Don’t lose your condominium insurance!

Too many syndicates of co-owners don’t realize that the insurability of their building is valuable. Some find out too late that they can lose their insurance—with potentially disastrous consequences. If you’re a co-owner, you may think this kind of thing only happens to others. But the number of Quebec condo owners losing their insurer has been rising in recent years, to the point where it has become a trend. And you’d be surprised to learn how hard it has been for some of them to find replacement coverage. Fortunately, there are things you can do to avoid such a situation.
Can I really lose my insurer?
Your insurer is under no obligation to keep you as a client when your policy comes up for renewal. Not only is it possible for a condo building to lose its insurance, it’s also increasingly common. Why? What has changed?
Water-related claims have skyrocketed in recent years, forcing insurers to impose stricter conditions. And here’s the thing: the increase in condo claims has a lot to do with the condition they are in. Too many condo buildings have been neglected by their owners over the years. Let’s not forget that the government had to bring in Bill 16 and Bill 141 to impose maintenance and self-insurance fund requirements on condo owners.
A history of recurring claims, inadequate building maintenance, and construction-related risks top the list of reasons insurers point to when they choose to stop insuring a condo building.
What does the loss of insurance mean for a condo building?
When a condo loses its insurance coverage, the members of the condo association board are responsible for finding another insurer. The time and energy involved in this task shouldn’t be underestimated. If you think a few quick phone calls to other insurers is all it takes, think again. When an insurer pulls the plug, it raises a red flag. As a result, it is not uncommon for other conventional insurers to refuse coverage. Board members must then turn to the international market or opt for a contract with much higher premiums and deductibles.
But the impact doesn’t end there. Many board members who have been through this experience describe it as a time of great stress. In an interview on orphan condominiums (available in French only), Yves Joli-Coeur, a lawyer emeritus specializing in condominium law, pointed out the potential consequences of being left without insurance. His explanations shed light on the delicate situation board members find themselves in.
- Board members end up with no liability insurance. Without coverage, they are no longer protected in the event of legal action by co-owners or third parties. This puts their personal assets at risk if they have to defend themselves.
- Condo units can’t be sold as long as the building remains uninsured. Insurance is compulsory for condo ownership. Without it, a notary won’t finalize a sales transaction.
- And since home insurance is a condition of mortgage financing, condo owners in an uninsured building end up in default with their mortgage provider. Technically, a lender in this situation could recall the mortgage.
- In the unfortunate event of an uninsured loss, the co-owners would also have to pay for repairs or renovations. A special (and very high) assessment fee would be imposed on all owners.
What you can do to avoid loss of insurability?
If your building has generated several insurance claims in recent years, you would be well advised to act sooner rather than later. To limit the risk of losing your condo insurance, the best solution is prevention. There are various steps you can take in this regard. Here are a few examples.
- In a building of more than 100 units, it’s almost impossible to go claim-free all year round. Make every effort to minimize the risk. To do so, start by targeting the most common type of condo claim: water damage.
- Develop a response plan illustrating the steps taken to reduce the risk of loss. Share it with your insurer.
- Be sure to establish a building maintenance log and let your insurer know about the work being done.
- Invest in progressive maintenance; a poorly maintained building makes insurers nervous.
- If you don’t already have one, add a requirement to your bylaws stipulating that contractors working in your building must hold a licence issued by Régie du bâtiment du Québec (RBQ).
Installation of a water leak detection system is undoubtedly the first preventive measure to put in place. A detection system responds directly to insurer expectations. It’s no secret: more and more insurers are making the installation of such a system a basic requirement. In most cases, you will also benefit from a premium reduction starting in the first year of installation, plus a lower deductible. Why wait?
Learn about NOWA4S, the reliable, user-friendly water damage prevention system designed to prevent leaks in your building.
Or watch an interview with Mélanie Bergeron.