Condo Adviser Episode 23: Deep Dive on Condo Insurance

Rod:                Okay, folks. Slightly past 5 o'clock so let's get started. Hello good evening, everybody. My name is Rod Escayola, and I'm your condominium lawyer with Gowling WLG, and welcome to the April edition of the monthly condo advisor webinar. This month we decided to take a deep dive on condo insurance. So that's a pretty packed agenda we've got. We're going to talk about how the insurance works in the condo world. We will be talking about the various industry trends; what do we expect around the corner. We'll be focusing on who pays for what and, of course, we're going to talk about the insurance deductible bylaws, standard unit bylaws and how they can help you and on that last topic you'll see there'll be a heated discussion. Lots to cover and in fact it must be a pretty popular topic because we were flooded, pardon the pun, with registrations. I know. I couldn't resist. That's bad. It's probably the single most complicated condominium issue that there is out there. Tonight I hope we'll be able to crack the black box open and see what's inside. At the end of this meeting what I'm going to do, in the interest of time, I want to share with you folks at home the results of our survey on insurance. But I didn't want to spend too much time on it during the webinar. So we'll do this at the very end but you'll be able to compare with other corporations: your premiums, your deductibles, how does it compare by condo size, by number of units, by regions and so we'll be sharing some slides right after this webinar for those of you who can stick around.

                        Now, I told you at the beginning of this year that I would spice things up. I would keep changing the speakers. I like to try to share the microphone and the stage with other people. Today, most of the usual crew that you've come to love, is taking a break and they'll be back next month. For now I got you an amazing crew. To introduce them to you, I've asked them what was their dream job as a kid. The first one, and then you'll get to see where they've landed now, the first one wanted to be an astronaut until she realized that she didn't like confined spaces. So I bring to you Tricia Baratta. She's with Gallagher Insurance. Hi, Tricia. How's it going? I think you're still muted.

Tricia:              Thanks for having me. Hello.

Rod:                Hello, hello. I'm very happy about this next one. I've always wanted to have a condominium director on the panel here, so I found one, and a good one. He's with OCSCC 882. He wanted to be a lifeguard and so we have here Chuck Davies. Hello, Chuck. How's it going?

Chuck:             I'm very well, thank you.

Rod:                We have someone who wanted to be a phys-ed teacher or the first female sportscaster. She's with FirstService Residential, Stacey Kurck. Hi, Stacey.

Stacey:            Rod, thanks for the invite.

Rod:                Hey, no problem. And of course your favourite condo twins, we have one who wanted to be a king and the other one who wanted to do TV. I wish we could just poll people to see who, if you can guess, who wanted to be the king and who wanted to do TV. So, Graeme MacPherson wanted to be the king. How's it going, Graeme?

Graeme:          It's good. Still working on that. Every day is just a stepping stone to greatness.

Rod:                Nice. David just realized today, you made it David. You're doing TV online.

David:              I've reached the pinnacle of my career. It's all downhill from here.

Rod:                Look at that. Okay, so folks, I see the chat line is already lighting up. If you want to make sure that everybody else sees your comment make sure that you select 'to all panelists and attendees'. If you only select 'to all panelists' only we get to see it but if you want to get involved in a discussion make sure you click on 'all panelists and attendees'. Housekeeping before we jump in. Your usual favourite disclaimer. So whenever we refer to legislation during this webinar we are referring to Ontario legislation. The information we're providing you is as of today, and is accurate as we can possibly make it to be, but this is as of April 7 so keep this in mind if you watch this on demand later on. Most importantly, keep in mind that the information we provide you here today is information. It's not legal advice so you need to, I mean it's useful, but if you have a specific question you should really turn to the experts. Either your condo lawyer, your condo engineers, your property manager and ask them to find answers to your very specific situation. As usual we will upload this webinar on the CondoAdvisor website. You'll be able to watch it on demand later on. You can access our past webinars by clicking on the webinar tab at the top of the CondoAdvisor blog. It usually takes me about 7 days to upload it. So be kind and patient with me. What else? Did I say everything I needed to do? I think I did. Okay. We behind schedule? We are behind schedule already.

                        The first thing we're going to do is, I always forget to put the names of whoever I introduce, sorry about that and that's the agenda. The first topic that sort of snuck its way in today was the various announcements made by the Province. One effective April 1 and one effective April 8. Graeme, give us a 2 minute summary of what took place this afternoon and last week.

Graeme:          This afternoon the Order was made that we would be going back into a state of emergency, subject to a stay at home Order again. Very similar to what's happened at the end of the Christmas holidays. Basically just stay home harder. Unless it's for an essential reason we're all asked to stay home. Non-essential stores have been closed except for curbside pick-ups. The big box stores are only selling essential supplies like your medicine, your groceries, etcetera, and residential evictions have been suspended. So this is more something that probably pertains to condo dwellers more than the condominium corporations themselves. But, you know what? Hey, it's the COVID update that happened today, we're not going to not include it.

Rod:                Okay. What about what took place last week? The shutdown restrictions. Can you summarize them quickly?

Graeme:          The shutdown restrictions were essentially just a Province wide. Usually our advice has been to look at what Province you're in, see what colour you are and figure out what your recommendations and restrictions are based on that. But this one was a Province wide quote/unquote shutdown. Which is essentially put restrictions across the entire Province as a blanket. Nothing major that most health sectors weren't already doing. You've got to wear masks. For condos you've got to make sure that any workers who come in are getting screened for COVID and anybody else who comes in is being invited to self-screen. No indoor organized events and outdoor organized events are to a maximum of 5 people. So that pretty much means that you're in person AGMs are still off the table. Your gyms, pools and rec facilities still have to be closed. Short term rentals are only available for those who are in need of housing right now and you should be continuing to clean and disinfect as frequently as you possibly can. With that one I'll channel my inner Jason and tell you to make sure you document it.

