Condo Adviser, épisode 44 : les assurances dans le monde des copropriétés (en anglais)

ROD ESCAYOLA: Good evening, everybody. My name is Rod Escayola, and I am your condominium lawyer with Gowling WLG. Welcome to-- is this the first of the year? Yeah, the first episode of 2024. We skipped January, because we were busy digesting turkey. And so here we are in February, February 7th, 2024.

Tonight, a very popular topic. Just by the looks at the numbers, it is a very popular topic because it's the most misunderstood topic that there is I think in the condo industry I would think. Not a day goes by without a client asking us an insurance question.

Not a day goes by without a client says, who pays for the damage? Who pays for the deductible? What happens with the improvements? And not a day goes by where we don't answer, it depends. That is our usual answer, and hopefully tonight we'll be able to clarify this question.

Now, to be able to clarify the question, I have invited-- you wouldn't believe it. I'm so excited about the people we have on the line tonight. I've invited all sorts of esteemed, very knowledgeable people. Some of them, you'll recognize. And so without further ado, I will introduce them. Now, I wanted to come up with a theme to introduce them tonight, as we used to do.

And I thought I would make a link to The Lion King. And I would refer to all these people using their Lion King character name, but Nailah evidently a millennial, told me that was too 1998 and that was too old. And so we went with for something else. We went for a far more recent movie, Encanto.

And in fact, we chose that movie because it's all about the magic house. And so we thought, how fitting. So there it is. Let's go around the table briefly, and I'll introduce our speakers and then I'll put on the screen-- I guess I should have put the Encanto picture for this part. And so the first person that we have around the table, we've had her before, almost three years

Ago. I can't believe it's been this long. We haven't had her three years ago. It's Tricia Baratta, she's, with Gallagher Insurance. And her Encanto spirit character is Mirabel. Mirabel is the main character. She has the keys to the house, and you kind of look like her actually Tricia, kind of. So welcome, thanks for joining us.

TRICIA BARATTA: Thanks for having me.

ROD ESCAYOLA: The next character that we have is-- well, the speaker that we have is Jose Deslongchamps. Deslongchamps is with Apollo CI Management in Ottawa, and her Disney spirit character is Dolores.

Dolores, her magical powers are that she can hear everything. Welcome aboard, Josee. I think well, she can hear, but she's muted apparently. OK, the next person that we have on the line is-- she is muted, is--

SPEAKER 1: [INAUDIBLE]

ROD ESCAYOLA: Murray Johnson. Murray, I'm so excited to have you again as a guest, a recurring guest. He's with the crossbridge, and his Disney character is no one other than-- let me see here, Mariano, the romantic man that everybody loves.

SPEAKER 2: Okay, so

SPEAKER 3: The resemblance is uncanny.

SPEAKER 2: one to one, you can't tell them apart.

ROD ESCAYOLA: Yeah, and now, Nailah Ramsoomair, Condo Lawyer, extraordinaire with Gowling WLG. Getting really comfortable with the team and the team with her. And her Disney character is Isabella, because her magical power is to make everything pretty apparently. OK, so there it is. Graeme, I didn't forget about you. Graeme's Disney character is Bruno, because he lives in the walls. He knows and hears everything.

SPEAKER 4: [INAUDIBLE]

ROD ESCAYOLA: That was you before the beard I think.

GRAEME MACPHERSON: Yeah, exactly.

SPEAKER 5: OK, so

GRAEME MACPHERSON: After this broadcast, I'll crawl back into my wall hole.

ROD ESCAYOLA: That's right, so this is it for the characters and for the introduction. Thank you so much for joining us. The usual housekeeping things, the chat has been turned on. Feel free to say hi and to ask questions, and to comment and keep it alive. That's always fun to see, the various questions that come up.

Although every time that one of you writes something, there is a square that appears on my screen and it's actually blocking my notes, so I'm kind of flying half blind. Usual disclaimers, for those watching this webinar, first, we are focused on Ontario legislation and Ontario reality. So if you're watching this from anywhere else outside of Ontario, lucky you, but this may not apply to you.

Also, keep in mind that what we present today is just general information. You absolutely need to bring the specific questions that you have to your advisor. Be them lawyers, manager, insurance provider, your insurance broker. You have to bring these questions back to them, because they will give you the answer that actually fits your specific situation.

Finally, what else do I need to say? I need to say that this has been filmed on February 7th 2024. And so therefore if you watch this later when you have nothing else to do, this weekend for instance, do know that some information may get stale as the time goes by. OK, there it is. Let's dive in, folks. Let's move here, let's go with this. So what we're going to do here-- oh, Tricia your hand is up.

TRICIA BARATTA: Yeah, there's a couple notes in the chat. People are asking if you could show them the list of speakers, without all the pretty Disney characters on top.

ROD ESCAYOLA: Look at that. Yes, I can do that. And good news, everybody, we will post this webinar on the Condo Advisor website. You will get to see also, and you'll be able to download the actual presentation.

So you'll be able to see these good speakers that we have. And at the end of the slide deck, there's an actual way to reach them. Sorry about that, folks. I didn't tell you that before ahead of time, Tricia. But there it is, people will be able to track you down. OK, Disney characters. Let's go here, let's dive in.

So what we're going to do first, we're going to start higher level and then we're going to drill down. And let's first go with some general statement. What is the default setting under the Condominium Act? And that's going to be covered by Nailah. But you'll see that if there's a default setting, that means that there's all sorts of exceptions and permutations, and all sorts of other layers that you need to look at. But what is the default setting? So let's start with this, Nailah, what insurance are condo corporations required to have?

NAILAH RAMSOOMAIR: Yeah, for sure. So the act lists certain types of insurance that the corporation should have. So you'll see them on the screen. We're going to start off with talking about property insurance first and foremost.

So for more information on that, you look specifically at Section 99 of the Condominium Act, which essentially says-- it protects against damages to units, and common elements caused by major perils. So major, major perils, that's defined in 99 (ii) of the act or in your declaration.

