Change in Condominium Insurance

1074.2 C.c.Q.: the legislator does not speak to say nothing
With 2 examples of disaster treatment to illustrate the new problems

 

The law aimed primarily at improving financial sector supervision, the protection of cash deposits and the operating rules of financial institutions (hereinafter the "law") was voted in the emergency parliamentary session before the end of the last provincial government. The Act entered into force on 13 December 2018.

The area of co-ownership, an important sector of the Quebec economy, is affected by the changes introduced by this law in the area of condominium insurance, and particularly with regard to the recovery of insurance deductibles or amounts for damages caused by co-owners or their property where such damages are less than the amount of the deductible.

The cause of this new state of affairs is the new article 1074.2 of the Civil Code of Québec (C.c.Q.) and is a very bad surprise for all condominium syndicates and all the co-owners of Quebec. This article adds a completely unforeseen new financial burden, as it transfers to the syndicates a significant cost and responsibilities previously assumed by insurers. Moreover, it was not subjected to any genuine form of consultation, is in no way required and, above all, is difficult to explain and unjustifiable.

According to the Insurance Bureau of Canada (IBC), the legislature's objective was to "clarify the rules so as to simplify the management of claims" and article 1074.2 C.c.Q. was seen to "qualify and distribute insurance deductibles and other sums payable by the syndicate’s insurer" and to determine "who may sue who, when and under what circumstances".

Although started with good intentions, the entry into force of article 1074.2 C.c.Q. constitutes a radical departure from decades of industry practice, since it now definitively and completely excludes the application of standard clauses that notaries have included in all declarations of co-ownership for several decades. The Chamber of Notaries, a professional order responsible for the protection of the public, concurred and approved these clauses which ensured that the syndicate did not have to prove "fault" to engage the responsibility of a co-owner who has caused injury to the syndicate, the building, one or more units, the common areas or other co-owners. These clauses held the co-owner responsible for their actions, those of their guests/tenants and tenant’s guests and the goods and equipment they were charged with, and it was up to the co-owner and his insurer to initiate a judicial remedy to demonstrate an absence of fault or negligence on their part to evade this responsibility.

The entry into force of article 1074.2 C.c.Q. is wreaking havoc and it completely modifies the responsibilities of condominium syndicates and the distribution of indemnifications between syndicate insurers and co-owners.

This article has serious financial consequences for Quebec condominiums since on December 13, 2018, the co-owners' civil liability insurers ask the condominium syndicates to prove the fault of their insured to be able to establish liability and be compensated.

In fact, since the entry into force of article 1074.2 C.c.Q., the co-owners’ civil liability insurers refuse systematically to reimburse the syndicate for the deductible it had to assume or the amounts for works it had to incur to repair the damage caused by a co-owner and the claim files continue to accumulate on the desks of the condominium syndicates’ lawyers.

Many voices are beginning to be heard in the condominium community, and professionals in the field (managers, lawyers, notaries, insurance brokers and others) are regrouping and organizing for this Government to bring the necessary changes required to revert to the situation that existed before 13 December 2018.

A syndicate must prove fault in order to be compensated for the deductible, or the amount of repair works and intervention if it is less than that of deductible. It is inconceivable that condominium syndicates are somehow obliged to act as if they were their own insurer, their own expert, or that they be obliged to incur considerable costs to appeal to external experts in order to be able to prove this fault - Costs for such expertise may exceed the amount of the claim.

The responsibility of condominium syndicates and the steps they must take to be compensated by co-owners have become more complex. Costs have increased, and will not cease to increase, as will the number of claims a syndicate will make per year.

In these circumstances, one must wonder why the co-owners would continue to insure themselves for their civil liability. One can also wonder who is benefiting from this new reality. No monetary consideration seems to have flowed to condominium syndicates: insurers have not reduced their premiums or their tariffs accordingly; premiums that will continue to increase according to the number of claims per year. Asking the question is answering it.

Article 1074.2 C.c.Q. provides no benefit to anyone except to the insurer of the co-owners. The situation that existed and that had been applied in co-ownership for decades, before 13 December 2018, was working and working well. Since then, nothing works anymore; and this is just the tip of the iceberg.

More concretely, since the implementation of article 1074.2 C.c. Q last December 13th the civil liability insurers of co-owners have refused to compensate condominium syndicates in cases where the same co-owner had, in the past, been held responsible, rightly in our opinion. To illustrate this point, you will find in the Appendix some real cases that speak for themselves. We compare these situations in the context before and after December 13, 2018.

In conclusion, the group of professionals, formed under the aegis of the Federation of Co-owners of Quebec (FCQ), request the withdrawal of article 1074.2 C.c.Q. and will transmit its position and recommendation to the Ministry of Municipal Affairs and Housing and the Ministry of finance.

We are confident that the elected representatives will be sensitive to these economic and social issues, given the importance of this sector to the Quebec economy, but also considering that it is essential to preserve the confidence of new buyers and existing co-owners with respect to this type of dwelling.

You may consult in PDF two examples of claims processing with the monetary stakes involved. In the meantime, a petition has been put online at: www.ensemblecontre1074.com so that the co-owners can add their voice to the movement undertaken in order to accentuate the message we carry.

Me Stefania Chianetta L.L.B., Méd. and ARB. Acc. IMAQ (Chianetta Avocats)
Élise Beauchesne, CPA, CA, Adm.A (SolutionCondo)
Hélène Vallerand (Laucandrique)