Insurance Deductible By-laws

HUGE (and time sensitive) NEWS!

When Bill 106 was released, it came as a shock that the prevailing practice of drafting insurance deductible by-laws in a manner that shifted the risk to the owner of the unit from where the damage originated was to come to an end. Bill 106 made it very clear that such a provision would now need to be found in a condominium corporation’s Declaration, and, even then, would require the approval of 90% of owners (after Bill 106 becomes law). There was no indication that existing Insurance Deductible By-Laws would be grandfathered, either.

Then came the release of the first draft of the proposed Regulations. Kudos to Patrick Greco (Miller Thomson) who suggested in a recent article that that existing Insurance Deductible By-Laws will be grandfathered, and that condominium corporations should move quickly to put these in place.

We don’t disagree – but it is important to understand (1) why this is important; (2) which condominiums should look into this; and (3) why there is still little certainty around this issue.

Why This Is Important? – To avoid a future dispute. A condominium corporation’s deductible amount will usually be lower than the legal costs incurred in fighting over whether in fact there was some “act or omission” on the part of the unit owner from where the damage originated. For this reason, by-laws are often (but not always) drafted in a way to shift liability.

Which Condominiums Should Look Into This? – ALL condominiums should look into this. Many newer condominium corporations running under by-laws established by developers don’t actually contain language that shifts liability. In fact, these insurance deductible provisions are all but useless. Some condominiums may have by-laws that were drafted shortly after the Condominium Act, 1998 came into effect – and before the courts decided how far we could go with the by-laws. Other condominiums have simply never gotten around to putting these by-laws in place.

Why Is There Still Little Certainty Around This Issue? – At this time, the Regulations are still in first draft. We don’t know what will survive or what will change. We also don’t know how they will be interpreted down the line. The language contained in the Regulations seems to be quite clear that existing by-laws will be grandfathered; however, there is still no provision that actually says that.

Going forward, all condominium corporations should check their by-laws for the existence and adequacy of an insurance deductible provision. Ask your lawyer for assistance – it should not take long to do. If you live in a condominium that needs to fix this:

1. Pass the by-law as soon as possible. The current limitation is July 1, 2017; and/or
2. Consider amending your Declaration. There is more certainty doing it this way as it is specifically spoken to in amendments to the Condominium Act, 1998 that have already received Royal Assent. Also, currently, this type of amendment can be accomplished with the consent of 80% of unit owners. After July 1, 2017, it will change to 90%. Additionally, you can use this opportunity to do some Declaration “housekeeping”.

The clock is ticking. The time to act on this is NOW. The deadline to finish any Declaration or by-law amendment is July 1, 2017. 

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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