Rod:                That's right. Well done. The list of essential services goes on. It's over multiple pages but here are the essential services I guess, Graeme, that are condo relevant.

Graeme:          Yeah, yeah. So your laundromats, your landscaping, snow clearing, although these days snow clearing is less of an issue, thankfully. Security, property management and maintenance and construction. In case you were wondering, Rod, bath houses are not essential and they're closed. Casinos are not essential and they're closed. What else? What else was the other one? Unfortunately the zoos are closed.

Rod:                The zoos are closed but condos don't fall in that definition. Okay, so that's sort of the update and as Graeme said, if you go to your favourite condo blog, hopefully maybe it's ours, we have a COVID tool. You can click on that and you'll be able to click on the colour that applies to your region. Right now it's all shutdown and these are the restrictions that are applicable until May 3, I think, if my math is right. So there it is. That's sort of the lay of the land and now we can finally, oh, what's this here?

Graeme:          This is actually another COVID update that is very specific to condos. As many of you will know, if you've listened to past webinars of ours, that the deadline to hold your virtual AGMs, or hold virtual board meetings, or send virtual notices of AGMs to your owners, that was May 31, 2021 if you didn't have a bylaw. We have been saying for a long time we'll see if that gets extended, and it did, to December 31, 2021. You've got the rest of the year, essentially if you don't have an e-meeting bylaw in place yet, you can still hold your virtual meetings and you can still hold virtual votes and send the notices by way of email. We've done a deep dive on bylaws last week, and talked about the e-meeting bylaw, so I won't go into it here but if you don't have it your deadline has extended.

Rod:                Okay. So bylaw or no you can have virtual meetings. You can proceed with electronic voting, at least until the end of the year. Wonderful. Perfect. Now on to the real topic. The reason why everybody has logged in today. We're going to take our deep dive on condo insurance and feel free to send your questions. If you want to make sure that we see your question you should make sure you put it in the Q&A, and not in the chat, because in the chat we'll lose sight of it. Lots of material to cover so, Tricia, I'm going to turn to you and if you can maybe start by helping us understand the various types of insurance that are required for condominium corporations.

Tricia:              Yes, certainly. Hello, everyone. Most importantly property and liability. In the next couple of slides we will give you an idea of what property and liability look like and property and liability separated from unit owner to corporation. Property being the common elements and all of that good stuff. Liability would be third party bodily injury and property damage, directors and officers. Questions have come up about volunteer insurance. This is questions that corporations have with respect to having volunteers and committee members do work on the property and are they covered. Quick answer, depends. Depends on the wording and depends on the work. So always please refer to your broker for questions about volunteers. Should a property manager be named as an insured, is a very common question. The answer is no, not named as an insured, but an additional insured. Very different. An additional insured, because they don't own the property, but they do work on behalf of the property they do need a little bit of help in coverage because they can't get coverage for that elsewhere. But as a named insured they are entitled to 100%25 of the benefits of the policy and they're not an owner so they should not have that benefit.

Rod:                Okay. Let me go back to volunteer insurance. You mentioned a couple of things that were interesting last week. Something about it depends what's the kind of work that the volunteer will do and it can't be work that requires a certain training or a certain level of expertise. Can you tell me more about this again?

Tricia:              Absolutely. If you've got a volunteer on, let's say a gardening committee, they can absolutely dig a hole, plant some annuals, as long as they're wearing the protective safety equipment they need. As long as it's not an activity that requires specific training. So let's say they're going up a ladder, they need working at heights training, so therefore if someone on your committee should not be cleaning eavestroughs or repairing anything on the roof line. The difference is they cannot be paid. So as soon as someone is doing work on your property, and they are paid, they're considered an employee and it gets a little muddy. So, to make sure, anyone that you've paid to be on your property doing work has their own liability insurance. To look after that because they likely will not be covered under the condo policy.

Rod:                Okay. Two sort of building blocks to tonight's presentation, premiums versus deductible. What's the 101 on that?

Tricia:              Sure. Premiums, this is the dollar value at the bottom of your insurance policy. This is what's going to come out the condominium's bank account. This is the agreed upon amount for the entire policy for the effective years. So the policy term. The deductible is going to be that first portion of the claim payout that is not covered by the policy. This will be different for every policy, every coverage type: property, liability, sewer back up, all of these will have different deductible value but this is the amount of the claim that the corporation in this case will be responsible to payout in the event of a claim.

Rod:                Okay, so that's the first portion of the claim that's never paid by the insurer. You're going to have to pay out of pocket. Okay. Now, what about this? We have two slides here. One that sort lists the insurance that an owner should get and the other one that lists the insurance that the corporation should get. The beautiful sort of drawing you see at the left of your screen comes from InsurEye and I've got to tell you that they have amazing articles on their website. If you have questions about insurance and how it works a good source of information. But help us, Tricia, understand what kind of insurance an owner should be getting.