So examples of that would be for example, fire, lightning, smoke, a windstorm, impact by aircraft evidently. So anything that you see on the list here, but it does not include the obligation to insure damage to improvements made to the unit. So that's an important part with the property insurance.

ROD ESCAYOLA: OK, and before we switch to the next kind of insurance that you need to have, it's important to pay attention to the wording in the act. And you will see for instance under Section 99, that it provides that the corporation shall obtain and maintain insurance.

Like that's an obligation, you shall do it. And you'll see that's important because there's a bit of a variation on the next slide here. So that's for property insurance. What else do we need to get insurance-wise Nailah?

NAILAH RAMSOOMAIR: Yeah, so you'll see the next two over here. We have liability insurance Section 102, and then insurance for directors and officers, that's at Section 39. So in terms of liability insurance, that's resulting from breaches of duty to keep the common area safe. So the corporation is essentially responsible for the common elements.

So if for example, a unit owner slips and falls on a common element, the corporation would be held liable for that. So that protects against that. There's also reference here to machinery, pressure vehicles and motor vehicles. And then we also have directors and officers. So Section 30--

ROD ESCAYOLA: Oh, yeah, I'll stop you there. So under Section 102, there's also an absolute requirement to get that, because Section 102 provides that the corporation shall obtain and maintain. So that's another one where you have no choice, but to get that. And then you're moving on to Section 39?

NAILAH RAMSOOMAIR: Yeah, so this is just when insurance is reasonably available. So this is different from the other two that Rod mentioned before. So director and officer liability is essentially for protecting directors and officers, from being held personally liable in the course of carrying out their duties.

ROD ESCAYOLA: Right, and so this one, the distinction with this one is it says something like, if the insurance is reasonably available, the corporation shall purchase, blah, blah, blah. I know we didn't rehearse this yesterday, Tricia, but in what context would we as a condo corporation have motor vehicle insurance? Like when does that apply, do you know?

TRICIA BARATTA: I have not seen a condo corporation with motor vehicle insurance, but the one portion that it might be referring to, is the non owned auto. And that's an endorsement that comes on most, if not all commercial policies.

And what it does, is it protects against liability if there is in fact an automobile used for the business or the operations of a condominium corporation, and there happens to be a third party bodily injury or property damage associated with it. So this will be noted. You'll have the GL stuff, the general liability stuff and it'll be included in that package.

ROD ESCAYOLA: OK, so your description reminded me of a very fancy condo in Toronto, where they had a shuttle bringing people to work. And so that may be referring to that. OK, I think [INAUDIBLE].

TRICIA BARATTA: They don't necessarily have to own the vehicle. It's just, they use it as part of their operations. It's just an extra layer of coverage.

ROD ESCAYOLA: OK, and some people in the chat are, evidently, you folks live La Vida Loca wherever you're at, with all sorts of fancy things. Some of you reminded us that there's valet parking in some condos, OK.

Wonderful, that's great. Not where I live, but I'm not complaining, am I? I'm not jealous. OK, so Tricia, I'm going to turn to you now. I did steal-- it's not stealing if I give credit to whoever's behind this beautiful chart, it's InsurEye. And so there's the credit to these people.

And so can you maybe walk us through this insurance chart, to help us understand-- oops, let me just move this here, to help us understand, what does it mean? All this insurance that we spoke about, what does it mean? So first, let's tackle the insurance that the owners should have, and then we'll move to the insurance that the corporation should have.

TRICIA BARATTA: Yes, absolutely. So the condo corporation, as Nailah mentioned, has responsibilities and shall under the act have certain coverages. It doesn't however, require or say in the act, unit owners shall have a unit owner coverage, but this is what we want to see. This is what every unit owner should be looking for on their unit owner policy.

And what that includes and should include is betterments and improvements. This is anything above the standard unit, description within the standard unit by law, if you have one. And I hope you do. If you don't, then that's a whole other webinar, and I'm happy to participate in that one as well. But this is anything that has been done to the unit, that's above and beyond the standard.

So we're talking about upgraded countertops, lighting, flooring, et cetera. That's the responsibility of the unit owner to insure. Contents, we also call those chattels. This is stuff that is not attached to the unit, so your appliances, your clothing, your furniture, anything that has any sort of value to you, the condo corporation is not responsible to insure that, you are.

Third-party liability, this is strictly for the interior of the unit. So the condo corporation as we'll see moving forward, is responsible for third-party liability outside of the unit, within the common elements. But the unit owner policy is in place to protect that unit owner for any third-party liability.

So we're talking about a visitor to the unit, that either is injured or has damage to their property as a result of being in that unit. Deductible and loss assessment coverage is coverage for if the insured, if the unit owner happens to be charged back a deductible for a claim that has happened within the condo corporation.

And we'll talk later about the deductible by law. But in the Condo Act, there is a requirement or an ability for a condo to put that deductible back on a unit owner, depending on circumstances. And there's coverage in there, and available to a unit owner for that.

And loss assessment is coverage for, if the condo corporation cannot make a claim for a loss and they have to go to the unit owners to collect for repairs in response to a loss, that coverage is in place as well. And then additional living expenses.

This one is huge because there's lots of people saying, the condo corporation should be paying for me to move out of my unit, if there's damage to my unit. But the condo corporation is not able, and cannot have that coverage. It's not part of what they're required to have.

So if you need to move out of a unit because of repairs happening in a unit, you want that additional living expense in the unit owner policy. And then if there's a locker, if there's a parking space, if there's any sort of storage that's allocated directly to a unit, you want to make sure that coverage for whatever is inside that area is in your policy as well.

ROD ESCAYOLA: OK, so this is a lot of information, but what's important-- well, it's all important. What's important to remember is something you said at the beginning, so this is what an owner should get to cover their risks, their liability.

The important element to keep in mind is that the Condo Act cannot or does not-- I shouldn't say cannot, the Condo Act does not impose that obligation on an owner. So if an owner is silly enough not to have this, then I mean, it's their problem to resolve.

