Insurance Deductibles By-laws – A Continuation

There’s been considerable dialogue across Ontario on the following:  When Section 105 of the Condominium Act is amended, condominium corporations will no longer be able to pass Insurance Deductibles By-laws.  But what about by-laws passed before then?  Will those existing by-laws still be effective?  Will they be “grandfathered”?

We’re pleased to advise that the province has offered some helpful additional comment on this issue.

The bottom line is as follows:  No decision has yet been taken about the possible “grandfathering” of insurance deductibles by-laws passed before the new Section 105 comes into force.

As mentioned in my previous blog on this topic, the draft new Regulations say that Periodic Information Certificates (PICs) to be issued by condominium corporations will include reference to insurance deductibles by-laws.  The province has confirmed that this doesn’t mean that insurance deductibles by-laws will necessarily be grandfathered.  It’s just that Section 105 won’t be amended as part of the first phase of condominium legislation amendments – and the new requirements respecting PICs will be part of the first phase.   The point is that existing insurance deductibles by-laws will certainly still be effective – at least until Section 105 is amended (some time in future) – and therefore will need to be mentioned in PICs (at least for the time being).  That’s what the new Regulations are saying – nothing more.

However, the province has also said this:

“No decisions have been made as to whether there will be transitional rules and, if so, how they would apply, in relation to the coming into force of the amended s. 105 of the Act. …This is something we intend to consult on as part of later phases of regulation development.”

I think this means that existing insurance deductibles by-laws might be grandfathered.

[This might be achieved, for instance, by saying that the new Section 105 won’t apply in certain circumstances – or in other words that the new Section 105 will only be proclaimed in force for certain situations.  For example, the current Section 105 might be allowed to continue in certain cases – for instance, where an insurance deductibles by-law has been passed prior to the date on which the new Section 105 comes into force.]

So again:  Existing insurance deductibles by-laws MIGHT be grandfathered.  We just don’t know.

What does this mean for condominium corporations?

Condominium corporations might wish to consider passing (or amending) insurance deductibles by-laws (pursuant to the current Section 105) for two reasons:

(a) Such by-laws will certainly be effective for the time being – until Section 105 is amended; AND

(b) Such by-laws also MIGHT be grandfathered (and therefore may continue to be effective even after the new Section 105 is proclaimed in force).

Here’s the added wrinkle:  In order to pass such a by-law, we of course need the support of the owners of a majority of the units.   It can be tricky to explain these insurance deductibles issues to owners (and to obtain their support).   I wonder if this will be even more difficult if we’re required to tell owners that the by-law might only be effective for a limited period of time (i.e. until Section 105 of the Condominium Act is amended).

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act.

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Insurance Deductibles By-laws – Will Existing By-laws be Grandfathered?

There’s been considerable dialogue across Ontario on the following:  When Section 105 of the Condominium Act is amended, condominium corporations will no longer be able to pass Insurance Deductibles By-laws.  But what about by-laws passed before then?  Will those existing by-laws still be effective?  Will they be “grandfathered”?

My answer to this question is:  Maybe; but I don’t think so.

In my view, the amendments to Section 105 of the Act are clear:  Insurance deductibles by-laws will no longer be effective after the amendments to Section 105 come into force.  Put simply, the amended Section 105 says that the corporation’s deductible is a common expense except in certain specific circumstances listed in the Section – and a by-law is not one of the circumstances [As our readers will know, one new exception will be an amendment to the Declaration.]

The bottom line is as follows:  For insured events that occur after Section 105 is amended, I don’t see how a by-law can have any effect on responsibility for the corporation’s deductible.

HOWEVER:  According to the draft new Regulations, the information to be contained in Periodic Information Certificates (to be issued by condominium corporations) will include the following:

If an insurance policy obtained and maintained by the corporation in accordance with the Act contains a deductible clause that limits the amount payable by the insurer, a statement that,

(i) describes any such deductible clause, including the portion of a loss that would be excluded from coverage,

(ii) clearly identifies, for any such deductible clause, the maximum amount that is to be added to the common expenses payable for an owner’s unit under section 105 of the Act or as a result of a by-law passed under clause 56 (1) (i) of the Act before the repeal of that clause came into force, and

(iii) warns owners of their liability as described in subclause (ii).

