British Columbia is undergoing a huge change with strata property insurance. Strata owners are facing significant increases in insurance rates and deductibles. Some renewals have increased 300%, with deductibles as high or higher than $250,000.00. There are also multiple older buildings across the province struggling to find an insurer to renew their policy.
If adequate insurance is not in place, an owner could become bankrupt if a claim is made against them. Deductibles vary and can be large, depending on the risk insured or the strata corporation's own claims history. If a strata corporation claims against its insurance policy for an amount exceeding the deductible, the corporation usually absorbs the deductible as a common expense to which every owner contributes through their respective strata fees or a special levy. However, owners may be personally liable to reimburse their strata corporation for the insurance deductible.
If a plumbing incident causes $75,000 in water damage to a strata owner’s unit and the strata’s deductible is $100,000, insurance won’t cover the claim. In this case, the owner could have to pay for the damages out of pocket, depending on the strata’s bylaws.
Many owners of strata properties do not realize that their common property insurance taken out by the strata corporation, will not cover the damages to their own units, or to any adjoining units for damage caused by them, such as leaky washing machines.
The Strata Property Act requires a strata corporation to carry property insurance over, "(a) common property, (b) common assets, (c) buildings shown on the strata plan, and (d) fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot."
The Committee recommends adding a new standard bylaw to require every owner to have insurance to cover payment of a deductible under the strata corporation's property insurance policy. Where an owner is responsible for the loss giving rise to the strata corporation's insurance claim, the Committee recommends amending the Act to allow the corporation to charge back to the owner the lesser of the cost of repairing the damage or the deductible. The Committee also recommends amending the Act to require a strata corporation each year to inform owners and tenants of any material change in the corporation's insurance coverage, including any increase in a deductible.
When you’re buying a strata property:
· Discuss insurance with your agent to better understand the situation.
· Obtain independent legal advice on strata bylaws and insurance policies.
· Determine if the strata is doing maintenance as needed, or are they deferring work that needs to be done?
When you own a strata property:
· Obtain a copy of the strata corporation’s insurance policy or policies.
· Get advice from their insurance provider to understand your liability, if the insurance doesn’t cover the strata corporation’s deductible.
· Be a proactive strata, and don’t defer necessary maintenance
· Know where your water shut off valves are
· Ideally, each strata owner should:
o have a unit owner’s insurance policy,
o have a policy that covers the higher deductible (insurance deductible insurance) to cover a loss in your unit, and
o understand the risk of not having enough coverage.
What caused this:
Several factors have led to high strata insurance costs, including a building’s size and construction materials used, claims history, where a building is located, the number of unoccupied units or tenants, the high value of real estate, lack of regular maintenance and the high cost of repairs—especially in the Lower Mainland.
These new premiums and deductibles are the new normal. As a result, we’ll likely see a rise in strata maintenance fees to close the gap between old insurance premiums and the new higher premiums. We’ll hopefully also see some government intervention. Alberta for example has implemented a regulation that no single owner can be liable for more than $50,000, any amount over that is incurred by the strata.
We hope you found this helpful, if you have any questions or concerns please let us know!