And it's important for owners to these various headings, because basically, if we're putting this insurance requirement on your ledger, it means that the corporation is not going to pay for it. The corporation is actually not insuring any of that. You're on your own for this. For the improvements to your unit, the content of your unit,

The cost to put you in a hotel when there's a massive glycol leak in your condo corporation that affects seven floors, that was very oddly specific I should say. OK, and so let's move on to the next one. So this now is the corporation's responsibility to insure. And this is what Nailah was talking about. So walk us through these various protections that we get through insurance.

TRICIA BARATTA: OK, so the condo corporation is required to have property coverage. This is coverage for the common elements. This is coverage for-- if you're in a high rise, this is the common foyer, hallways, amenities, the roof, the building envelope, et cetera. But also, if there's a standard unit description or a standard unit bylaw registered, it also includes those standard unit finishes.

So everything in that unit that's covered in the event of an insurable loss, that is also part of what the condominium corporation's policy must cover. Basically, if it is listed in the reserve fund study plan, it also is something that the condo corporation must insure. So there's a couple of places to look for, for what's included in the common elements and the standard unit.

And then general liability, we hear about this all the time. This is to protect the condo corporation. If someone is to have a bodily injury situation or property damage-- this is not us. This is not us as the unit owners or the corporation, this is when people come on to the condo property.

It is utilized for residents, if they happen to be injured and sue the condo corporation as well. But ultimately, what it is for, is for third parties people that are not residents of the property, if they get injured or have property damage as a result of being on the common elements.

Boiler and machinery coverage is coverage for those loss or damage resulting from the failure of a piece of equipment. This is HVAC units, elevators, generators, electrical transformers. And believe it or not we have seen claims where there is a failure of such equipment, set in an accidental, that will come later.

Set in an accidental failure, and the resulting damage isn't covered by a condo policy because they don't have boiler and machinery coverage. So that's extremely important to have, regardless of what kind of condo you live in.

Directors and officers liability, Nailah mentioned, this is to protect the directors for doing what they do as a volunteer in helping to manage a condo corporation and all that goes with it. We are all human. They're volunteers, they could make mistakes. This is coverage in place for that confidence, so that they can do what they do.

And then privacy and cyber liability, this is highly contested. I argue this with brokers, with my clients. Everybody touches a piece of IT, a piece of smart equipment and there is a possibility of private information being lost or being hacked. And therefore, coverage in place for that is important.

The other two that I'll mention that are not required-- so this privacy and cyber liability is not a requirement of the act, but it is recommended. The other that is recommended is legal expense insurance. It's not covered here, but is highly recommended, if there are losses that are non insurable and you do need either legal advice or need to go to small claims court.

And then the other one, which is now escaping me, oh, crime and fidelity. So you need to protect, you need to protect the finances of the condo corporation from an employee, a manager, someone that might have access, that could potentially cause financial hardship to the condo corporation.

ROD ESCAYOLA: What's your first one? I missed it, because I'm going to update this slide.

TRICIA BARATTA: Legal expense.

ROD ESCAYOLA: No, the one before. I love that one, but the one before.

TRICIA BARATTA: Cyber, it's on there already.

ROD ESCAYOLA: OK, I thought there was another one that I missed. OK, perfect. So I'll add that. So a couple of questions that came into the chat, somebody asked me, what are the numbers that we see appearing? It's because , where I borrowed this beautiful slide, these numbers refer to the boxes that I've recreated to the side. So don't look at the man behind the curtain.

And then somebody asks us, who's responsible for things in the wall? We're going to talk about that. Mostly about the damage that results from things behind the wall, more so than what's behind the wall. And somebody has asked, what if the corporation has a bylaw requiring owner insurance to have property insurance? Does that then become mandatory? Graeme do you want to try that or?

GRAEME MACPHERSON: That's a bit of a crunchy question. We sometimes get that question actually. And it's important to remember that in order for the corporation to have a bylaw mandating something, we have to always keep in mind, well, under what authority can this bylaw exist? And bylaws can only do things that the act says they can do.

And the list of things that the act says bylaws can do is set out at Section 56 of the Act. And nowhere in Section 56 for example, does it suggest that it would be possible to make a bylaw requiring owners to have insurance.

And that's often why we see in declarations-- I'm prepared that most, if not all of the audience members here, if they look at their declaration, it will say, here's what the corporation must have for insurance. And here's what owners, if they have insurance, must have, if they have it. If they decide that they can or should.

So it's one of those things where something like that may not be strictly enforceable, and I don't think putting all of your eggs into that basket and thinking that that will provide adequate protection is the safest play. I'll put it that way.

ROD ESCAYOLA: Wonderful, couldn't have said it better. OK, now let's dive into a couple of definitions, to keep demystifying this beast that is the condo industry. And again, Tricia, you're in the hot seat again. There's a couple of these. Maybe let's go through them.

TRICIA BARATTA: Sure, so I'll try to keep it quick, high level, but again, I'm willing to answer questions later on if needed. So premium, how do we get a premium? So the premium is-- the calculation is the total insured value, we call it TIV, so the total insured value.

So let's say a building is worth $100 million, we're going to do a calculation and apply a rate to it. And that's how we get a premium. The premium will vary depending on the coverage type, and the rate will vary depending on the coverage type. We've got different coverage types.

We've got property, we've got general liability, we have directors and officers, et cetera, as we showed in the previous slides. So premium is the number the dollar value that the condo corporation is going to pay for the entire policy, that's the dollar value and we get it through rate, yeah.

ROD ESCAYOLA: Right, so that's what we the corporation are going to pay our insurer to provide us with the various insurance we've seen, right?

TRICIA BARATTA: Yeah, and there's some reasoning that goes behind the rate and how we get the rate. So again, the total insured value of the property, you're going to have a higher premium if you have a higher total insured value. If you've got 100 million, you're going to pay more than if you have a $50 million property.

Again, the CGL limits, the general liability limits. If you want $5 million in coverage, it's going to cost less than if you want $10 million in coverage. The building components really make a difference as well, so we have ratings for fire resistive.

