STORY SUBMITTED BY MICHAEL GIBSON – CONDOMINIUM LAWYER – MILLER THOMSON LLP. Originally printed in “InSite to Condos” Vol. 39, Issue 1.
In January 2020, Alberta introduced new provisions of the Condominium Property Regulation, shedding light on insurance obligations between owners and their condominium corporations. One significant change revolved around insurance deductables.
Absolute Liability for Unit Owners
Previously, when a condominium corporation suffered a loss, they paid the insurance deductible and then sought to recover it from the owner responsible for the loss. However, under s. 62.4 of the Condominium Property Regulation, this is no longer the case. Now, if a condominium corporation pays an insurance deductible for a loss originating in an owner’s unit or exclusive use area, the owner is absolutely liable for that deductible. Absolute liability implies that the owner is held responsible solely based on the proof of the loss originating in their unit, regardless of any negligence.
Moreover, this deductible chargeback may even be secured against the owner’s unit if the condominium bylaws permit.
But there’s a limit: the law caps an owner’s liability for deductible amounts at $50,000. While owners are “absolutely liable” for deductible costs in their units, they can’t be held accountable for more than $50,000. This limitation shields unit owners from excessive financial burdens arising from unforeseen events.
A Developing Practice
Since these changes to the law on insurance in condominiums, a practice has emerged in which owners’ insurers may opt to pay up to the $50,000 limit, even if no claim is made by the condominium corporation. This practice offers condominium corporations flexibility, allowing them to collect up to the maximum chargeback amount against the owner of the unit where the loss originated without necessarily filing an insurance claim. Though this is still a developing practice and should not be taken as a given.
Despite these legal realities, some find the law unfair, and it raises questions. For instance: why should the condominium corporation, and by extension, all unit owners collectively, bear the burden of repair costs – even temporarily – when the cause
of the damage originated within an owner’s unit?
Accidents happen – without negligence; simple wear and tear alone can lead to losses and damage. This is the nature of property ownership; owners have a responsibility to maintain their property. In the context of collective ownership and condominium living, ownership implies shared responsibilities among owners for the benefit of the entire community.
For instance, a water loss in a multi-unit residential building can impact multiple units. The law seeks to strike a balance: on the
one hand – holding the owner of the unit where the loss originated primarily responsible to a maximum extent – while on the other the condominium corporation is responsible for the remainder as a shared expense. Owners can secure insurance for their individual liability, while the condominium corporation can budget a contingency fund for any potential accidents it may need to absorb.
Exceptions to Liability Limits
The law in Alberta includes an exception to the $50,000 liability limit. This cap applies only when an owner may be held
absolutely liable, irrespective of fault. But…
In cases involving evidence of negligence or intentional destruction, the cap may not protect the owner. Section 62.4(6) of the Condominium Property Regulation preserves the condominium corporation’s right to file a civil lawsuit against those responsible for willful property damage and negligence. This ensures that, in cases of negligence or willful damage, condominium corporations maintain the right to seek recovery against individuals at fault, regardless of the deductible chargeback cap.
Despite these deductible provisions being in effect for the last three years in Alberta, some cases continue where condominium boards and managers seek full repair costs from owners, even when the owner’s insurance has already covered the $50,000 deductible and negligence isn’t at play.
In such cases, it’s crucial for boards and managers to have clear evidence of negligence, review the corporation’s insurance history, and to know the full background that went into setting the deductible limit before filing a claim.
In many cases, transparency around bylaw amendments can provide clarity for all before a claim is ever filed, providing adequate security for deductible chargebacks in the process. Careful consideration and transparency are essential when navigating the evolving landscape of condominium insurance in Alberta.