Clearing Confusion Concerning Condo Corporation Insurance Coverage
Generally speaking, when we imagine situations that might require taking out an insurance policy, the particulars are usually quite thrilling: travelling to far-off lands, for example, or taking part in any number of death-defying activities like skiing or white-water rafting. Even driving a car fits the bill, given the speeds and risks involved (although describing the morning commute to work as “thrilling” might be a bit of a stretch!).
When you compare these activities to the simple, mundane task of serving on your building’s condo board, it seems fairly ridiculous that condo corporations have active policies in place. Aside from paper cuts and the odd grumpy resident, what’s there to worry about, right?
Actually, you’d be surprised.
The Importance of Condo Corporation Insurance
Before we go too much further, it’s worth noting that maintaining an active condo corporation insurance policy isn’t a choice – it’s required by Alberta law. This makes good sense when you break it all down. Condo board insurance is a commercial-style policy that covers not just active board members, but unit owners, the corporation as a whole, and any other people or organizations that may find themselves at risk in association with the condo community. This sort of policy protects the common, shared spaces within your condo building and ensures that if anything happens in these areas, coverage is there.
Now, if you’re thinking that this language sounds a little broad and “insurance-y,” you’re absolutely right. That’s why condo boards work to create a document called a master policy that clearly defines what is and isn’t covered by the condo corporation’s insurance policy. Generally, master policies will specify coverage for structures and common areas of the building as well as standard unit coverage and insurance for liability and personal injuries (so long as they happen in a shared space). That said, condo corporation insurance only covers so much, so don’t be fooled into thinking that just because your building has an insurance policy that you shouldn’t consider one for your individual unit, as well – but that’s a blog for another day!
In the meantime, let’s take a look at another facet of insurance your board should take a moment to familiarize itself with: directors and officers insurance.
Directors and Officers Insurance: Not Something to Overlook
Adding an additional layer of protection to your standard, boilerplate condo corporation insurance is directors and officers liability insurance (or D&O insurance) – something that each and every condo board out there should really look at having in place. For the uninitiated, D&O insurance protects condo boards and board members in the unfortunate event that they end up facing a lawsuit within the scope of their position and authority.
Now, you might find yourself thinking “Well, we already have condo corporation insurance…do we really need D&O coverage, too?” and to that, we shout from the rooftops: YES! Yes, you absolutely need D&O insurance. Even if your board is the most careful, capable, conscientious team to ever oversee a condo community, you can’t account for the sorts of people and trouble you might run into, and hiring a defense team even for a winning case can be an incredibly costly affair. In addition, many condo corporations out there have clauses that require boards maintain specific amounts of D&O coverage for members, so for some condo boards out there, lack of coverage might not even be an option. For everyone else: save yourself the stress, heartache, and potential financial trouble. If you’re an acting member on a condo board, do yourself a favour and insist that the board invest in a D&O insurance plan immediately.
How Do the Upcoming CPA Changes Play into All of This?
All of you engaged condo owners out there have probably been sitting there reading this blog and biting your tongues to keep from shouting at the screen “BUT WHAT ABOUT THE CPA CHANGES???” and for that, we give you a gold star! You’re 100% right – the recent amendments to Alberta’s Condominium Property Act that are set to come into effect within the next year will absolutely impact a number of details related to condo corporation insurance, including:
- Clarifying the term “standard unit”
- Bylaws for required owner’s insurance
- What corporations must insure with regards to standard units
- Rules around developer-owned units
- Coverage for mixed-use units
- Details regarding parking spaces and storage units
- Owner notification
- Repair responsibility
- Deductible recovery
- Fidelity bonds,
- We can keep going…but you get the picture.
As we get closer to seeing these amendments go live, we’ll be sure to take a deep dive into what they all mean right here on this blog. In the meantime, know that changes are coming and to keep an out for them if you’re looking to make any moves regarding condo corporation insurance or D&O coverage over the course of the next few months.
Condo board insurance can be confusing, but with the help of this article, we hope you’re feeling better-equipped to review your own condo’s policies to make sure you, your board, and your fellow residents are protected. If you’ve found a condo corporation coverage policy that does the trick for your board, be sure to let other Alberta condo owners in on the secret over at Alberta Condo Owners for Change – log on and be a part of the conversation!