When the building is built, when you have a high rise and it's built of mostly concrete, and you've got fire separation between units, it is going to have a different rate or a lower rate than those town homes or those low rises that are built mainly frame or wood frame.

Building components are going to impact the premium. If you've got sprinklers in the entire building, if every square inch of that property is sprinklered, then your premium is going to be lower than if it's not. And then the other things that impact are the geographic location.

If it's near a flood zone, a quake, as we know from the Ottawa area, wind, et cetera, the premium will be affected by that. And then your loss experience. If you've got a high loss experience, you're going to have surcharges and it's going to impact your premium.

ROD ESCAYOLA: And everything else that happens in the world, the fires in Fort McMurray, the floods wherever else, the tornadoes in Eastern Ontario, et cetera, et cetera. OK, deductible .What is the deductible?

TRICIA BARATTA: The deductible is the self-insured portion of a loss. And it most often it's different depending on the coverage type. So all your property is going to have one type of deductible. Your sewer backup is going to have its own deductible.

Your earthquake is going to have a separate deductible, and that's basically what you are going to pay as a condo corporation in a loss. You are going to pay that portion, and then the insurance company is going to pay the rest.

It varies by coverage type as I said, and the deductible can be the responsibility of the corporation or the unit owner, depending on the cause of loss or what bylaws might be in place and what they stipulate. The things that impact the deductible will be again, the total insured value.

If you have a $100 million building and it's 27 floors, the likelihood of a water loss causing big damage is higher because you've got a lot of units stacked on top of each other. So you're likely to have a higher deductible for water damage than let's say, a frame town home style of condo corporation for water damage.

Construction makes a difference as well. The building components, have you got aluminum wiring in your property? Then you're probably going to have a higher deductible because the risk is higher.

ROD ESCAYOLA: So the

TRICIA BARATTA: And then again like location, like flood, wind, quake, that will ultimately determine what the deductible will be.

ROD ESCAYOLA: Right, so the deductible is the portion that the insurer will not pay, and we'll talk in a minute about who pays that. So that's the first portion. If you make a claim, you're not going to pay that and the corporation will be on the hook for that first part.

And just to put an example of a certificate on the screen here, you can see that there's various deductible, depending on what is the peril being insured against. So in the case of this corporation, then if there's a sewer backup, the insurer will not pay the first 50,000.

If it's water related, they won't pay the first 50,000, same with the flood. The deductible means that if there's an earthquake, this corporation will have to pay the first $150,000 and so on and so forth. So that's for that. Very briefly, what's the loss ratio?

TRICIA BARATTA: The loss ratio, it's the portion or the incurred losses for a condo or a corporation, what costs save the insurance company has paid out within a certain period of time, versus the amount of premium that they've paid. So if you paid $100,000 in premium this year and they had to pay $200,000 in losses, then you're going to have a high loss ratio.

And a high loss ratio is not good, you're going to get a higher rate. You're going to get surcharges associated with that loss ratio. So the fewer losses and the lower costs that the insurance company has had to pay out, the better your loss ratio, the better your premium.

ROD ESCAYOLA: OK, I want to go back to the deductible because I had a note here, to try to do a very informal poll. And I'll turn to both Murray and Josee, to get a sense of what they've seen in the industry in the last couple of years. Like what do deductibles look like? And how have they evolved? So I'm going to start with you Murray .

MURRAY JOHNSON: Sure, some time ago-- and I'm going back maybe four or five years, we were seeing water loss deductibles, which is the most common one. We were seeing them around $5,000 to $10,000. And then the market went through the correction, and suddenly we started seeing deductibles in the range of $25,000 to 50,000.

That might be the new norm, but then I know we have a lot of clients that have deductibles that are in excess of $100,000. So it's quite a new landscape these days.

ROD ESCAYOLA: Right, and what do we see in Ottawa and the Eastern Ontario region, Josee?

JOSEE DESLONGCHAMPS: Very similar, you used to be able to still get a deductible about $5,000, $10,000 for water. You still see the odd 10,000, it's very unusual. Though 25, 50 is more normal. I've seen 75 and 100 though on the Ottawa market for water damage. So they're on the rise.

ROD ESCAYOLA: And so there's a question from Arlene. In a minute, we're going to talk about who pays the deductible and how you budget for that. But I take it-- I wonder if this is true or maybe I'm oversimplifying this, Tricia, maybe a higher deductible has a positive impact on the premium. Does that lower the premium because they know that they're not going to be stuck with the first $50,000 or $100,000 worth of claims? Is there a correlation?

TRICIA BARATTA: There absolutely is a correlation. It's not necessarily true that you'll see that correlation year one after a big loss. They're likely going to put up the deductible year one after a big loss, in order to recoup-- to stop you from making claims.

And ultimately, they're in business to make money. But then yes, you are going to see, there is available premium savings when you up a deductible. So that does come into place, not immediately after a loss, but you can opt for a higher deductible.

ROD ESCAYOLA: I am shocked to hear that they're in the business of making money. I'm shocked. You should have seen our numbers, everybody left the webinar, what happened? So Tricia, what's

TRICIA BARATTA: Don't shoot the messenger. I'm not the insurance company, just to clarify.

ROD ESCAYOLA: I know, tell us a bit more about subrogation, what is that in the condo world, but in the insurance world?

TRICIA BARATTA: Yeah, subrogation is the process of collecting damages from a responsible third party. So we've got a condo that's had a big loss, and it's a result of for example, a plumber coming in for a unit owner and not doing the repair correctly. And it results in fitting coming loose, and damaging six units below.

The condo corporation will have to take that claim and run with it, and their insurance company will pay for that. But then their insurance company is going to knock on the door of that responsible third party, they're going to say, hey Joe plumber, you did some damage to this property.

We want you to basically give us back some of that loss. And they'll go to Joe plumber's insurance company, because Joe plumber is insured because we made sure of that before we let them do work in our building.

And that the condo insurance company is going to recoup some of that loss and it's going to help us a lower our loss ratio. So if our condo corporation pays a $100,000, our insurance company is going to go and do it for us. We don't have to do it. They're going to knock on Joe plumber's insurance company's door and say, we want some back.

