The issue of home insurance in the condominium market is still causing discontent despite recent reforms to iron out serious problems that have plagued this sector for years.
At the center of the dispute is the wording of an article of the Civil Code which would allow insurers to withdraw following a claim.
The situation has been decried for months by Yves Joli-Coeur, a renowned lawyer specializing in co-ownership. Two weeks ago, it was the Quebec Association of Condominium Managers (AQGC) which made a public outing to urge the government to modify the text of the law.
What is the problem ?
Before the reform…
We must go back before 2018, before the start of the condominium reform (Laws 16 and 141).
Insurers then gradually deserted the condominium market, with good reason: more or less competent syndicates and insufficient condo fees resulted in buildings being poorly maintained. On top of that, the construction problems are so glaring that companies refuse to insure buildings that are less than three years old.
A chain reaction ensues: an increase in claims, less competition in insurance, higher premiums and an explosion in deductibles, ie the portion of damages borne by the co-ownership.
Remember that there are two levels of insurance in this type of home.
The coverage of the syndicate, on the one hand, extends to the common portions as well as to the private portions.
The individual insurance of each member protects personal property and improvements made to their private areas (the marble floor rather than the standard wood covering, for example).
When an event causes damage whose value is below the deductible, it is the syndicate which must first indemnify, therefore all the co-owners.
Under a clause provided in the declaration of co-ownership (the contract that unites the members and the syndicate), a co-owner could easily be held responsible for the damage if the origin of the disaster came from his home. The syndicate could then turn to the insurer of the culprit for compensation. The reality is a little more complex, because the insurers of all those whose unit had been damaged could also intervene.
It all worked as long as the deductibles were reasonable. The situation began to worsen with the surge in franchises.
We play on words
The reform introduced long-requested changes, including standards for the provisioning of provident funds. It obliged the unions to set up a self-insurance fund (corresponding to the highest deductible listed in the contract) and forced the co-owners to take out civil liability insurance (an obligation that existed in the declarations of co-ownership).
In the event of a claim, it is always up to the syndicate to pay for the repairs when the value of the damage remains within the limits of the deductible. Rather than having all the co-owners pay directly, it now draws on its self-insurance fund, which amounts to the same thing, because the kitty will have to be replenished by the members.
It is the addition of an article in the Civil Code (1074.2) which comes to sow the bickering. In a first version (2018), the text in question stipulates that a syndicate can claim damages from a co-owner if the damage is caused by his fault.
In the minds of co-owners’ insurers, it is now necessary to prove the fault of their clients to compensate the syndicate for civil liability. For the unions, this means undertaking legal proceedings to have the wrongdoing recognized.
The article was amended in 2020 to broaden its scope, but not enough, according to lawyer Yves Joli-Coeur and Élise Beauchesne, of the Quebec Association of Condominium Managers. They claim that insurers interpret the law so narrowly that court intervention becomes almost a must. Expensive, such approaches do not guarantee results.
Each on their side, Me Joli-Coeur and Ms. Beauchesne evoke similar cases where condo tenants have caused heavy damage by their negligence, without the owner’s insurance indemnifying the syndicate in civil liability. They also give the example of the plumber who, having incorrectly connected the pipes, causes significant water damage. In such a case, insurers would refute the involvement of their client, even if it was the latter who called the plumber.
No to changes
The Insurance Bureau of Canada (IBC) opposes further changes to the law. He recognizes that it is more difficult for the unions to be compensated, “but if it were too easy, we should increase the premiums of each co-owner”, affirms the spokesman of the BAC, Pierre Babinsky.
On this aspect of the file, the BAC and the condominium managers are arguing. On other aspects of the question, they form a common front with the government, in particular regarding the quality of construction, an element totally absent from the reform.
Will we see the end of this saga?