In all Alberta condominiums, the condominium must provide insurance coverage over common elements and all units, including the accidental escape of water. So if a leak occurs inside a unit (i.e. from a faulty dishwasher line), and a number of units are then water damaged, a claim must be made and the repairs covered by the Corporation’s insurer, not the individual unit owner’s insurer.
Unfortunately, condominium corporation’s insurance deductibles seem to be increasing, with some reaching as much as $100,000 in larger complexes with poor claims histories. Because of the high deductible amount, many condominiums want to charge that cost back to the owner. However, that can only be done if bylaws have appropriate wording that states it can be. SVR recommends that all condominiums amend their bylaws to include wording that makes it clear that an insurance deductible can be charged back to the owner if the damage was caused by something that “was the responsibility of the owner and/or arose within the condominium unit”. Many bylaws do not have that wording, but rather say the condominium may charge back the condominium corporation’s insurance deductible to a unit owner if the damage was caused by an “act or omission” of an owner.
The act or omission wording has been particularly problematic for condominiums. In previous condominium cases, the Alberta Courts had equated the words “act or omission” with a negligence standard, making it very difficult for condominiums to successfully charge back an owner. The case law example SVR had previously relied upon to advise boards that act or omission meant a negligence standard is Reilly v. Freedom Gardens, where an owner’s dog chewed through a water line, causing a leak which in turn caused substantial damage to a number of neighbouring units. While one would think that the owner should be responsible for the bad behavior of his dog, the court found that the owner could not be charged back the insurance deductible in this case. Since the owner had no reason to suspect his dog would chew the line, the condominium had not met the burden required to prove the owner was negligent. For many years, we at SVR have used this case as the basis for advising boards that when an appliance inside a unit simply malfunctioned and the bylaw had “act or omission” wording, that it would be difficult to prove that the owner had been “negligent” in causing the water leak. In such cases, we often advised against pursuing the owner for the deductible.
However, a new case, The Owners: Condominium Plan NO. 7721985 v Adrienne Dawn Breakwell (“Breakwell”) seems to overturn Reilly, which potentially changes how we look at “act or omission” cases. In Breakwell, the owner wasusing her unit as a rental property. Her current tenants were moving out, and she was attending the unit only for providing showings to potential new tenants. Accordingly, there was only intermittent traffic in the unit. The owner had attended to show the unit on December 29, and on December 31 the circuit board on the unit’s furnace malfunctioned when no one was present in the unit. This malfunction caused a loss of heat and, ultimately, two pipes in the furnace room froze and ruptured. The furnace was only three years old, and there were no issues with the furnace prior to the incident. The loss was exacerbated due to the fact that the owner could not locate the water shut off valve for 45 minutes. The shut off valve had been covered up by cabinetry units,allegedly in breach of the condominium’s bylaws.
The matter was first heard in Master’s Chambers where the Master disallowed the chargeback, referring to Reilly and stating that the corporation had not proved that the owner was negligent. However, on appeal, Justice Mandzuik of the Court of Queen’s Bench reviewed Reilly and stated that Reilly was NOT authority for the proposition that the words “act or omission” necessarily require negligence and that the “act or omission” bylaw had to be read in conjunction with the rest of the bylaws.
The Court in Breakwell also found that the owner was responsible for this loss because, based on the evidence, the owner breached:
By-law 2(a) which required her to repair and maintain the unit and keep the unit in a good state of repair; and
Bylaw 44 which required the owner to “take appropriate steps to ensure that all plumbing, heating, ventilation and cooling system are in working order and that they are repaired, maintained and replaced where necessary.”
In essence, the court put the onus on the owner to prove that she had regularly maintained the furnace.
Further, because the shut off valve had been concealed, the Court stated that while the owner did not conceal it (the property was bought “as is” and had been covered by a prior owner during renovations), as an owner of the property, she should have known where the valve was located.
Take Aways
“Act or Omission” wording in Bylaws may not mean the corporation has to prove negligence. A full review of the bylaws is required.
In the event of a loss from an appliance or plumbing/heating system in their unit, owners may need to provide evidence that they properly maintained their appliances and plumbing and heating equipment.
Owners need to make themselves aware of the location of shut off valves (and similar essential fixtures) in their units.
Please note, this does NOT mean that all toilet back ups, refrigerator water line breaks, and dishwasher water leaks can now be charged back to owners when the bylaws say “act or omission”. The Breakwell case has very specific facts (owner/tenant not actually occupying the unit at the time, shut off valve improperly covered, etc.) and each water loss and potential insurance chargeback needs to be reviewed on its own circumstances along with the condominiums bylaw wording.
SVR is pleased to provide assistance in this regard.
For more information on insurance deductibles or to discuss a specific claim, please contact a member of the condominium department.