Maybe we get 80,000 back, then we're only in for a $20,000 payout. On our policy and our loss ratio as we talked before, amounts paid out versus premium, it's better and we get less of a surcharge, less of a hit on our premium.

ROD ESCAYOLA: Right, so the condo corporation's insurer pays the condo for the damage or pays to repair the damage in the condo. They turn around and they try to recoup from a third party that's responsible, that's basically what subrogation is.

And a question we often hear-- and I'm not sure if this is where we talk about that, Tricia, but sometimes what I hear-- a condo corporation, what they tell me is, we know it's Joe plumber that caused the damage. And so rather than make a claim to our insurer, we're going to sue Joe plumber ourselves. Well, first we're going to try to negotiate, and then we're going to sue.

And in most cases, it may not be a very good idea. I mean, let the insurer do that for you. If they think that they can recoup the funds, make the claim, get the funds from the insurance company and let them do the subrogation part.

Now, it's not always 100% true, in the sense that there may be cases where you wouldn't have made a claim anyways. You're within your deductible, so you would not have claimed from your insurer. And so that may be a situation where you want to negotiate with Joe plumber. Or I mean, if worse comes to worse, you may want to sue Joe plumber.

And it also is going to depend on the amount at play. There's tons of situation where you may be spending good money in a hope to get some good money against bad money kind of thing. OK, co-insurance, this is something else that's of interest. There appears to be a raging debate in the industry at the condo level, regarding whether a co-insurance is a good strategy. And so what is co-insurance? How does that work?

TRICIA BARATTA: Co-insurance is a clause that the insurance companies put in an insurance, insuring agreement or in a policy that is related just to the property coverage. And it requires that the insured-- in our case, it's the condo corporation, insures up to a certain percentage of the total insured value, again, that TIV.

And in most cases, what we see is an 80% or a 90% co-insurance clause. And it means that as the insured, if you're a homeowner or you're a business owner or a condo corporation, if you see that 90% co-insurance, it says that you must insure your property up to 90% of its total insured value.

So what they'll do is they'll say, there's a 90% co-insurance clause on your policy, so you must ensure up to 90% of the total insured value. And if you do not, there is a penalty involved if you have a loss.

And I'm not talking about a total loss, I'm talking about, if you have a $25,000 loss and the insurance company says, I don't think you're insuring the value, they can go and do an appraisal on their own. And they can ultimately do this fandangled formula and say, you're not insured to value. Your policy as a 90% co-insurance clause, and you're not up to 90%.

And therefore, we are only giving you a portion of that loss back, and you're responsible for a portion of that loss. What we see is that, if we do updated appraisals-- we're going to talk about appraisals next, appraisals will help with that.

If you can say, I know within 12 months how much the total insured value of my property is, then the insurance company doesn't necessarily do that, their own little appraisal on the side and come after you. Because you've shown them, we know what our total insured value is. So the 90% or the 80% co-insurance clause is invalid. It's not in play.

ROD ESCAYOLA: Right, so if you're not insured for 100% or 90% in the case that you indicated, where the co-insurance threshold is 90%-- if you're not insured 90% or 100% of the value of the building let's say and there's a claim, the insurer may say you're under-insured.

And so we are going to prorate based on some calculation. And we're not going to give you 100% of whatever we would have given you otherwise, because you weren't insured at 100%. Now, what I think I'm hearing is that, some people are kind of playing with that.

And they're looking at this and saying, OK, well, I only have to be insured at 90%, and that's not going to offend-- as long as I'm at 90% plus, I'm not going to offend or trigger the co-insurance clause.

And by doing that, I guess the game and the gamble that they're paying is that, it's going to be slightly less expensive for me to be insured. That is a very dangerous game to play. And I'm not sure-- well, I certainly wouldn't recommend it, but I'm not sure. Anyways

TRICIA BARATTA: Murray has a pretty good explanation, and a pretty good stance on that, Murray.

MURRAY JOHNSON: Yeah, co-insurance, I mean, part of what we see out there-- and it's really sad to say, is that there are a disproportionate number of owners who don't carry insurance. And now you're into a whole different problem, right, Tricia?

TRICIA BARATTA: Mm-hmm.

MURRAY JOHNSON: And then you've gone beyond co-insurance here. Now, you've got an owner that's going to be or could be responsible for the entire deductible or the cost of repair, whichever is less.

ROD ESCAYOLA: Right, and I think yesterday, the sentence you coined was, it's a dangerous way of attempting to control your premium. That's how you reacted yesterday to co-insurance. OK, anyways, enough about that. Let's move on to appraisals, and you spoke about that a minute ago, Tricia. So well, what it is, but also, how often should we get an appraisal? And why do we do appraisals?

TRICIA BARATTA: An appraisal is a third party professional coming into the property, and doing an investigation of the building itself, the building. So if you're a town home or if you're a high rise or multi-buildings, they come in and they give a true assessment with current rating, current costs of replacement for each different component of a building or buildings. And they'll tell you what that TIV is, what that total insured value is.

And then that's something that you can provide to your insurance broker, and they can confidently go to the insurance company and say, this is how much it would cost today, if we had a total loss on this property. And again, this is a third party, a true third party professional. This is not the insurance broker doing this for you. This is a professional that has lots of experience and lots of education to do it.

ROD ESCAYOLA: Right, and if I go back to my example of this condo corporation here, in this case, the latest appraisal identified the fact that if they were to rebuild the whole tower, it would cost $31.5 million.

And so this number is obtained by getting an appraisal done, and this number informs or influence or has a drastic impact on the premium, on the deductible, on the coverage and so on and so forth. So we need to know what's the value, if in fact this building was totally destroyed I guess that's--

TRICIA BARATTA: And it takes away that total issue of a 90% or an 80% co-insurance. It just takes away co-insurance in totality.

ROD ESCAYOLA: Right, OK. Go ahead.