Tricia:              Certainly. As you see in this condo tower arrangement we've got the information, the highlighted sort of pink or salmon coloured block there which is considered the unit, and then you've got all the blue outside which would be considered condo responsibility. They've got that in their little legend up there at the top. So within that pink or salmon block we've got betterments and improvements. This would be considered under the property. It will look like property but it'll be a line there for betterments and improvements. This is anything above, if you have a standard unit bylaw in place, this would be anything about that. If builders grade cabinetry and flooring is all within the standard unit descriptions, this would be if you have put in laminate flooring above carpet, or if you have put marble countertops in you'd need to be covered by the unit owner policy,  because in the event of a claimed unit the condominium corporation is only responsible to put back the standard unit, which is likely not what's still in the unit. The other one is third party liability. We've got an issue here with our slide. Looks like we've got a duplicate. One of these should say contents. You need to make sure, the unit owner, that you've got contents coverage. Contents being anything that is not physically attached to the unit. We are talking about your clothing, your furniture, your personal items, but also important to note, your appliances. Appliances are also considered to be contents and are the responsibility of the unit owner under the contents coverage. Third party liability will be if you cause property damage or if someone is to hurt within your unit. This is not outside the unit. This is strictly inside the unit. Okay? Deductible and loss of assessment. When the condominium has a loss, and depending on who ends up being responsible for the deductible for that loss, if that were to fall on the unit owner then this would be coverage in place for that. So the condo corporation has a loss, the unit owner is assessed the deductible amount, that unit owner is going to go to the unit owner, broker or policy and say, "I now am responsible for this deductible." and they would pay a smaller deductible in order to have that coverage triggered. Additional living expenses. If the unit needs all new flooring, and all the contents need to come out, and the unit owner needs to vacate the unit, definitely an important line to make sure is on the unit owner policy's additional living expenses. The line item and the amount of coverage is important. Make sure that this amount isn't just standard and thrown onto the policy. If you live in a lovely nice condominium that has in-suite laundry, you want to make sure that the amount that you're going to have allocated to additional living expenses, should you need to move to an Airbnb or a hotel, they have all those amenities in room. So have that discussion with your broker as well. Then the locker. We see it down at the bottom left here. Don't forget about the contents within the locker. The locker itself may be the responsibility of the condo corporation but what is inside is not. So it's important to make sure that if you have a locker or a storage space allocated to your unit that the contents inside are also covered. Sometimes these are high cost items like the ..., etcetera.

Rod:                Okay. So all of this is what the perfect insurance that an owner should get and a corporation can't impose that on the owners. It's up to the owners to do what they have to do to make sure they're property protected but that's the responsibility of an owner. Now I'm going to move to the next slide. I'm going to change this slide. I'm going to correct it. It should be betterments/improvements, then content, then third party liability and so on. Now this is the insurance that the corporation must get.

Tricia:              Yes. So we're talking about all of those things in blue on the diagram there. So the common elements, it's going to be all of the things that the condo's responsible. We're talking about roofing, elevators, the landscape, the underground parking but it's also for the standard unit finishes. So that standard unit bylaw, if you're corporation does have one in place, that will set out what the condominium corporation is responsible to repair following an insurable loss. That could include, like I said, builders grade cabinets, etcetera, depending on what exactly is in the standard unit description. This is the bulk of the policy. This is where most of the cost of the policy comes in. General liability, this is the coverage for anyone if there's bodily injury or property damage, third party coverage. So this is not the corporation itself. This is for anyone who comes onto the condo property. This does not include property damage or bodily injury within a unit. This is everywhere else. Boiler and machinery. Not all corporations require this coverage but if there is in fact an elevator, if there's a swimming pool with pool equipment, if there's an air make-up unit, those corporations do require boiler and machinery coverage. This will ensure that should there be a loss, and there's a piece of equipment damaged and therefore there's a high loss of property damage associated with that, that it is covered and it is separate from property which can be confusing for some people.

Rod:                We're falling behind schedule. So you're going to have to summarize very quickly the next two and we need to move on because I'm going to run out of time.

Tricia:              We've got two directors and officers liability here so I can just talk really quickly about them. The directors and officers liability is for an alleged failure to act in honest and good faith on behalf of the corporation. The directors are doing a good job and making decisions on behalf of the condo but should there be a financial hardship, or an alleged financial hardship, on behalf of the owners or an owner, this is protection for the directors for that.

Rod:                Okay. I will correct this slide as well. It doesn't matter how often you look at it. So I'll correct that. Thank you so much. I'd thought I would share some very brief results from our survey, but again, I'm going to sort of drill down after this webinar and we will share much more details. But on average, for those of you who did take the survey, we found out that the average insurance premium in Ontario, for the corporation, appears to be between $20,000.00 and $50,000.00. The highest that was reported in our survey was $236,000.00 and the lowest was $5,000.00. I suspect that that may be a common element condo corp. I'm not to sure. So that was one of our questions. What's your insurance premium? The other question we had, what's your deductible? And again, that's the portion that the corporation will have to pay out of pocket. It's not paid by the insurance provider. The average deductible in Ontario appears to be around $17,000.00. The highest that we got as part of our survey is $100,000.00. So there's at least a corporation, in fact there's quite a few corporations out there, that have deductible that's $100,000.00, $200,000.00 even, but the highest we got in our survey was $100,000.00. The lowest we got was $2,500.00. Then you see it by region. But again, I'm going to drill down on this later on at the end of this presentation.

                        David, I'm going to turn to you. Give us the 101 here of who pays for what when a unit gets damaged.

David:              For sure. This section is going to come with a major caution. This is very high level and very 101. A lot of the questions we get are something breaks, whose fault is it? Who has to pay? So here are the default rules and you always have to look at everything in conjunction altogether. You have a look at the default rules, your declaration, whatever existing bylaws you have and try and figure it out to get your proper answer. But under section 90 of the Condo Act the basic default is owner's maintain their units, corporations maintain the common elements. Under section 89 of the Act the corporation shall repair units and the common elements after damage up to the standard unit and subject to the declaration. So the declaration can modify that. When we're talking about damage we're talking about an insurable event. So not just any damage. It's an insurable event. The declaration can, as we said, alter the obligation to repair after damage. That's down in section 91 of the Act, by either imposing on the owner the obligation to repair the unit after damage, and we also have to keep in mind the limit that's put in there at section 123 of the Act where there's such substantial damage that it would result in more than 25%25 of replacement cost of the condo. It throws out all the rules right there and it's a termination of the condo, essentially.

