REIN Ultimate Insurance Program

Emerging Trends

Strata-titled Properties

The increase in condo living has seen a parallel increase in litigation over the often hefty deductibles on many condominium corporations’ insurance policies. Many strata councils have instituted bylaws that shift the responsibility for this deductible onto owners.

The decision handed down by the Supreme Court of British Columbia in May 2007, regarding Mari vs. Strata Plan LMS-2835, is a case in point. The issue raised was “Who pays the insurance deductible?”

As of July 2000, the Strata Titles Act of B.C. was substantively amended and the new Strata Property Act of B.C. became law. Under this new Strata Property Act, decisions of “responsibility” could no longer be made by strata councils. Instead, the new Act stipulates under Section 158 that insurance deductibles are a common expense to be paid for by the strata corporation. However, the Strata Property Act made a provision for strata corporations to sue an owner, if the strata council concluded that “the owner is responsible for the loss or damage that gave rise to the claim.”

In the case of Mari vs. Strata Plan LMS-2835, a flood occurred in the Mari unit when the water level switch in their washing machine malfunctioned. The damages to the Mari unit, as well as to a number of units below them totaled $9,888. The strata corporation’s insurance policy covered the repairs, but there was a $5,000 water loss deductible on the policy. Therefore, the strata corporation asked the court to assign costs against the Maris to cover the $5,000 deductible. The judge agreed that the Maris were “responsible” and ordered them to pay the deductible. As mentioned above, the judge did not find the Maris negligent (there was no way for them to know that the part was defective), but rather “responsible” for the incident. One line of reasoning used by the court to reach its conclusion was that condominium unit owners are much like owners of detached dwellings—both are responsible for whatever loss or damage is deemed to have occurred in their house or condo unit, regardless of the absence of fault or negligence on their part.

In another case similar to the above, a pipe burst within the bathroom wall of one of the condo units, which caused common-area damage. Once again, the court found the owner “responsible” and he was required to pay the deductible on the strata corporation’s Master Insurance policy.

As a result of the above referenced cases (particularly the Mari vs. Strata Plan LMS-2835), several strata corporations have decided to charge back to the “responsible” owner—both the insurance deductible and any damages that exceed the deductible. In one case, water damages totaled approximately $8,000 and the strata corporation’s Master Insurance policy deductible was $5,000. The strata council decided that the owner was “responsible” and concluded that the strata owner did not have the right to the benefits of the Master Strata Insurance policy. According to one report, some strata councils have instituted bylaws that assign responsibility for plumbing lines that service each condo unit to each respective owner.

The Mari vs. Strata Plan LMS-2835 decision now works as a precedent and will likely stand until it is challenged in a higher court. Until that happens, most strata councils will rely upon it despite Section 158 of the Strata Property Act, which says that an insurance deductible is a common expense.

In view of the foregoing, three actions are important for all condo unit owners:

  1. Perform regular checks and keep in good condition all washers, dishwashers, ice-makers, garburators, toilets, sinks, tubs, taps, water filters and purifiers, hot water tanks, and visible water lines.
  2. Know where the water shutoff valves are for each kitchen and washroom within the unit, and ensure that they are properly working.
  3. Obtain a copy of the strata corporation’s Master Insurance policy and review it.