MURRAY JOHNSON: And it's cheap. Getting evaluation done of the property is fairly cheap. For around $1,000, you can purchase a three-year plan where they update it each year. And that's really cheap. Just imagine that if you just let inflation take over, you could actually be underinsured or overinsured. In either way, there's a risk there, a financial risk.

ROD ESCAYOLA: Right, Josee, how often do we do these appraisals?

JOSEE DESLONGCHAMPS: Biannually is probably what you're going to see in Ottawa. A long time ago, you could go three, maybe four years, but the market changes quite quickly. Conditions and everything is changing so quickly.

It's a good idea to do it at least every other year, but Murray is right, most of the Ottawa firms will also offer a three or four year plan, where the original assessor comes back to do just a mathematical analysis on year two and year three. We're talking hundreds of dollars per year, this is not where you want to save money. It's not going to save you money in the long term. You want to invest in this one.

ROD ESCAYOLA: Right, Graeme, I think you mentioned something yesterday about declarations providing some guidance on how often we do this.

GRAEME MACPHERSON: Yeah, I echo what Josee and Murray said. This is not where you want to save your money. But even for anyone who really is trying to keep that $100 in the corporation's pocket rather than get the appraisal, you may not in some circumstances have a choice.

Some declarations-- and I think it's more of a newer trend, but some declarations are imposing requirements to get appraisals done within a certain time frame with regularity. So it may not be something that you even are able to skip if you want to.

So check out, if it's something that you're on the fence about again, I don't think you should be. I think you should just get your corporation appraised at the rate that has been indicated here. But if you are on the fence about it at the very least, check your declaration. Make sure that you're not off side of that.

ROD ESCAYOLA: OK, wonderful.

MURRAY JOHNSON: Yeah, and there was a question in there, when should you do it? And I think you want to time it so that you get that valuation maybe about two months before your policy runs out. So you can get that information to your broker, not at the last minute, but with lots of lead time.

ROD ESCAYOLA: Right, I'm glad you brought that up actually. And I experienced that at my own condo, where the two things coincided and happened at the same time. And so we got the premium, we signed the contract.

We renewed the policy, and then suddenly they realized, oh my goodness, the appraisal just came in and the value of your condo or the cost to rebuild your condo has tremendously increased. So now this policy is no longer covering you for that.

This policy is covering you for the prior amount that we knew. So then we had to bump up the premium. Maybe can you help us demystify the various insurable perils. And I mean, some of them are quite obvious, but I'm interested in water escape and floods, and all these ones related to water.

TRICIA BARATTA: For sure, important to start in that apparel is sudden and accidental fortuitous. It's something that we don't see coming, it's possible. We know it's possible. We know pipes burst. We know that sewers back up. We know that fires happen as a result of various causes, but it is sudden and accidental. We can't predict it.

We don't know when it's going to happen, and that's important to note. The major perils as we noted earlier, include, fire, water, vehicle impact, aircraft impact. Unfortunately, that's now in there, earthquake. Fire is self-explanatory.

Water is confusing for people, and that's because as we talked about yesterday, water, people say, I had a flood in my unit. We didn't have a flood in your unit. You had a water loss in your unit. That's a word that gets thrown around, but water floods, sewer backups, surface water, those are all different scenarios that happen.

And water would be a typical if you had overflowed the bathtub and there's water damage, we see people have ruptured water tanks or fish tanks in their units, that is definitely a water loss. But then we talk about flood. Flood is a breaking out or an overflow of a natural or artificial body of water. Flood is a body of water.

So we don't have a body of water within our units. We don't have a flood in our unit. We have a water loss in our unit. Sewer backup is the backup or overflow of water from inside a pipe, or a drain or a sewer. , A drain it has to be located inside a building. And then again, septic tanks, sump pumps sewers.

And then fairly recently over the last few years, we've included or insurers have included surface water, which is natural or basically water diffused over the surface of the ground. And we see this from let's say above ground pool bursts, or we have that 100 year storm that we have every other year.

And water has nowhere to go and it sits on top of the ground and it comes in window wells, and that sort of thing. So that's surface water. And then we also have earthquake. Again, it's different in all areas, what perils are actually really important to insure against, but hopefully that clears that up for you, Rod.

ROD ESCAYOLA: OK, wonderful. Guess what? We're totally running out of time. And so I've made a decision that we're going to have a SQL, and we're going to have to re-invite all of these people maybe next month actually for the bylaw portion of it, because we're going to run out of time. But I want to complete this segment. without rushing it.

So what we're going to do is, Nailah, I'm going to turn to you. Now that we have all the moving parts and all the bricks to build this wall, Nailah, I'll turn to you, for you to tell us, what is the default setting under the act? So we know what insurance we need. We know what we need to be insured against. We know how we get the insurance, how we get the appraisal.

So an insurable event happens, whatever it's going to be. There's a glycol leak that's coming from the-- again, from the penthouse. And so tell us who's-- and that's the question we get the most often. My most read blog post is, who's responsible to pay for water damage in my unit? By far, this is the blog post that everybody reads the most. Nailah, take it away. Who's responsible to pay in the event of an insurable event?

NAILAH RAMSOOMAIR: Well, so Section 90 of the Act is going to state that, owners are responsible for maintaining their unit and the corporation's responsible for maintaining common elements. But if you look at Section 89, it says that the corporation shall repair units and common elements after damage.

And when we speak about damage, that's an insurable event. Not damage from use or wear and tear, so just note that. So that's kind of your default setting, is that the corporation is responsible for that. But you need to then look at your declaration. Because your declaration may say something different, and it may shift that responsibility back to the owner, so that's different from what's stated in the Act.

So look at your declaration first. Then second, you need to look at your standard unit bylaw, and your insurance deductible bylaw. Because the corporation will repair the common elements after damage up to the standard unit, so you need to figure out what your standard unit is. So you look at your standard unit bylaw for that, and then finally, you look at your deductible bylaw to figure out what you'll be paying.