Rod:                Right. So this is maybe the starting point of most important sort of building block to this discussion today and it's a bit shocking to me when I first got involved in condo corporations. If a unit gets damaged, as a result of an insurable event, the corporation, that's the default setting, the corporation has to go in and fix it up to the standard unit. To me, initially, that was like which grass? What is that? How is it that suddenly I don't have to insure my own stuff? I turn to big brother. But as David said, this default setting can be modified by the declaration, so the declaration could shift onto the owners, the responsibility to repair unit after damage. So you need to look at the declaration, as David said, you need to look at the legislation and you also need to look at the very specific of the instance that you're faced with. So that's the default setting. What about who's responsible to pay the deductible? Just to put it in context, so my unit is damaged, let's say it's going to cost $50,000.00 to repair. The corporation has to come and help me. The deductible is $25,000.00. Who gets to pay that deductible portion?

David:              The default setting deductible is a common expense (ie: payable by everyone as part of the proportion share to their common expenses). Again, unless damage results from an act, omission of an owner and the damage is limited to the unit, or if the corporation has an insurance deductible bylaw, which many corporations do, that might extend the circumstances under which the deductible can be added to the unit. So again, this is a very, very  cogent example of where you can't just rely on the default provisions saying deductible's always a common expense. Very, very often it's not and you really have to look at the facts of it and see who's actually covering the build at the end of the day.

Rod:                Okay. So going back to my example, my unit gets damaged, it's going to cost $50,000.00 to repair. The default setting is the corporation comes and fix it, but the first $25,000.00 would normally be absorbed by the corporation, which means all the owners get to share in the glory of my deductible. But having said that, one of the exceptions under the Act is if I'm at fault and the damage is limited to my unit. So that sort of sets the table for the next installment of this presentation. I'm going to go back to you, Tricia, and to Stacey. Now that we understand a bit how that works help us understand the renewal process behind the condo's insurance. Tricia.

Tricia:              Sure. I can just start. We like to start 120 days prior to renewal. Certainly we do not want this process to start happening immediately before renewal or before expiry. It does not give the corporation enough time, and the broker enough time, to research the market and paint the best picture that we can for the corporation. At 128 days we'll start looking at what has taken place in that renewal. With a broker they should be on top of what has in fact happened but we look for the major updates that have been completed. The insurers want to know has the roof been done recently. If there's an update of reserve fund study, claims, etcetera, and believe it or not it's important whether or not there are a majority of rentals versus unit owner occupied. We like to have these renewals out for boards to review at 60 days. Now that is in a perfect world. COVID and the hard market is making that extremely challenging, as I see Stacey nodding her head, and with that I will pass it to Stacey.

Rod:                So, Stacey, this is really a joint venture. I mean the corporation has to do it due diligence. You have to do your part as a manager. Your broker has to do it so, from the manager's perspective, how do you tackle renewal process?

Stacey:            Yeah, Tricia, thanks for saying that. In a perfect world, right? I think with the insurers, one less of them over the last few years, and the tightening of everything and premiums kind of going up, we've definitely seen a shift over the last 24 to 48 months. Where we used to ideally get, we'd love to start it at 120 days, and especially in those circumstances where boards may want us to get another proposal. So not just about a renewal. I think I tie them in together. Renewals are, and I don't want to say they're easier, but they are. If you're happy with your insurance, and there's no huge increase, then it was running tickety-boo so to speak over the years. What we've seen over the last 2 to 3 years is that that's not the case. Premiums have skyrocketed from 20 to 100%25,  without claims on 15 year old condos. So the renewal process has been really stressful to some and it's really about the communication with the board members understanding. So for all of you watching today, if you are a board member, I'm sure you've been in it. All management companies are the same, right? We're going through the same thing as is the insurance broker as well. Whoever you are with, as a broker, hopefully they are flexible and able to provide you a proposal more than 30 days. But what we're really seeing is the brokers are really only giving us 30 days within that renewal period. That's certainly not enough time so ideally 120 days would be like a Christmas miracle. But really we're struggling to get a proposal within that 30 days even and we understand. Hopefully the boards can understand we can work together through this and understand really the reasons for this.

Rod:                Okay. One of the questions that often comes up is when to make a claim and when to self-insure. Tricia, can you shed some light on that? I'm also going to turn to you, Stacey.

Tricia:              I think the most important thing, it's important that boards realize that you prepare your reserve fund study plan. You plan for all of those things that are expected. You plan for major repairs and replacements and, nowadays with the market as it is, you need to also plan for the unexpected. So budgeting more than just the premiums. If the premium is $25,000.00 you need to budget for more than that. A couple times the deductible is when I would recommend making a claim. If it's not two to three times the deductible, if your deductible is $10,000.00, make sure that that $15,000.00 loss the corporation has budgeted for that amount to pay out of pocket instead. Right now with this market making a claim to save $5,000.00 is unfortunately, definitely, going to impact premiums for at least 1 to 3 years. Go ahead, Stacey.

Stacey:            I agree with you, Tricia, it' just changed. We used to be $2,500.00 was the deductible. Right? That was the go to. We're looking at $25,000.00 now as a minimum and I think every condo should be there. It shows that don't easily use the insurance because it's not as easy to get insurance now as it was before. So you really want to budget for that and I can agree with you a one time, or two times, would be ideal if you can have that. It's just good budgeting, in general, for the community. If it's $25,000.00, and you've only budgeted $25,000.00, and you have a claim and you're only going to do it if it's two to three times the amount of the deductible, you need to have that just in case, that second.

