Can condo board ditch water loss coverage to lower insurance costs?
Property act sets out exactly what perils condo corporations are obliged to include
Q I am on the board of our highrise condominium building. The corporation's insurance policy has come up for renewal. The quote on our new insurance policy is extremely expensive for our building. Our building has had a lot of water loss claims. To save costs, the board has decided to forgo water loss coverage. Is this legal?
A The short answer to your question is: No, this is not legal. Your condominium complex must have water loss coverage.
Section 47(1)(a) of the Condominium Property Act states that a condominium corporation must place and maintain insurance on the units and the common property against loss resulting from destruction or damage caused by any prescribed peril.
Section 61 of the Condominium Property Regulation sets out what perils specifically a condominium corporation must place and maintain insurance against, which include fire; lightning; smoke; windstorm; hail; explosion of natural, coal or manufactured gas; water damage caused by flood; water damage caused by sewer backup or the sudden and accidental escape of water or steam from within a plumbing, heating, sprinkler or air conditioning system or a domestic appliance that is located within an insured building; among other perils.
Therefore, the corporation's obligation to have insurance in place for any of the prescribed perils, which includes water loss coverage, is clear. The corporation must maintain insurance on all units and common property against water loss.
There is, however, room to allow for certain commercial realities. Section 61(6) of the regulation states that a corporation will be compliant with its statutory insurance obligations, even where the insurance obtained is subject to certain limitations or exclusions, provided that such are reasonable in the circumstances. The Alberta Courts have not interpreted this section and therefore, I cannot provide any definitive answer as to the application of s. 61(6) of the Regulation.
Helpful Hint: The Condominium Property Act and the Condominium Property Regulation require condominium corporations to place and maintain insurance for all prescribed perils. However, condominium corporations are capable of negotiating coverage limits and deductibles, or premium rates, provided they still have coverage as provided for in the Act and Regulation.
Roberto Noce, Q.C. is a partner with Miller Thomson LLP in both the Edmonton and Calgary offices. He welcomes your questions at albertacondolaw@millerthomson.com. Answers are not intended as legal opinions; readers are cautioned not to act on the information provided without seeking legal advice on their unique circumstances.
Follow Noce on Twitter at @Robertnoce.