March 13, 2020
Laura Thibeault, Your Peninsula REALTOR®
Here's a portion of what the Insurance Brokers Association of BC had on their website regarding recent changes in the insurance scene for Strata Corporations:
STRATA INSURANCE RATES ARE RISING
Over the course of 2019, strata corporations across Canada either received notice of a premium and/or deductible increase on renewal of the building insurance policies, or were advised that they should budget for increases on their next renewal.
In BC's Lower Mainland region, where an estimated half of its total 2.7million residents live in strata-titled property, these increases are having a widespread impact. Some renewals have reportedly increased anywhere from 50% to 300% and the deductibles to cover claims have also increased substantially, from $25,000 per claim to as high as $250,000 and $500,000; at least one building has had its deductible increased to $750,000.
What do Strata Insurance Policies typically cover?
Owners of individual units in the strata building all own a proportionate share of the common property. To help ensure that all owners' equity is protected, the Strata Property Act requires strata buildings to be insured for full replacement value of all common property, common assets and fixtures. This includes the original construction. Insurance valuations must be based on recent appraisals.
Becasue of the ownership structure of stratas and their commercial-grade systems (plumbing, boilers, elec-trical, heating and ventilation) strata buildings are insured with a commercial property insurance policy, which is modified for strata property.
Strata units owners insure their contents, plus upgrades made to the unit, under a "condo" homeowners' policy. These policies include 2 crucial coverages: a) liability insurance to cover damages from losses that origiante in the unit and extend to the common areas or other units, and b) coverage for a portion of the strata building's deductible in the event of a major claim.
How does this impact owners of strata units in BC?
If your strata corporation is faced with a substantial increase in insurance rates, the cost will be reflected in your annual budget that determines your annual strata fees. If the deductible is dramatically increased it means that any claims under that deductible are not covered by insurance and, subject to your bylaws, each owner is likely responsible for the cost to repair common property.
So coverage for owner liability is more important than ever. Unit owners will want condo homeowner insurance that covers their liability in the event of a claim for damages to their unit, as well as the cost of a deductible or the risk of being sued by other owners if they cause a claim.
WHAT CAN YOUR STRATA DO TO LIMIT THE RISK?
1) Be aware that being able to demonstrate long-term stability and a proactive approach to building maintenance will put your building in the best light for risk assessment. In these current market conditions, switching insurance brokerages or insurers may not be in your Strata's long-term best interests.
2) Review your Strata's Depreciation Report to ensure your Strata is meeting regulatory requirements, and that the Report's recommendations are reflected in the building's maintenance and repair plan for items that pose a risk such as roofing, water linese, and drainage systems.
3) If the Strata Corporation is faced with a change in insurance, dramatic increases in cost and deductibles, or the possibility of no coverage, immediately give notice to all owners regarding the changes. Early disclosure helps owners understand the situation & work together to find a solution. Provide the new summary of insurance as soon as it has been renewed so owners can amend their unit coverage accordingly in a timely manner.
4) If your building fails to obtain insurance, contact a lawyer to identify potential liabilies and risks for owners and council members and what next steps you should consider.
5) Repair access or building issues that may risk an injury. Address broken sidewalks, or security issues.
6) Work with owners to manage these common water damage risks:
a) Ensure owners have access to the water shut-offs in their units so they can quickly shut off water
b) Verify all units with washing machines have upgraded their hoses to braided steel.
c) Remind all owners that soft water in Lower Mainland means they can use less soap or with later model appliances, they can use high-efficiency soap. Excess soap suds can build up and block pipes.
d) Regulate or discuss owner activities such as smoking, barbeques on balconies, balcony gas heaters, insuite hot water tanks, and storage of flammable materials.
7) Update your bylaws. Bylaws that present a risk to human rights complaints also increase your risk. Comply with the Strata Property Act and enforce your bylaws.
1) The Strata Council and all owners should work closely with your insurance broker. Invite your broker to your Annual General Meeting to explain the changes to building's insurance.
2) It is imperative that you as a unit owner have property condo insurance for your unit. Your Strata Corp-oration is required to provide all owners with details of all building insurance policies and warranties in effect. Be sure you understand your Strata Building's coverage, limits, and deductibles, and how the Strata and/or your Strata Bylaws may apportion or assign responsibility for deductibe or under-the-deductible losses. Relay those conditions to your insurance broker, who will explain your coverages and options.