Why is Unit Owner Condominium Insurance so Important?

If you have never lived in a condominium (and sometimes even if you have), you may not be aware that, with some small exceptions, a condominium corporation gets insurance for the building and unit improvements up to the standard unit description. However, there are still gaps in that insurance, and my advice is generally to obtain a unit owners’ condominium insurance policy to cover those gaps.

Why is it important? It can protect your stuff, but more importantly, it can protect you from screw ups that you may not have even caused.

The decision of CH Condo Corp v. Payam, 2019 SKPC 70 gives us a recent example of the importance of this insurance. The condominium corporation went to Provincial Court (small claims) and used Section 65(6) of the Condominium Property Act to claim that a unit owner owed them the deductible for an insurance claim that they needed to make to repair damages that started from the unit that the unit owner was responsible for.

The facts of the case, as far as I can distill them:

• Owner bought this unit brand new as a rental property.
• The condensate line was not hooked up to the furnace or A/C when the place was bought. It seemed to cause water to escape flood the units below. The owner and tenant was unaware of this problem.
• Condominium Corp used insurance for repair, paid deductible, and sought compensation from unit owner.
• Neither party had overwhelming evidence of the cause. Owner thought that problem was possibly due to weather. Condo corporation could not be sure that the water was from the lines, but the problem stopped after the line was hooked up. On balance of probabilities, the court decided it was from the line.
• Owner was decided as NOT being negligent by failing to hook it up.
• Despite that – owner was still deemed responsible. While it wasn’t negligent, it was still an “act or omission” that allowed the corporation to pursue the costs of the deductible from the unit owner.
• Judgment was granted in the amount of the deductible, plus some court costs.

So unit owner bought something that he was entitled to expect that was installed correctly, but still responsible for the deductible for the damage that it caused.

The court specifically commented on the availability of consumer insurance that could be purchased in this case to have covered that loss. It also commented that they could explore a claim as against the developer or trade person that installed the furnace.

The national trend with condominium corporation insurance is that it is becoming more expensive. One method of controlling that cost is to increase the deductibles per claim. It reduces the risk associated with the main policy. Whereas deductibles of $5,000-$10,000 are common locally, I have seen examples that have significant exceeded that. Nationwide, I have heard from colleagues of situations where deductibles have been increased $100,000+.

Accordingly, the risk to the individual owner is going to increase. The condominium corporation is going to try and pass deductible costs on to the unit owner, and the unit owner insurance policies would be the best form of defence from a surprise $10,000 bill (or more).

However, one aspect of the decision that perplexed me is the description of the furnace room as “part of the unit”. In my experience, it is more common that those types of furnace rooms are set up as exclusive use common property, and not as a portion of the unit. I was curious enough to search the condominium plan, but it was not totally clear to me where exactly the furnace room was located relative to the plan.

It stood out to me because the court in its reasons reviewed the blueprints from the purchase agreement, and not the condominium plan, to determine unit boundaries, and that can often lead to confusion. Developers often include exclusive use common property in those drawings, without a distinction of the differing types of property ownership. However, it may be that the court was reviewing the plan, but called it “blueprints”. Clarity on this point may or may not have affected the decision, but it is important to understanding rights and responsibilities of ownership.