When Can a Strata Charge an Insurance Deductible Back to an Owner?

When water leaks from a strata lot and damages the common property or other strata lots, often the strata corporation makes a claim with its insurance company to cover that loss. For high-rise condo buildings, the insurance deductible can be significant. I have seen insurance deductibles in the range of $5,000 to $50,000 and have heard reports of deductibles being even higher than $50,000.

The Strata Property Act permits a strata corporation to charge back the insurance deductible to the owner of the unit where the damage originated from, if the strata has the correct bylaw. As a result, an owner can be on the hook for a significant sum of money. All owner should have insurance for their strata lot, which insurance should cover the strata's insurance deductible. If that is the case, the owner would, hopefully, only have to pay their insurance deductible, with a much lower deductible amount.

In the case of The Owners, Strata Plan VR 194 v MacKinnon, 2017 BCCRT 46, the strata corporation sued an owner to recover its $5,000 insurance deductible claiming that the water leaked from the owner's unit while the owner was doing bathroom renovations. However, the strata didn't have a bylaw that permitted it to charge the insurance deductible back to the owner - the strata was attempting to rely on a bylaw that made an owner responsible for negligence that occurred while doing renovations in the unit.

The CRT found that the owner was not negligent in his bathroom renovations: the building had a history of 13 leaks and the pipes were more than 42 years old. The leak from the pipe was a result of the age of the pipes, not from the owner's work. As a result, the strata was not entitled to charge back the insurance deductible and its claim was dismissed.

In another recent decision, of Clark v. The Owners, Strata Plan LMS 3938, 2017 BCCRT 62, an owner sued the strata corporation to have the insurance deductible removed from the owner's account. The owner argued that she was not negligent, that the washer suddenly failed without warning and caused the water loss. The strata corporation did have a bylaw, but the bylaw required the owner to be negligent for the insurance deductible to be charged back to the owner.

The CRT, as in MacKinnon, found that the owner was not negligent. The CRT then applied the test set out in the case of Strata Plan LMS 2446 v. Morrison, 2011 BCPC 0519, wherein the CRT must first look to the strata's bylaws before deciding whether the insurance deductible can be charged back to the owner.

Due to incorrectly drafted bylaws, the strata corporation had to remove the $5,000 insurance deductible from the owner's account because the owner wasn't negligent and the bylaws required negligence before the owner had to pay the deductible. The strata was also ordered to pay the owner $225 which were the owner's CRT filing fees.

As can be seen from the cases, it is very important to have properly drafted bylaws. Further, bylaws should be reviewed periodically to ensure that they are still applicable or haven't become outdated by the changes in the case law and legislation.


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