This is unquestionably confusing.  Why refer to insurance deductibles by-laws in Periodic Information Certificates if such by-laws will no longer be effective?

I think there may be two answers:

(a) Insurance deductibles by-laws will of course continue to apply to any insured events that occurred before the amendments come into force. Adjusting those “pre-amendment losses” may take some time; and

(b) The amendments to Section 105 are not expected to be part of the planned First Phase of the amendments (whereas Periodic Information Certificates ARE expected to be part of the First Phase). Therefore, insurance deductibles by-laws may still be effective for some time to come – ie. until Section 105 is ultimately amended.

The Canadian Condominium Institute is checking with the province to see if the confusion can be resolved.

In the meantime, what should a condominium corporation do?

If you don’t currently have an Insurance Deductibles By-law, I suppose you could consider passing such a By-law.  The by-law certainly will be effective until Section 105 is amended.  And the by-law might continue to be effective after Section 105 is amended. But I have two cautionary notes:

I. Again, I think there’s a real possibility that such by-laws will have no further effect after Section 105 is amended.

II. Owners might be reluctant to consider passing a by-law that might soon be ineffective.

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act.

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Amendments to the Condominium Act: Repair & Insurance Obligations in Relation to Units

The coming legislative amendments will bring some changes relating to repair and maintenance obligations of condominium corporations and owners.   What are those changes; and what impact will they have on condominium insurance?

The Condominium Act (the “Act”) currently indicates that, subject to the contents of a condominium’s declaration, the condominium corporation is responsible for repairing units after damage.  The amended Act will say that owners must repair their units – unless the declaration says otherwise.  In our view, this will have very little impact on most condominiums, for the following reason:  Almost all declarations spell out the repair and maintenance obligations.  In other words, the Act seldom determines the repair and maintenance obligations.  As a result, the repair obligations contained in the vast majority of condominium declarations will simply continue to apply, regardless of the changed wording of the Act.

This said, in our view, it will nonetheless make sense for all corporations to review their Declarations – and to consider whether or not the Declaration should be amended – for the following reasons:

(a) The definitions of “repair” and “maintenance” will change – and this might mean some changes of responsibility in the particular condominium.  [It would be a good idea for the corporation to understand any such changes of responsibility – and also to consider any resulting desire to amend the Declaration (see below).]

(b) If the Declaration does not spell out the repair and maintenance obligations, the amendments to the Act will indeed change the responsibilities in that condominium.

(c) Some corporations might simply wish to consider an amendment to the Declaration, to change the repair and maintenance obligations set out in the Declaration, whether or not as a result of the coming changes to the Act.

What about condominium insurance?

Notwithstanding the pending amendments to the Act, condominium corporations will still be obligated – under Section 99 of the Act – to obtain and maintain insurance covering the common elements and the standard units.   So even though owners may have the obligation to repair their units (as is most often the case now), owners have the benefit of insurance – arranged on their behalves by the corporation – covering their standard units.

The only changes to the insurance regime will be as follows:

(a) There will be a prescribed standard unit description that will apply in cases where condominium corporations don’t have a standard unit by-law.

(b) As described in our recent blog post, there will be changes to responsibility for the deductibles on condominium corporation insurance policies.

Otherwise, the insurance regime is not changing.

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act.

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Insurance Claims – Watch out for the Limitation Period!

Our readers may know that the limitation period for most types of claims in Ontario is two years. This means that the claim must be started (by court process) within two years from when the claimant discovers or ought to have discovered the basis for the claim. Otherwise, the right to assert the claim is likely lost.

However, for many insurance claims, the limitation period maybe shorter.

Condominium corporations are sometimes required to consider claims against their insurers. For instance:

(a)    When damage is caused to the common elements or standard units, repairs may be covered by the corporation’s property insurance.

