Creation of a self-insurance fund

Article 1071.1 C.C.Q.

Will come into effect 24 months following the adoption of regulation, at the latest on June 13, 2022.

Article 1071.1 C.c.Q. will require the syndicate to create a liquid self-insurance fund available on short notice. This fund, which is separate from the contingency fund, remains under the ownership of the syndicate, and will be used to pay the required deductibles for the insurance taken out by the syndicate.

The self-insurance fund will also be used to compensate damage to property in which the syndicate has an insurable interest, where the contingency fund or an insurance indemnity cannot provide for such reparation, when it decides not to file an insurance claim, or in the event the syndicate cannot file a claim because of a high deductible.

The self-insurance fund is established based on the amount of the insurance policy deductibles and an additional reasonable amount to cover the other payments for which it is to be used.

The legislation stipulates that the self-insurance fund must be available within 24 months after the regulation has come into force. Given that the legislator has the obligation to publish a regulation by June 13, 2020, syndicates must therefore have set up their self-insurance fund before June 13, 2022 at the latest.

Lastly, it may be advisable to fund twice the amount of the deductibles. This way, rebuilding the fund after the first use will not be as urgent.

Mandatory civil liability insurance for co-owners

Article 1064.1 C.C.Q.

Will come into effect 6 months following the adoption of regulation, at the latest on December 13, 2020.

Article 1064.,1 requires each co-owner to take out third-party liability insurance, with the mandatory minimum amount to be determined by government regulation.

Creation of reference units descriptive files

Articles 1070 and 1106.1 C.C.Q.

For all co-ownerships established starting June 13, 2018, the syndicate must provide co-owners with a sufficiently precise description so that the improvements made by the co-owner are clearly identifiable.

For co-ownerships established before June 13, 2018, this obligation has not yet come into force. In order to prevent the private portions from being deemed to be a “reference unit” including improvements made by the co-owner, it is important to provide a description of the “reference units” to the co-owners.

This new provision may have a perilous effect on the building’s insurance, since without an accurate register of the reference units, all leasehold improvements made to the private portions since the original construction could be taken into account in the costs of reconstruction.

We therefore believe that it is crucial for syndicates to quickly draw up an accurate register describing the main reference units.

New article 1106.1 C.c.Q. requires the promoter to provide the syndicate with a description of the private portions at the special meeting (transition meeting). For condominiums established before June 13, 2018, this obligation will come into effect on June 13, 2020.

Costs of Reconstruction and Professional Appraisal

Article 1073 du C.C.Q.

Will come into effect 12 months following the adoption of regulation, at the latest on December 13, 2020.

The syndicate is already required to take out insurance corresponding to the reconstruction cost of the building.

The new version of article 1073 C.c.Q. provides a framework for this practice and requires syndicates to hire a member of the professional order (most likely the Ordre professionnel des évaluateurs agrées) designated by government regulation to assess the building’s reconstruction cost. In addition, the reconstruction cost must include the taxes, cost of debris removal, and the fees of the various professionals involved in the reconstruction. A copy of the appraisal must be given to the insurer.

The law also requires that the amount determined by the professional appraiser be re-evaluated at least every five years. These updates must be sent to insurers in order to index the actual value of the reconstruction cost.

Syndicate’s civil liability

Article 1073 C.C.Q.

The syndicate’s civil liability insurance must cover the members of its board of directors and the manager, along with the president, secretary and other persons in charge of conducting the general meeting of the co-owners.

It is therefore important for the syndicate to consult its representative to ensure that the scope of its civil liability coverage complies with the new legislation.

Unreasonable deductibles

Article 1073 C.C.Q.

Will come into effect 12 months following the adoption of regulation, at the latest on December 13, 2020.

The insurance policies taken out by the syndicate will need to have a deductible deemed “reasonable”. The government may prescribe by regulation the criteria according to which a deductible is considered unreasonable.

No recovery of deductibles and damages from a co-owner

Articles 1074.1 and 1074.2 C.C.Q.

Will come into effect 12 months following the adoption of regulation, at the latest on December 13, 2020.

Since December 13, 2018, a union can decide whether or not to take advantage of the insurance when a claim is made.

When insurance is not used, the syndicate shall diligently repair damage to the insured property. If the syndicate could have been indemnified by the insurance, it will not be able to sue the co-owner for loss, nor a person who is member of a co-owner’s household, nor a person in respect of whom the syndicate is required to enter into an insurance contract to cover the person’s liability (e.g. directors, assembly officers and manager). The syndicate must still report this claim to the insurer (article 2470 C.C.Q.)

The syndicate may recover from co-owners, even if it relies on insurance, by contributing to common expenses, the sums incurred for the payment of deductibles and reparation for the injury caused to property (e.g. items not covered by the insurance policy, coverage limit), subject to damages for the injury caused if the syndicate establishes the fault of the co-owner (article 1465 C. C. Q.).

Primary insurance

Article 1074.3 C.C.Q.

A co-owner may take out, as a precaution, insurance for their entire private portion and not only the improvements. As a result, this insurance would duplicate the syndicate’s insurance. The new Article 1074.3 C.c.Q. stipulates that in such a situation, the insurance taken out by the syndicate constitutes primary insurance.

An insurer may not be subrogated to the rights of the syndicate, unless…

Article 1075.1 C.C.Q.

An insurer may not be subrogated to the rights of the syndicate against a co-owner, board member or a person who is a member of a co-owner’s household, except in the case of bodily or moral injury or if the injury is due to an intentional or gross fault.

In conclusion

The legislator is still to adopt several regulations to complete the framework provided by Bill 141. I will be keeping track of any new developments and will report on them in future articles.

Note that I am neither a jurist nor a lawyer, and this document was prepared for informational purposes only and does not constitute legal advice or opinion.

The various insurance industry players who would like to provide professional services to condominium property managers must be informed and follow the necessary training to properly advise their clients.

Co-ownership insurance is not as straightforward as it may seem. It is crucial for the administrators to choose a qualified insurance representative with the proper credentials and knowledge to guide and advise them on the right insurance products, based on the changes brought about by the new legislation.

Administrators need to exercise caution, because the appeal of a lower insurance premium should not have them stray from their primary responsibility, which is to adequately insure the building and take out an insurance policy that complies with the law. Indeed, administrators may engage their personal liability towards the co-owners when taking insurance which does not comply with the new legislative framework.

In summary, some property managers will most likely have to change how they “shop around” for insurance. In fact, although crucial to sound building management, the insurance premium should no longer be the primary concern. More than ever, property managers will be required to primarily purchase insurance products which comply with legislation and the declaration of co- ownership, even though it means paying the right premium required.

Feel free to contact me if you have any questions.

Patrick Beauvais

Damage Insurance Broker

Account Manager – Co-ownership insurance at BFL CANADA

514 904-4434 | pbeauvais@bflcanada.ca