Rod:                So what I take away from this segment is this, and it all depends of course on what is the amount of your deductible, but if the claim is obviously within the deductible then you don't ask yourself that question. You're self-insured. But if it's two times or three times the deductible that's when you start considering making a claim. Having said that, that makes sense when you have a deductible that's at $5 or $10 or $15 or maybe even $20,000 but if your deductible is $50, $75, $100, it becomes far more difficult at that point in time to self-insure. But what you need to remember is that when you make a claim you need to pay the piper later on and it's going to catch up to you. Just keep that in mind that not all claims are worth turning to the insurer. Okay, wonderful. What is this? I'm looking for, yeah, we're missing a slide. I'm going to make sure it gets put back on but, Tricia, can you maybe tell us what's coming down the pipe? What are the pressure points on the industry right now? What makes the premiums go up? What makes the premiums go down? I'll make sure I add the slide on.

Stacey:            How to improve your situation, I think. That's what we were talking about.

Rod:                No, not so much. It's my fault I'm missing the slide. Tricia, do you remember last week we were talking about what's coming down the pipe. What's backing the industry? Do you remember that?

Tricia:              I'm sure everyone's heard about the hard market and I'll make it as quick an explanation as I can. For a lot of years condominiums had a pretty decent rate with respect to property coverage. Unfortunately the insurance companies, with the amount of claims that they are seeing come in over the last few years, they need to catch up. They're doing that, not only are they doing that to catch up, but they're also realizing that now with all the claims being made that they're not making money. So that decrease, they're saying they don't want to cover as much property, so we call that decreased capacity. Then there's a lot of hoops to jump through in order to get coverage. We're seeing it as you have to fit into a certain box in order to get coverage which means you don't have any claims, you're property is under 40 years old, you're not in an sort of flood mapping areas and your property is protected, which means it's really close to a fire department or it has fire hydrants all over the place. That's why we're seeing increases in rates. We are not seeing a lot of condos make claims which is good, however, it's frustrating. A lot of people don't want to hear that. Why do we have insurance if we don't make claims. But unfortunately that's the only way that we're able to sustain coverage, maintain coverage, and not have to go overseas to get coverage which is going to cost an arm and a leg, for lack of a better term.

Rod:                Okay. So changes that are putting some pressure on the industry. The change of the flood mappings, that's one of them. New building requirements and building codes. But I guess one of the good news, a recent good news in the insurance industry, is the changes that have been made to the Occupiers Liability Act. That's Bill 118. Can you give us a quick snapshot on that?

Tricia:              Sure. So Bill 118, effective just this January, it has changed the requirements for claimants that is claiming an alleged slip and fall. It is changing the requirements in they no longer have 24 months to report that claim, and to submit notice of claim to the condominium corporation, or to the property owner in general. Now they're given 60 days. Which is fantastic, not only for condos, but it's fantastic for the contractors that are servicing condo corporations because their insurance is going up. They're finding it very hard to get coverage and ultimately their premiums go up and that dollar value goes back to the unit owners in their condo fees. We're quite excited for condo corporations, and contractors who work so very hard to keep the property safe, that now those corporations have only 60 days to be concerned. If there's a claimant coming forward, it's only within 2 months, and the condo corporation and the insurance company aren't prejudiced in missing information or documentation that they may need. It's very good. Very exciting.

Rod:                Okay. Perfect. Back to the regular program here and I'm going to turn to you, Chuck, and obviously I had a problem with my presentation. I don't think I had the final look version in front of you tonight but that's the one you'll see on our website. I'll make all the corrections and it's going to look amazing. Chuck, I'm turning to you now. Chuck is a director with OCSCC 882 and you had to look into cost containing strategies with respect to insurance. How did you tackle that?

Chuck:             Right. So, we actually did it at the front end. We took over from the developer in 2012 and in 2014 we had a hard look at insurance. It wasn't at that time a major cost concern to us but we could see what was happening, more generally around the industry, and we could see that it could become something. So we tried to act a little bit more proactively to do with it. Next slide, please. We're in the West End of Ottawa, by the way.

Rod:                Right.

Chuck:             I'll just talk very quickly about our experience with insurance costs over the past number of years. Then the main elements of our cost containment strategy which are the insurance deductible bylaw, the standard unit bylaw and some other practical risk identification reduction measures and I'd be happy to answer questions sort of later in the evening if there are any. Next slide, please. So this is the profile we've experienced over the past 8 or 9 years. Our insurance cost was essentially flatlined from about 2013 through to 2019. We passed our standard unit bylaw which is a bare box or bare bones standard unit bylaw in 2014. Prior to that we did have a fairly large damage claim. It didn't significantly affect our insurance but certainly, if it was repeated, it was going to be have a significant impact. Then just a year or two ago we had another large one, which because of our bare box standard unit bylaw, was not covered by our insurance but rather by the unit owner's insurance. Now we have in the last 2 years experienced fairly steep increases but those are industry wide and I'm sure every condominium corporation in Ontario, if not wider, is getting those sorts of general across the board increases. In 2012 insurance was about 3.8%25 of our total operating budget, our total condominium budget, and even after 2 years of fairly steep increases it's now 3.7%25 of budget. So we continue to, in our view, have insurance costs under control and we're quite happy with where we are right now. Next slide, please. So the insurance bylaw was handed over to us by the developer and, in our case, unit owners are responsible for paying the insurance deductible for anything related to damage in their unit, regardless of cause. Also, makes them responsible for the deductible for claims resulting from actions of a unit owner. We have fairly comprehensive onus on unit owners in terms of their responsibility for the deductible. Our deductibles are shown here. So we're not having our deductibles jacked up by our insurer. Primarily because we're not filing claims. The purpose of the bylaw is to keep our costs down as a benefit to all the owners as a collective.

Rod:                So you had already in your books the insurance deductible bylaw that was provided by the developer. So you already had a mechanism in place to be able to shift to the owner, in certain circumstances, the cost of the deductible if there was going to be a claim. Right? So you had that already?

