Part 20 published on 01/11/07
Condominium Corporation responsible for deductible
The owners’ unit was damaged by water escaping from a burst pipe. The pipe burst because the thermostat for the unit had been set to zero by the tenant. The total damage was over $23,000, but this was below the $25,000 deductible for water damage on the condominium corporation’s property insurance policy.
The Court said that the condominium corporation was responsible for the deductible loss because:
- The condominium corporation was obligated to place and maintain insurance on the units (other than improvements made to the units by the owners) against the risk of loss resulting from various perils, including water escape.
- This conclusion flows from Sections 27 and 47 of the Condominium Property Act and Section 61 of the Condominium Property Act Regulation.
- The condominium corporation accordingly covenanted to place and maintain such insurance on behalf of the owners. The corporation then made an economic decision to obtain insurance with a water damage deductible of $25,000, but this did not alter the corporation’s insurance covenant.
[Editorial Notes:
a) I understand that this decision may be subject to appeal.
b) Even if there were a covenant to insure, this would surely have to be subject to a reasonable deductible. It seems to me that all parties would have to understand that the reasonable deductible would constitute “uninsured loss”, falling outside any covenant to insure.
c) In this case, the by-laws of the condominium corporation did not render the owner and/or tenant responsible for the deductible. The question remains: Would such a by-law be upheld?
d) The Court does not appear to have considered the following question: Even if there is such a covenant to insure as between the condominium corporation and the owners, does this prevent the condominium corporation from seeking to recover the deductible from the tenants?]