13/02/2018 – Jurisdiction Ontario
Part 61 published on 01/03/2017
Waiver of subrogation provision in condominium’s by-laws did not prevent claim by tenant’s insurer
A commercial condominium unit suffered substantial water penetration as a result of damage to the roof of the building, during an ice storm. Damages (including business interruption losses) were suffered by the owner and the tenant of the unit. The insurer for the owner and tenant covered those losses, and then asserted a subrogated claim against the condominium corporation and the condominium’s manager, alleging that the corporation and manager were responsible for the losses. The condominium corporation and manager argued that the claims against them were prevented by a provision in the condominium corporation’s by-laws stating that an owner’s insurance must include waivers of subrogation against the corporation, manager and others.
Based on the above argument, the insurer agreed to drop the claims for losses suffered by the owner. However, the claims for losses suffered by the tenant were still to be resolved.
On a motion for summary judgment brought by the condominium corporation and its manager, the Court refused to dismiss the claim for losses suffered by the tenant. The Court said:
The purpose of a waiver of subrogation rights (as in Article 14.03 of the corporation’s by-law) is based upon the allocation of risk between the condominium corporation (which assumes responsibilities for insuring the building), and the owner of the unit (which is responsible for insuring the contents/equipment of the unit). The intention in allocating those risks is that there will not be subrogation between the two parties for a loss to the other’s property even if caused by the negligence of the other party.
On the specific facts of this case, I agree with Elite’s position. YRCC and Talc’s (the manager’s) interpretation of Article 14.03 would be to protect YRCC and Talc from legal responsibility to occupiers caused by the potential negligence of YRCC and Talc. The wording of Article 14.03 is simply not explicit enough on its own to create an obligation upon an occupier (whether arm’s length or not) to maintain property insurance with a waiver of subrogation rights. If the effect of a condominium by-law or regulation is to preclude an occupier from redress for negligence suffered at the hands of the condominium corporation, express and explicit wording ought to be used. This is especially so when a condominium corporation chooses to set out explicit obligations upon occupiers as YRCC did in Schedule “A” to its by-laws.