Date published: 09/08/2022

The draft regulation on co-ownership insurance should be clarified

August 6, 2019 - Several clarifications are requested with respect to the draft regulation on co-ownership insurance. Tabled on July 17, its content raises questions expressed by the Damage Insurance Chamber (Chambre de l'assurance de dommages (ChAD)), the Insurance Bureau of Canada (IBC) and the Québec Co-owners and Manager Association (Regroupement des gestionnaires et copropriétaires du Québec (RGCQ)).

The statement "water flow" to be covered by sole effect of the law is one of the elements that these three organizations identified as requiring greater clarity. In their current form, these terms are open to misinterpretation. Instead, the term "water damage" should be recommended, according to the ChAD and the RGCQ. The IBC noted that the terms "water flow" or "storm" are too general and do not exist in insurance contracts.

Lack of clarity in regard to the self-insurance fund

In addition, the ChAD asks the government to clarify the rule surrounding the contribution to the self-insurance fund, since the draft regulation is not explicit on this subject. The organization deplores divergent interpretations that may affect the application of the regulation and the protection of the public.

According to the ChAD, three aspects must be reviewed with regard to this fund: the time or frequency at which the contribution must be established, the deductible excluded and the effective date. With regard to the first aspect, it asks that the frequency or timing of the contribution be specified by adding, for example, "annual" to the first sentence.

Flooding and earthquakes

In addition, like the RGCQ, the ChAD wants the deductible for flood protection to be excluded, as it is the case for the earthquake deductible. It can reach $25,000 in certain cases, both groups report.

With regard to the mandatory evaluation (every five years) aiming to establish the reconstruction cost of a co-ownership, the ChAD and the RGCQ fear the creation of a bottleneck, if only members of the Order of Chartered Appraisers of Quebec (Ordre des évaluateurs agréés du Québec) are authorized to do so. The ChAD suggests that other orders independent of insurers, syndicates and condo managers should be able to carry out these evaluations. On the condition that the mandated professionals have professional insurance.

Absence of the notion of unreasonable deductible

In its additional comments, the ChAD points out that the government has chosen not to exercise, as of now, its power to determine the criteria by which a deductible is considered unreasonable. The organization states that this decision could have negative consequences for the syndicates and co-owners.

The ChAD therefore urges the government to include in this draft regulation the criteria for determining what constitutes an unreasonable deductible. This is to prevent syndicates of co-owners from being exposed to insurance overdrafts or facing prohibitive insurance premiums or deductibles.

In conclusion, the IBC believes that the new provisions on co-ownership, including those currently found in Bill 16, will likely have the effect, in the short term, of raising awareness among co-owners on the role of the deductible. And in the medium-term, to reduce the loss ratio, thus encouraging a reduction in the amount of deductibles.

Montreal, August 6, 2019

Source: Insurance Journal