Insurance

1. Insurance The Condominium Corporation & The Condominium Unit Owner A presentation for The 2008 Toronto Condo Show, by Darlene Cade, CSIB, BSC., Cade Associates Insurance Brokers Limited and Michael H. Clifton, M.A., LL.B., ACCI (Law), Clifton Kok LLP Legal Counsel

2. Introductions • Who we are • What we’ve brought you

3. What happens when your toilet overflows….. The scenario

4. Let’s step back in time to just those few minutes before the toilet overflows…. AND ASK OURSELVES….

5. Did we pay the insurance premium??? And before we talk about toilets…

6. What type of insurance do you need? …What type of condo are you? • Condos come in all shapes and sizes! Including: • Multi-Storey Buildings; • Townhouses (side-by-side or stacked); • Stand-alone (detached) buildings; • No buildings at all (vacant land condominiums); • No units at all (common elements condominiums). Our discussion will be limited to what is relevant for Standard Condominium Corporations:* and in respect of them, whatever the shape and size, there is always a Condominium Corporation and a Unit Owner. *(For other types of condominium, see your insurance and/or legal counsel for advice.)

7. The Corporation’s Insurance • The Ontario Condominium Act, 1998 obliges Standard Condominium Corporations to insure: • All of the common elements, and all of the units excluding “improvements”; (more on this after) • “boiler, machinery, pressure vessel and motor vehicle” insurance, if such items are owned and/or used • Commercial General Liability related to the premises and the occupation and operation of the condominium; • If available, Directors & Officers liability coverage.

8. A Bit About “Improvements” • “Betterment” is not a term in the Act. It is no longer accurate to use the term “Betterment” or “Betterment & Improvements” for condominium corporations in Ontario

9. A Bit About “Improvements” • An “Improvement” is any part of a unit that is not defined as “standard” in the condominium corporation’s “standard unit definition”. NOTE: If there is no “standard unit definition” there are no improvements!

10. A Bit About “Improvements” • The term “standard” has nothing to do with what the Builder originally installed. It can include owner-made changes to the property. • Likewise, Builder-installed components of the unit can be defined as “improvements”. • Therefore, it is very important to read and understand your condominium’s standard unit definition. (Hopefully to be found in your by-laws.)

11. A Bit About “Improvements” • Standard unit definitions can vary from corporation to corporation – you cannot rely on anyone else’s definition – be sure your insurer understands yours! There are 2 basic extremes: “Status Quo”: A “status quo” definition aims to preserve just that: the “status quo”. This type of definition often includes a detailed table that may provide specifications of certain fixtures, including paint shades, faucet styles and sizes, trim, counters, counter-tops, flooring, etc. “Bare Bones”: This definition makes only the minimum components of the unit “standard” – such as unfinished boundary materials or “shell” of the unit (such as dry wall and sub-floor), and basic components required for the supply of heat and utilities (but not necessarily including any fixtures that use them).

12. A Bit About “Improvements” • The condominium corporation is only required to insure “standard” components of the unit. The unit owner is responsible to insure all of the “improvements”. Which brings us to the next topic…

13. Unit “improvements” Personal Property of the Unit Owner Personal Liability of the Unit Owner related to ownership, occupancy & use of the Unit The Package also includes: Contingent insurance To rebuild own Unit if the Corporation fails to carry sufficient insurance to rebuild Loss Assessment To pay assessments imposed by the Corporation related to an insured loss – i.e. Corporate Deductibles Unit Owners’ “Ideal” Insurance

14. What every unit owner must ask: Do I have sufficient insurance limits to rebuild my Unit, with all my desired improvements?

15. Corporation’s Concerns Claims Frequency: i.e. burns to floor, fire damage to cabinets, countertops and water damage claims Insurance Costs increase Cost of insurance is passed through common expense to Unit Owners Dissatisfied Unit Owners at the next condo meeting! & Action Plan Start with a clear and sensible Standard Unit definition (and make sure the Owners know what it says!) Better Risk Management awareness to Unit Owners Increase Corporate insurance Deductible Unit Owner pays for damage to own unit under the deductible amount Claims for Unit Damage

16. Different Strokes for Different Situations

17. Situation 1 – Within One Unit Damage in Unit A, affecting only Unit A

18. Situation 2 – Unit to Unit Damage in Unit A, affecting Unit B Common Elements?

19. Situation 3 – Unit to Units Damage in Unit A, affecting Units B, C and D

20. Situation 4 – Unit to Common Element Damage in Unit A, affecting only part of the Common Elements

21. Situation 5 – Common Element to Unit Damage in Common Elements affecting Unit A