Fire Insurance
Oh, I've seen fire and I've seen rain
I've seen sunny days that I thought would never end
-lyrics of a James Taylor song.
The ever-increasing fire assault on the Okanagan has recently hit home on several fronts. Although all fires are devastating, for condominium dwellers the fall-out can be doubly damaging. Individuals not only lose their homes, but as share holders, their corporation is also damaged.
The fire destruction of Barber Terrace, a new 34 unit condominium in Kelowna, raises several issues, which will be debated and negotiated well after the mop-up crews are finished their mammoth restoration task. While the flames burnt much of the fourth floor, the water used to extinguish the flames found its way throughout the entire structure. Between the two the once beautiful building is now in ruins more resembling a scene out of Baghdad. Long after the clean up, the legal and insurance implications could still be raging.
One concern is beyond controversy. First and foremost is the imperative to carry adequate insurance coverage. Many strata dwellers mistakenly believe they are covered by the corporation’s policy. Every unit should have adequate coverage to protect such things as personal belongings, improvements, loss of rental income, moving and storage and housing allowance.
A StrataScene reader raised the question if an owner could sue another owner for loss under the strata’s insurance policy. “An insurer cannot subrogate against its own insured, and this principle does apply to the insurers of a Strata Corporation,”according to Christy Lovig, a lawyer with Doak Shirreff. “The Strata can, however, sue an owner to recover the deductible portion of an insurance claim, if the owner is responsible for the loss or damage that gave rise to the claim.”
“The bylaws of a Strata come into play here, too,” says Lovig, “if a Strata's bylaws contain an indemnity bylaw, then they are justified in charging a deductible and any uninsured amount against the owner's strata lot, where that owner has been found to be "responsible" for the claim; but in the absence of such a bylaw, this may not be allowed.
.An indemnity bylaw would simply reserve the right to collect deductibles or other uninsured amounts from an owner, and it's therefore highly recommended that Strata Corporations amend their bylaws to include an indemnity bylaw. Such a bylaw would help the Strata to avoid lawsuits by allowing them to simply charge the uninsured amount against the owner's strata lot. The definition of "responsible" under the Act, however, is not fully developed.” Lovig says.
The question was also raised whether owners had a choice to restore the building, or take the insurance payout instead. Section 159 (1) of the Strata Property Act states the corporation may, by a resolution passed by a 3/4 vote at an annual or special general meeting held no later than 60 days after the receipt of the money….may decide not to repair or replace the damaged property.
Subject to section 160, if the strata corporation decides not to repair or replace the damaged property, the insurance trustee or the strata corporation that receives the payment holds the money and any interest in trust for each person who has an interest in the money, including the holder of a registered charge, and must distribute the money according to each person's interest.
StrataScene is intended for general information purposes only.
Gunnar Forsstrom is a licensed Strata Manager with Coldwell Banker Horizon Realty.
Send your questions to: gforsstrom@coldwellbanker.ca or call: 250-860-1411