ROD ESCAYOLA: Right, so the default setting is if your unit is damaged, the corporation must repair it, unless the declaration changed that. And the responsibility to repair is only up to the standard unit. The standard unit may be defined by a standard unit bylaw, which we will not have time to cover too deeply today. And then another question is, who pays the deductible?

OK, wonderful. Let's see what's the next-- and you did mention that, that in fact the declaration could change that. And Graeme, an example of a declaration that would change the obligation to repair after damage, like what are we looking for to see if we have that?

GRAEME MACPHERSON: It's actually very, very common. It's quite rare to have a declaration that doesn't change that obligation. And normally you're going to find it in your declarations maintenance and repair section, where it's going to indicate that in most circumstances, the language will be something around, the owner is responsible for the maintenance and repair after damage of their unit at their own cost.

ROD ESCAYOLA: Right, and I know that there's two schools of thoughts out there with respect to, what does that mean when the declaration says an owner is responsible to repair their unit after damage at their own cost? And there's one school of thought that says, well, this only applies if the corporation isn't insured for that [INAUDIBLE].

And so they try to push it back to, well, if the corporation is insured, then this doesn't apply. And so they bring you back to the default setting, where the corporation is responsible to repair. The other school of thought is, well, it says what it says. It says, the owner shall repair the unit after damage at their own cost. I mean, it says what it says, the owner's responsible.

Now, when we have these debates with insurers, depending on what's the amount at play, we're going to face a variating degree of resistance. I mean, sometimes while we're talking about is 25,000, it's easier to convince them that I'm right in my reading of the declaration. If it's more money, it's more difficult. Anything to add to that, Tricia?

TRICIA BARATTA: No, I think that sounds very clear. We just have to remember that an insurance-- or as we're going to talk about in the next one about bylaws, if there's a standard unit bylaw in place, then it doesn't matter what the declaration says about repair after damage. If it's an insurable loss, the standard unit bylaw jumps in and overrides that. And then I mean, we roll with who's responsible for a deductible that way.

ROD ESCAYOLA: Right, and so-- oh, go ahead.

MURRAY JOHNSON: If you're talking about a standard unit bylaw, these days, in the last 10 years or so, there was a requirement for developers to provide something called a schedule AA, which was a list of the standard unit components in the suites.

ROD ESCAYOLA: Right, and so what corporations can do now is adopt a bylaw to change that. Now I'm going to park both bylaws for the next episode, because otherwise we're going to run out of time quickly. But in a nutshell, the insurance deductible bylaw will allow you to shift the responsibility of the deductible amount onto someone other than the corporation.

And again, we'll talk about that next episode. Whereas the standard unit bylaw, which is what we're talking about, is the bylaw that defines what is the standard? Because the corporation insures and repairs up to the standard. Anything that's above the standard, then is the responsibility of the owner.

And with this bylaw, you can move the dial. Do I want to include everything? Which means more expensive to repair, which means more expensive to insure. Or do I want to include less or nothing in the unit? Which means less expensive for the corporation to insure and repair. But what we're doing basically, we're shifting between insurers, which insurer will pay for that, the corporations insurer or the owner insurer?

That's the importance of being insured. OK, I'm going to come back how to improve your situation. But I do want to ask you a question, Tricia very quickly, a question that we hear all the time, something to do with the EVs. If corporations are installing EV chargers now, does that have an impact on the premium? Should we advise our insurer that we're doing this? Are we concerned about that?

TRICIA BARATTA: Yeah, so to date, we have no impact on premium directly associated with the presence of EV chargers. So they haven't been in existence long enough, and they haven't failed yet because mostly they're pretty new.

ROD ESCAYOLA: Don't say yet. Oh come on, don't say yet. They haven't failed yet.

TRICIA BARATTA: I'm a risk manager. Everything I see, I see risk. That's what I do. I'm a downer, it happens, I'm sorry to say. So we don't really know how to determine the hazard just yet, but what is recommended by a broker is, transfer the risk to a third party professional. And how we do that-- and we say, transfer risk in any way we possibly can, is rely on a third party professional.

One that's properly insured, for potential errors and omissions. They need insurance coverage. And then they also have to be someone that has the expertise to install per the manufacturer's specs. If you can say that, and you can provide that information to your broker and the insurance company, they're going to go, awesome, you've done all appropriate things, the prudent things to make sure that it is safe.

Make sure that the insurer knows they're there. And make sure that you insure them, because if there is a loss associated with them or if you have a loss in a parking garage, et cetera, you want to make sure there's coverage for those. The insurance company doesn't know they're there, they're not going to cover them.

ROD ESCAYOLA: OK, wonderful. So before we turn to how to improve your situation, was it complicated enough folks at home? All these moving parts and who's responsible for what, and what does what? And who does what? And so on and so forth, fear not, we have actually developed a chart.

A chart that will allow you to basically follow along, and it will tell you who's responsible for what. And I'm going to disclose the chart. I've actually asked Graeme to prepare the chart. I haven't had a chance to look at it, but we're going to walk through it together. And so Graeme prepared this chart here. So the first question, let's say you have a flood, how do you measure it?

That's the first question. Is this a spoon flood, a cup flood or a bucket flood? Like, is it truly a flood? And that helps you determine, is it flood or water escape? Or whatever it is. Then the next question that we always ask is, well, what has been damaged, units, common elements or both?

And depending on what has been damaged, then you have to ask yourself, was an owner a damn, damn in this situation or was it Joe plumber? So is there a fault on the owner's side? Now, so the three option is, was the owner a damn, damn, it's either yes or yes or yes, apparently. That's Graeme's practice.

And so then that brings us to the next question, do you have one of these bylaws, the insurance deductible bylaw or the standard unit bylaw? If you don't have an insurance deductible bylaw or a standard unit bylaw, call the lawyer. If you do have an insurance deductible bylaw, a standard bylaw, it depends, call the lawyer. There it is. It always goes back to this. Graeme, you outdid yourself here.

GRAEME MACPHERSON: I

ROD ESCAYOLA: Until this very minute, he didn't know he did this chart.

GRAEME MACPHERSON: Sometimes I astound myself.

