On May 1, 2014, FirstService Residential hosted a seminar for Strata Council Members on the topic of Strata Insurance
. The event featured a panel discussion with guest speakers Paul Duchaine (Vice President of Claims, Real Estate Division of BFL Canada) and Jamie Bleay (Lawyer, Access Law Group). The event was hosted in the amenity room of Capitol Residences, a Strata Corporation managed by FirstService Residential. The following is a general summary of discussion points from the event:
Introduction to Insurance
- The Strata Property Act (SPA) outlines the minimum insurance coverage that a Strata Corporation must hold.
- Part 9 of the SPA requires a Strata Corporation to insure the Strata property, including common property, common assets, etc. for full replacement value.
- A Strata Corporation must also have general liability insurance to cover the Strata in case of negligence or injury.
- The Strata does not have to insure items inside of an Owner’s Strata lot.
- Strata Councils should consider carrying Directors and Officers liability insurance to protect any actions taken by the Strata that cause pure economic loss to others (ex: a decrease in a Strata unit’s property value). This coverage typically protects Stratas for $2M to $5M.
- The SPA does not require Owners to carry personal insurance.
- 85% of Strata insurance claims are water-related. Sprinklers and dishwashers are the typical causes of these claims and usually lead to chargebacks against the responsible Owner.
- There have been a number of factors contributing to increasing insurance premiums for Stratas, including:
- Global natural disasters have increased perceived risks for insurance companies
- Regulators are requiring insurance companies to save additional funds for potential emergency situations
- Appliances and flooring being put into new concrete highrise properties do not help mitigate water loss issues
- Stratas are not required to carry earthquake insurance. The deductible for earthquake claims is typically calculated as a percentage of a property’s total insurable value.
- Owners should explore having earthquake coverage added to their personal policy. This will help cover the cost of the sizeable deductible that may be charged back to an Owner from a Strata claim caused by an earthquake.
- Stratas should be careful with increasing their deductible in an attempt to reduce their Strata’s insurance premium.
- Check with your insurance broker as to whether they offer legal advice services as part of their policy options.
- The sooner a Strata contacts their broker with a potential insurance concern, the faster a broker can help advise the Strata.
- Section 158 (2) of the SPA allows a Strata Corporation to pursue individual Owners in paying their portion of the Strata Corporation’s deductible when a claim is filed.
- Under this section of the SPA, an Owner does not have to be negligent to be responsible for their portion of the Strata’s insurance deductible.
- This portion of the deductible is typically determined by an Owner’s unit entitlement.
- Recovering chargebacks from Owners is usually done through Small Claims Court.
- Stratas can choose to pass a bylaw that allows them to sue in Small Claims Court. Without this bylaw, a ¾ vote from Owners is required.
The summary above summarizes the subjects discussed during the seminar and is not intended as formal insurance or legal advice. For insurance and legal inquiries, Stratas should consult with their insurance broker or legal counsel.
We invite Council Members from all Strata Corporations to join us at our upcoming events. For more information visit our News and Events page by clicking here