Rising Costs in Insurance Premiums and Deductibles By: Kate Letchford
How can a condo corporation mitigate the rising costs of condo insurance? Condo corporations are facing rising costs of insurance premiums and deductibles. There is concern in the industry that this trend is
establishing a standard unit definition. This means that the condo corporation must maintain some insurance. To address the inflated costs of insurance, some condo corporations are engaging in self - insurance. Another strategy is shifting the costs of repairing property damage to individual unit owners by implementing by - laws and selecting insurance policies with a higher deductible but lower premium. These strategies come with risks that the condo corporation must consider before putting them into effect. Ultimately, it is the condo owners that bear the rising cost of insurance, whether it is borne by the unit owners collectively (through common expenses) or, shifted to individual unit owners. Self - insurance or the Lack of Insurance Self - insurance is a risk management strategy that sees a condo corporation manage its own risk up to a set dollar value, rather than relying upon an insurance policy. For example, if the condo corporation chooses a very high insurance deductible, then the corporation will have to rely on its own funds to remediate damages incurred as a result of an insurable event below that deductible. In the industry, it is becoming more common to see deductibles of $50,000 or $100,000 per event. In effect, the corporation is making
Kate Letchford, JD is a lawyer with Cohen Highley LLP in London. Cohen Highley LLP has offices in London, Kitchener, Chatham, Sarnia, Stratford and Strathroy. Kate provides risk management and regulatory compliance advice to condominium corporations, unit owners, and property management companies.
here to stay and the price of insurance will continue to
rise. CCI London and Area Chapter recently held a two - part seminar discussing insurance issues in the condo industry, discussing how to combat increasing premiums and the legal requirements to have insurance, as outlined in the corporation ’ s governing documents. We continue to have numerous questions and concerns about condo insurance obligations. For those who were not able to attend, we wanted to address some of the issues discussed. As a starting point, it is important to remember that Section 99 of Ontario ’ s Condominium Act, 1998 (the “ Act ”) requires condo corporations to maintain property insurance to cover damage the units and common elements resulting from major perils. Section 102 of the Act requires condo corporations to maintain liability insurance and Section 39 of the Act sets out the requirements to obtain directors and officers insurance, where that insurance is reasonably available. Each condo corporation ’ s declaration and by - laws may set out additional obligations to obtain and maintain insurance and the scope of that insurance by
CCI Review 2020/2021 —June 2021 - 10
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