(b)   When a claim is made against the condominium corporation and/or directors, the condominium’s insurer may have a duty to defend the claim (and may have a duty to pay any judgment).

In such cases, condominium corporations must be careful to preserve their claims. In particular:

  1. As a first step, the insurer must be given prompt notice of any such claim or potential claim against the insurer.
  2. In addition, if there is any doubt or possible doubt about the insurer’s acceptance of the claim, the condominium corporation must start the claim against the insurer (by court process) within the applicable limitation period. And, for purposes of this second step, here’s the key point: The limitation period for such insurance claims may be shorter than the typical two-year limitation period.

The Courts have said that the limitation period for insurance claims can be determined in the insurance contract/policy. For example, many insurance policies contain one-year limitation periods (from the date of a loss) for claims against the insurer. Some policies contain one-year limitation periods under both the property insurance coverage and the liability insurance coverage.

The bottom line is as follows: Whenever you are confronted with a claim or potential claim against your insurer, be sure to consider the two steps noted above, and also be sure to check the limitation period in the policy. Again, if a claim against the insurer is necessary, it must be started by court process within the limitation period noted in the policy.

To read more about condominium insurance, check out our previous blog post.

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Condominium Act Reform: Proposed Amendments could Eliminate Insurance Deductible By-laws

TODAY is the deadline to turn in written submissions to the Standing Committee for consideration during their review of Bill 106 – the Protecting Condominium Owners Act.

Bill 106 recently passed on second reading, and is currently before the Standing Committee on Finance and Economic Affairs for review and further public engagement. Several issues are of particular concern to many of us working in the condominium industry. Notably, Bill 106 could prevent condominium corporations from relying on a by-law to extend the circumstances under which they can charge back an insurance deductible to a unit owner. Instead, the bill would require this type of practice to be included in a corporation’s declaration.

If passed, this amendment could pose a huge burden on corporations. Many corporations currently have insurance deductible by-laws (passed with consent from the majority of owners) to assign responsibility for an insurance deductible back to the negligent unit owner.

The requirement to provide for this practice in a declaration, rather than through a by-law, may prove impossible. The issue is that many corporations do not have a provision for this practice in their declaration, and getting the required consent to amend their declaration may be unfeasible.

If you are a condominium owner, board member, or property manager, you may also share this concern. If so, it is important to submit your written objection to the Standing Committee before tomorrow’s deadline.

The Eastern Ontario chapter of CCI has prepared proposed wording for a submission, and has posted it on their website here. The proposed wording is as follows:

Date: _________________________

We, the owners of (Name and Condo Corporation Number) or Member of the Condominium Community (Property Manager) (insert which best represents you), object to the proposed governance change made to Bill 106, Section 105 (4) related to Insurance Deductible By-law.  We respectfully urge that recommendations made in Legislative Brief, Recommendations for Amendments to Bill 106: Protecting Condominium Owners Act submitted October 22, 2015 by the Joint Legislative Committee for the Canadian Condominium Institute (CCI) and Association of Condominium Managers of Ontario (ACMO) be implemented as noted below:

Pages 3 & 4, Issue Sheet No. 3, Governance, Insurance Deductible By-law Retain section 105(3) as drafted in the current Act; Delete section 105(4) from the amended Act; and Additional Note: The Regulations should also make the owner liable under 105(2) for damage caused by an act or omission of the owner and his/her tenants, guests, invitees, licensees and agents.

Signature: _____________________

Written submissions are being accepted up to 6:00 p.m. on Thursday, October 29, 2015. They can be forwarded to the Committee’s Clerk for consideration at the following address:

Committee Clerk
Room 1405, Whitney Block
Queen’s Park
Toronto, Ontario M7A 1A2

Tel: (416) 325-2536
Fax: (416) 325-3505

See Jim Davidson’s recent blog post about this concern for further information.

Our readers in the condominium industry are welcome to contact our Condominium Law group with any questions about the potential impact of this bill.

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