Chuck:             Exactly.

Rod:                Okay. What about the standard unit bylaw?

Chuck:             Standard unit bylaw, we were fairly early in the Ottawa market going to the standard unit bylaw. We're quite happy that we did. So what it does, essentially, is it makes the corporation responsible for insuring the things the corporation owns and it makes unit owners responsible for insuring those things that they own. It's really designed to take advantage of the much more competitive nature of the homeowner insurance market compared to the commercial market where we, as a corporation, have to go fishing. This was a complex conversation with owners, I will say, but at the end of the day a substantial majority of owners voted to approve this bylaw.

Rod:                Okay and so the bylaw that you have, the standard unit that your corporation is the bare bones or the bare box one, which means that anything within that unit  has to be insured and repaired and maintained by the owner, but the corporation will always insure that there's a place for that unit and will always insure connections to common service and so on and so forth. So really what's in the unit is owner responsibility. Right?

Chuck:             Yes, and in fact that was a big selling point with a good number of our owners, that they were no longer going to be having their condo fees go to the insuring of units, regardless of how careful other owners were. So in our case we were eliminating a risk to our owners that their insurance costs through the common policy for the corporation would go up because of the actions of other owners.

Rod:                Okay. Finally, I think this is your last slide.

Chuck:             So this is very quick. We're tackling the issue, the risk of water damage in our facility, we are in the process of negotiating the replacement of rental water heaters. Those are part of the unit and they are the responsibility of the unit owner but we are, as a collective, going to have them all replaced as a single exercise. At the same time we're going in we're replacing washing machine hoses, again, despite the fact that that's really an owner's responsibility, we're doing it for the benefit of the corporation. We're also trying to keep on top of plumbing issues. We've recently, in terms of fire protection, replaced all the units' smoke detectors. Which, again, were something that technically was the responsibility of the unit owner but we did that to get everybody up to the same standard.

Rod:                Okay. Wonderful. So these were precautions taken by the corporation, and you sort of took over something that you would normally expect an owner to be responsible for, but you did it collectively and that sort mitigates or reduces the risk of the fire or water damage or etcetera, etcetera. Okay, wonderful. Anything else?

Chuck:             These are the big ticket drivers of insurance cost increases so we protect them.

Rod:                Right. Stacey, I think you had a question.

Stacey:            Yeah, I just thought of this with you doing that. It's great proactive risk management, Chuck, on your part for the corporation. Wondering, legally, once the corporation endeavors to replace machine washing hoses, for example, then it's really, essentially, would you say taking the responsibility off the owners from that moment forward?

Chuck:             I'll defer to the lawyers. We don't see it that way and we're not selling it that way to owners. The owners will retain responsibility for ensuring the proper maintenance of their facilities, of their belongings. We're just providing a common schedule of replacement and facilitating that replacement at a collective expense.

Rod:                Right. That's exactly it and at the end of the day your rules can also put some certain sort of restrictions or limitations. So with a rule, fine sense, you could ensure that all the water tanks are replaced every 10 years. You could expect or impose on the owners the obligations to have proper braided hoses from the machine and so on and so forth. So all that Chuck has provided there was a systemized program that owners could opt into. Okay. Wonderful. Graeme, we're running out of time but I want you to give us the good, the bad and the ugly on the insurance deductible bylaw.

Graeme:          I will be very quick and cognizant of time here. As David explained to us earlier, he gave us the default setting under the Act, that said the corporation is usually paying the deductible unless the damages are restricted to a unit and it's caused by an act of the owner, or an omission of the owner. As Tricia explained, we're seeing deductibles rising. We're seeing premiums rising and as claims continue to come in that's going to continue to go up. If we could go to the next slide, one of the things David told us, is that the responsibility to pay for the deductible is something that you can modify by way of a bylaw. That raises question like what if a negligent owner, someone like Graeme who maybe once fell asleep in a tub while it was running, what if something like that happens and it causes damage to his or her unit? Or what if that damage then spreads to another unit? Or worse even, what if spreads to another unit and common elements? These are questions that we need to consider. Who in those circumstances is fair to charge the deductible to? The other question that often arises is, what if it's nobody's fault? Sometimes God isn't happy with the dishwasher and it strikes. Sometimes there's just a flood and no one could have predicted it and no one could have prevented it. So what do you in that circumstance? So what the insurance deductible bylaw does is sets out who's going to be responsible for that deductible cost in these events that I've described. If you go to the next slide it breaks down where the responsibility lies in various events. Again, I know I'm moving fast here and I'm just doing so so we can get to people who are more interesting than me, and rest assured everybody, these slides will be available for you to download. Generally, at least the insurance deductible bylaw that we tend to recommend is one where the owner of the unit is responsible for the deductible if either they're at fault or it's nobody's fault but the damage was sourced from within their unit. Like the dishwasher example I gave. It sucks that it's not your fault but at the same time it sucks more for everybody else having to subsidize that cost. In circumstances where there's no one to blame, and the damage was not sourced from within a unit, well what do we do then? In that circumstance our recommendation tends to be, and what we think is the most fair, is that the units who have been damaged have to share the deductible in that event. Again, it's one of those things where you've got a plug your nose and pay the deductible but you have to ask yourself, as an owner and really as a shareholder in a corporation, are you really wanting to subsidize the insurable events that happen to other units? So, Rod, I went through that pretty quickly, so.

Rod:                I was hoping you would do it en francais, actually.

Graeme:          No. I haven't had any drinks yet.

