Strata, homeowner or landlord must work directly with their brokers to place appropriate coverage
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Dear Tony:
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When we tried renewing our homeowner insurance in January, our insurance broker told us the strata report on insurance was incorrect. Under the Strata Property Act, the strata corporation must provide a list of all the units and their liability for a share of an earthquake deductible in the event of a major event a following claim. They advised this was necessary so they could calculate the homeowner maximum risk when the policy was placed.
We have spoken to our property manager who advised this is not a requirement of the Strata Property Act and the strata is only obliged to provide the summary pages of the policy showing the current placement, value, cost and deductibles. There appears to be some confusion around this issue and the calculations.
— JRB
Dear JRB:
The property manager is correct. The obligation to report on insurance as part of the annual general meeting is a requirement of the standard bylaws, not the Strata Property Act, and does not specify the details of the insurance, only the report is issued by the strata corporation.
It is recommended to include the cover pages of the policy to ensure everyone is informed of the policy renewal, the appraised value of the corporation insured elements, exclusions and the deductible for different perils.
The earthquake deductible is calculated on the appraised value of the insured property. It is applied as a percentage of the insured full replacement value. A common deductible is 15 per cent.
For example, in a 68 unit apartment style strata corporation, the current insured replacement value is $37,400,000. Apply the deductible of 15 per cent which is $5,610,000. That would be the amount to calculate for each unit owner share, in the event of an earthquake claim. You then apply the calculation to the unit entitlement of each strata lot. The total unit entitlement is 74,800 and strata lot 1 unit entitlement is 890, which is applied to the deductible. Unit 1 earthquake deductible calculation is $66,750.
While a strata corporation may provide this table of calculations to their owners, it is an estimate and not a reporting requirement unless the bylaws have been amended. There may be other variables that affect deductibles. Not all policies are the same. Appraisals must be current, deductibles vary, the claims history of the strata corporation may apply and there may be exclusions within the policy relating to building and component conditions.
It is important for both a strata corporation and homeowner or landlord to work directly with their insurance brokers to place appropriate coverage. Whether it is an earthquake deductible or claim where an owner is responsible, if you do not have unit insurance coverage, you can still be required to pay for the strata insurance deductible or damages.