ROD ESCAYOLA: OK, so it's almost 6:00. I wanted to have a good laugh at that, but I want to go back to ways to improve your situation. And I mean, really I feel bad because I brought in Josee and Murray, and we barely sort of scratch at their knowledge. But maybe the few minutes that we have left, I'm going to divide it between the two of you. And maybe you Murray, like from the trenches, boots on the ground, how do you improve your situation?

MURRAY JOHNSON: Yeah, it's all about controlling risk and eliminating liability if you can. So I'm going to go through this very quickly. I'm recommending the creation of two contingency accounts on the balance sheet for the corporation. One, I'm calling a multi-year testing, and there's where you throw in things like the five-year elevator load tests.

Look in your fire safety plan, there's 1, 2, 3, 5, 7, 12 and 15 year tests that can be expensive accrue funds for those. Once you've established that, share that information with your broker again around month 10. Include things like stack cleaning, that's where we get those sewer backups, roof inspections. Here's one that I like the best, a program to exercise shut off valves.

And lately, if you've been watching the news, it wouldn't hurt to have an e-bike lithium battery policy. All of these things, if you have plans in place to mitigate them, are going to help ease the pressure on your premiums and deductibles.

Don't leave it there. Let's look at another one. Because of the high deductibles-- this is sort of a self-insured contingency account, it's a deductible account, the old adage of, we're not going to make a claim until it's two or three times the deductible, doesn't work when your deductible is $200,000.

So there's going to be a lot of self-insured claims. If you want to avoid those special assessments, create that and accrue funds over a longer period of time. The goal is to get three to five years claims free, so that you can start to impact those. Really quickly, some other things that you want to share, have you installed water leak technology? Have you completed event loss mitigation training?

Designed emergency preparedness plans that are shared with the residents. Do you have spill kits that stop water from going down the elevator shaft? All of these strategies work towards mitigating insurance claims. Put them in place, help your insurance broker frame you as a best practice, low risk community. I think those kinds of things that the board can effect will go a long way.

ROD ESCAYOLA: OK, Josee. Murray left a couple on the table deliberately for you to cover. So how do you improve your situation? How do you become this low risk condo corporation? Which of course, will make people happy, but it will also make your insurer happy because they collect the fees and they don't have to pay any claims.

JOSEE DESLONGCHAMPS: Yeah, I think you never skip a chance to do preventive maintenance. Take care of your electric systems. Do your IR scans, your infrared scans. Make sure that they're documented. When you get the report, read it. Make sure that the deficiencies are corrected. Share that information with your broker.

If you undertake any kind of special project in your building, you're changing all the shut off valves, under sinks, in the kitchens, in 10 risers this year and next year you're doing the next 10, share that with your broker. Make sure that they have the information you need.

And do this maintenance, the preventive maintenance. It'll make your equipment last longer, but it will also make sure that it functions properly. Do your outside maintenance. Make sure the grading on your property is proper. Take care of your roof. Do the roof maintenance. Don't let ice damming occur. Do the necessary work to prevent that kind of stuff.

A lot of this stuff, it's sudden and it occurs without notice, but if you're doing the proper maintenance, you can get ahead of a lot of this stuff. It's really not that expensive. It's not hard. Have a proper maintenance plan, stick by it and always involve your broker.

Always go to them. Quite often the broker will come back and give you a list, have you done this, this, this? Because I'd like to be able to show that. And go, yeah, as a matter of fact, I did. Or you go, oh gosh, no that's not done. Let's get ahead and let's do it.

ROD ESCAYOLA: Right, and all these efforts that both you and Murray have-- all these initiatives that you've talked about, they're only truly useful if you've documented that. Because documenting allows you first to know that it's done, that it's done regularly, it's well done, et cetera, et cetera.

And it allows you to brag about it to the broker, which will go and try to negotiate the best deal for you. OK, wonderful. It's 6:00, folks. So what we're going to do is, we're almost certainly will have to have an episode two. It was very well attended tonight, as clearly, we've struck a nerve. And so the next webinar will be on March 6th, 2024.

We will post the information about the webinar as we get closer. I'm not sure if the next one is going to be about insurance again, the bylaws. We didn't cover the bylaws in this. I didn't want to rush it. You'll have to register again.

To register for the webinars, you will need to go-- well, first we will broadcast the invitation, but you can also go to the webinar tab of our condo advisor website. If you click on that, it allows you to register. So 6:02. Thank you very much everybody around the table. Josee Deslongchamps from Apollo, ACICM, right?

JOSEE DESLONGCHAMPS: That's the way. That's it.

ROD ESCAYOLA: OK, thank you so much, Murray Johnson from Crossbridge Thanks so much for having shared your knowledge. Tricia wouldn't have been able to do it without you. And every time you participate, I actually learned tons of stuff tonight. But even yesterday when we prepared, I wish we had recorded yesterday's talk.

So thank you so much, Tricia, with Gallagher. And of course, the two condo cousins, Graeme MacPherson, Nailah Ramsoomair and that's it. It's 6:02. I can smell the cooking in the kitchen. So thank you very much, everybody.

Have a great month of February. Happy Valentine's Day coming up. And it's someone's birthday tomorrow, someone on the panel has a birthday tomorrow, Josee, happy birthday.

JOSEE DESLONGCHAMPS: Thank you.

MURRAY JOHNSON: Happy birthday.

JOSEE DESLONGCHAMPS: Another year younger.

TRICIA BARATTA: Happy birthday, Josee.

JOSEE DESLONGCHAMPS: Thank you.

ROD ESCAYOLA: Take care everybody, good night.

Thanks, everybody. And Graeme, you were right again, I've put too much stuff in the agenda.

GRAEME MACPHERSON: I'm cursed with the foresight of the future.

ROD ESCAYOLA: OK, good stuff Thanks, everybody. Amazing, amazing webinar. Thank you.

MURRAY JOHNSON: All right.

TRICIA BARATTA: Thanks, guys. Lovely to see you all. Take care.

ROD ESCAYOLA: Bye, take care.