Rod:                Oh, okay. So I think I want to go over your three scenarios. Someone flushes rice down their toilet and they're clearly at fault. It would be fair for them to pay the deductible. By the way, when we say we shift the deductible to the owner, the owner who's properly insured can shift that, can make a claim and ask their insurer to cover it. Their personal insurer, right? So the first scenario, they're negligent. They flush rice down their toilet. They leave the bathtub running. That's perfect example. Second scenarios, they're not really at fault but they're at the source of it. Their dishwasher leaks. Who should pay for the deductible? What would be fair? And with this bylaw we go back to it sort of comes out of your unit so that would be fair. The scenario that always triggers more discussion is what if the damage to the unit is not the owner's fault and isn't sourced within the unit? There's a pipe that leaks. There's the pool that leaked. There's the roof that leaks. Whatever it is. So the damage is source on a common element but at the end of the day, his unit, my unit, is damaged. Or my unit and Graeme's units are damaged. So the question still remains the same. Who should fairly absorb that deductible in that case? The bylaw we propose is such that it shifts the responsibility of the deductible to the owners whose units have been damaged and that continues to be fair, in the sense that you're going to get a new floor out of it, and it continues to be fair to the rest of the owners who had nothing to do with this incident, and why would they be subsidizing the deductible for damage that affected your unit or my unit? That's sort of how we approach it with our insurance deductible bylaw. But again, we're always only talking about the insurance deductible, and if an owner's properly insured they have the ability to make that claim from their own personal insurance.

Graeme:          Rod, I'm going to quickly jump in because one of the questions that I often get asked, and it's happening in chat now, is what if the corporation is at fault? In the circumstance let's say you live at OCSCC 666 and I'm your director, and I have been ignoring advice that you need to make sure that you're pumping the drains. You need to make sure you're maintaining X,Y or Z and I refuse to. I don't want to. I want to cut costs or I'm lazy or what have you. What this bylaw doesn't do is give a free pass to corporations to ignore their responsibilities. That's not what it does. But what it does is in circumstances where it's nobody's fault, but it's not sourced from within a unit, we feel that it's most fair for the unit owners affected to pay that deductible. That's the reality for homeownership across Ontario.

Rod:                Right. I think that it's important to sort of go back to that's how homeownership and home insurance works in Ontario. Across the board. For anybody else that doesn't live in condo land. So it's not sort of which graph or an obscure concept to have owners insure their own units. It's kind of in line. But you're right. I'm glad you brought it up. The insurance deductible bylaw cannot protect the corporation who is at fault. If the corporation or the directors are at fault then you go back to the corporation. In our survey we asked people if they had an insurance deductible bylaw. 46%25 of those responding said yes. I always am amazed when I get, "I don't know." Most of our responders, those who took the survey are directors, and this is 32%25 of our directors out there don't really know if they have that. You may want to look into it. Okay, now, the standard unit bylaw is the other bylaw we want to talk about. I'm going to say this. Remember what David said initially. David said that the corporation is responsible to repair a unit after damage up to the standard unit. So the question then becomes, what is the standard unit? Now if you include everything in the standard, if your unit includes all the finishes and all the bells and whistles that the developer gave to you, it makes a unit that is more expensive to insure and more expensive to repair. On the other end of the spectrum, if you have nothing in the standard unit, if the standard unit only includes such as Chuck's standard unit when he was talking about the bare box or the bare bones, if nothing is included in the standard, all it means it that each owner is responsible to repair and maintain their own units. So when you look at that spectrum, from the corporation's perspective, which one of the two is more expensive to repair and which one is more expensive to insure? Well obviously the unit that has all the frills and finishes, that one is more expensive to insure and repair and the other one that has less or none of these finishes, is less expensive to repair and to insure. The standard unit bylaw allows you to move the dial here. On one end you include everything. On the other end you include nothing. That's the example that Chuck had with the bare box or bare bones or structural bylaw. Now, in the middle of that range you could include or exclude anything that you want. Some corporations they find that the bare bones model is maybe not very palatable for their owners. So they instead decide let's remove the flooring. Let's remove the cabinetry from the standard unit. Whenever you remove something from the standard unit you're basically shifting the responsibility to repair it to the owner and their insurer. Now, I will say this. If you approach the debate as an investor, if I was a shareholder looking to invest in a condo corporation, I would be far more attracted to the standard unit that is under the bare bones model. I'd more attracted to that because that corporation faces less risks, less costs, less surprises. So if I was an investor I would prefer that. I realize that owners sometimes they kind of, it's a bit odd to them, and they feel like, "Gee, why am I responsible to insure my unit?" Well, because you own it. That's why you're responsible to insure it. But at the end of the day you need to come up with a bylaw that meets the needs and desire of your community. The benefits of a bare bones or bare box standard unit is that, it says here, it reduces the collective insurance cost. I think it's more accurate to say that it keeps under check and I think the graph that Chuck should us a couple of minutes ago speaks volume to that. It will limit the increases more so than result in an actual decrease. You're not going to get a cheque from the insurer next year saying, "Oh gee, you overpaid this year." It is more equitable, as amongst the owners, because every owner is responsible to insure what they own. If I want to have expensive finishes, if I want to have expensive floors, if I want to have expensive cabinetry, why are you paying for that if it gets damaged? So it's more equitable in that sense. It puts the onus on the owners to be more careful. If I know that I'm responsible to repair my unit after damage I'm going to be more careful than if I think I live in this wonderful land where the corporation looks after all my needs and desires. The bare box or bare bones bylaw, in my view, reduces the disputes between various insurers because if you went from middle grounds and excluded the floor, then the owner has to deal with the flooring but the corporation has to deal with the baseboards, and the owner above who's had the source of the damage is also somewhat involved, you may have three insurers that are pointing the finger at one another. I would say this, also, it streamlines the process. If my unit is damaged I turn to my insurer, and I have a relationship with them, and I have a contract with them and I call them and I say, "Okay, my unit is damaged." They come in and they take care of everything. So to me, bringing the insurance regime closer to what is applicable to all the other homes in Ontario, kind of makes sense. That's the bare box or bare bones standard. So that's for that. But again, as I said, both of these bylaws have to be voted on by your owners, and so you need to come up with something that makes sense, and you need to sell it to the owners. Owners need to understand the benefit to them.

