that cost. Regardless most owners would opt to process the claim in question under their own insurance rather than create a huge impediment that would later be an obstacle in selling their unit.
- Corporations should establish rules and educate their owners with regard to what is covered and not covered through the corporation’s insurance, especially with regard to items that are not easily maintained by the owner
- Educate owners on how to maintain various component of their unit
- Owners should carry their own insurance for repairs after damage
- Insurance companies and brokers need to clearly understand that under their governing documents, the corporation is in control with regard to whether or not a claim is to be covered
- Insurance agents also have to be held to the same understanding
Next week we’ll talk about how condominiums should ensure that they have passed insurance deductible and unit boundary by-laws.