We've asked in our survey if you have a standard unit bylaw and 79%25 of the respondents said yes. As you can see, a standard unit bylaw is very popular. But when we've asked them what's included in your bylaw, about 37%25 told us that everything was included in it. About 20%25 indicated that they had a bare box or bare bones standard unit bylaw. In the middle you see people excluding floors and excluding cabinetry. When we say that everybody, or a big bunch, 78%25, have a standard unit bylaw the next question, and the more important question is, what's in your bylaw. I'm going to say this about the group that has included everything in their bylaw. You're missing the point, in my view, of the standard unit bylaw which is to reduce the cost and the risk to the corporation by allocating it to the owners, who can insure at far lesser cost than the corporation. Whenever we present these bylaws to be voted on, what I like to do is I like to go and ask a couple of owners to give me the information about their insurance coverage, their personal insurance. As you can see these owners, you see their premium, and what you'll hear often owners will tell you, "Oh my goodness. My own personal premium is going to explode. It's going to cost too much money." That's not accurate. In fact, and this is the odd part of this discussion is that, most owners are already insured. Both to cover the deductible and to cover their unit, everything in their unit. So the owners are paying twice and they don't realize it. So that's the purpose of these two bylaws is to just shift which insurer will come to the aid of the owner in case of damage.

Oh my goodness. That was so quick. I can't believe how quickly we had to do this but we're kind of on time. Kind of. I'm a minute behind schedule. So what I'm going to do is I'm going to go around the table again. I'm going to thank our speakers, ask you for parting words of wisdom or one last word of advice before we part. After that, for those of you who still have time while your supper is cooking, we're going to drill down on the results of our survey. Panelists, please stick around. I'd loved to hear what you have to say about the survey and the results that we got.

So, going around the table, Tricia, you're a superstar. Tricia Baratta from Gallagher Insurance, thank you so much for helping us understand really all the moving parts of the condominium insurance and how it works. Any words of wisdom before we part, Tricia?

Tricia:              Words of wisdom, I think I would say remember that your broker and your property manager are your allies, they are your teammates. They are working doing their very best to get the best possible results in renewals for your corporation. Open communication and transparency amongst the three is very important. Make sure that you have that conversation. You ask those questions and you realize that the broker and the property manager aren't necessarily in control of the outcome. They are doing everything in their power to assist.

Rod:                Wonderful.

Tricia:              Thanks for having me.

Rod:                Thank you. Chuck Davies, President at 882. I gotta tell you something. Our AGM is next week. People can run from the floor. If you have nothing to do next week you can join our AGM and maybe we can elect you at our board of director. Thank you so much, Chuck. I really appreciate your input and your experience. Any words of wisdom or parting words before we go?

Chuck:             I've been looking at the Q&A and the chat and there are some folks who have not had questions answered and are perhaps a little unhappy about that. My advice is to recognize that not all these questions have immediate, simple, quick answers and so maybe there is some way we can do follow ups with some of you who would like more deep dives into some of these questions.

Rod:                Right. You're right. Unfortunately we can't answer very specific questions but I'm going to have a look at the Q&As that came up and we'll see if there's a way to either share answers or maybe what we could do is pick the best questions and then reconvene the panel and maybe tackle some of these questions. We really wanted to give you sort of the base, the starting point. Okay, thank you so much, Chuck.  Stacey Kurck, FirstService Residential, thank you so much for joining us. This is the first time for you on this webinar. Thanks so much. Any words of wisdom before we part?

Stacey:            Thank you for having me. It's great to see a board member and insurance participate with lawyers and management, I think it was a great team. The parting words is a standard unit bylaw. Really. If you don't have one, or if you don't know if you have one, what's in it, look at it and either update it or get one for your corporation. I go with Tricia's words too, let's work together. Right? It's all about working together. Absolutely.

Rod:                Thank you so much again, Stacey, for joining us. Now our two favourite condo twins. Graeme MacPherson, parting words of wisdom?

Graeme:          It's kind of along the same lines that Stacey said. For any owners listening it's important that you are aware of what your governing documents are. So I encourage you to check out if you do have a standard unit bylaw, if you do have an insurance deductible bylaw, take a look and really make sure that you do have adequate coverage on your end. So that's something you can talk to your broker with about as well. Just staying informed is certainly something. That's my word of wisdom.

Rod:                Wonderful. Thank you so much. David Plotkin, condo lawyer with Gowling WLG, you have 15 seconds, Super Dave.

David:              For sure. Now that we're all being ordered to stay at home, and stay at home harder even though we're all staying at home already, be like Chuck and start thinking about preventative measures that your corporation can take or that you as an unit owner could take as well to limit your risks. I know Jason Reid has spoken a lot about the increase in fire and water damage that's happened with everyone staying home. Things to think about.

Rod:                I think your neighbours have tapped into your WiFi, David. There was a bit of garble but that's good. I think we made most of it. So our next webinar is Wednesday, May 5, and will be posted on CondoAdvisor. When you click on this you'll be able to register. If you have ideas of topics, if you have questions, if you want us to tackle something, please feel free to share those with us. Again, you'll need to register. In a couple of days I'll set up the new registration link. So that's about it for us. Wash your hands, wear masks, you know the drill. Be kind to one another and we'll see you in a month from now. And, again, people if you want to stick around I will share with you our survey result in a minute. Take care. See you on the other side.